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Moutai Profit Growth Slows Amid Xi Austerity Push

Kweichow Moutai Co. (600519), China’s largest maker of baijiu liquor, said first-quarter profit rose 21 percent, less than half the pace of the year-earlier period as President Xi Jinping pushes to curb extravagant spending by government officials.

Earnings increased to 3.59 billion yuan ($582 million) in the three months ended March, according to a company statement to the Shanghai Stock Exchange yesterday. First-quarter earnings rose 58 percent in the year-earlier period.

Xi’s austerity campaign has hurt demand for high-end baijiu, popular at official banquets and for gift giving in China. Moutai’s sales rose 19 percent to 7.17 billion yuan in the latest quarter, the slowest growth since the third quarter of 2010, according to data compiled by Bloomberg.

The company’s sorghum spirit can fetch $300 a bottle. In Communist Party lore, the company’s 106-proof liquor was used to clean the wounds of soldiers during the Long March, when Chairman Mao Zedong’s soldiers endured immense hardships as they fled over snow-clad mountains and through deadly marshes to evade Chiang Kai-shek’s Nationalist forces.

As China’s economy boomed following Deng Xiaoping’s market opening in the late 1980s, the fiery spirit came to symbolize the growing wealth and power of the country’s elite. The Guizhou-based company’s market value soared from less than $1 billion a decade ago to peak at about $41 billion last year.

Xi warned in November that resentment at graft and the enrichment of cadres and their families threatened the Party’s grip on power.

To contact Bloomberg News staff for this story: Aipeng Soo in Beijing at asoo4@bloomberg.net

To contact the editor responsible for this story: Anjali Cordeiro at acordeiro2@bloomberg.net

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