Kweichow Moutai (600519) Group, the parent of China’s largest white liquor maker, is among a group of state-owned companies seeking investors to help it expand and be more competitive, the official Xinhua News Agency reported.
A group of 28 companies from China’s southwestern province of Guizhou plans to each attract at least two strategic investors dometically or overseas by the end of 2017, according to today’s article, which cited the province’s state-owned-assets supervision commission. Kweichow Moutai, the unlisted parent, will be turned into a shareholding company, Xinhua reported.
Demand for Moutai’s high-end baijiu liquor, popular at official banquets and for gift giving, has fallen as Chinese President Xi Jinping has pushed to curb extravagant government spending. A hunt for new investors by the state-owned parent could pave the way for international companies to expand in the country’s baijiu market, which is estimated by London-based Euromonitor International to form 98 percent of China’s total sales of spirits last year.
“The whole baijiu industry is entering a transformational stage with the government clamping down on excessive spending and extravagance,” Liu Hui, Shanghai-based analyst at Capital Securities Corp. (6005), said over the phone. “Moutai is likely looking for strategic partners to help improve its management expertise, and to beef up its low and mid-priced product offerings.”
The government austerity campaign will weigh on earnings growth at Chinese liquor makers and their profits will rise less than 20 percent this fiscal year, UBS AG analyst Wang Peng said at a Shanghai briefing on July 17.
The Guizhou companies are looking to attract investors who have financial and technical strengths and human resource talents, which will help them improve their competitiveness and expand the market for their products, according to the Xinhua article. Diageo Plc (DGE), the world’s largest liquor company, controls part of Chinese white spirits maker Sichuan Shuijingfang Co.
Li Hongfang, a spokesman for the group’s Shanghai-listed Kweichow Moutai Co., couldn’t immediately comment to the report.
Moutai, which sells 106-proof liquor, said on April 18 sales rose 19 percent to 7.17 billion yuan in the first quarter, the slowest growth since the third quarter of 2010, according to data compiled by Bloomberg.
China’s economy expanded 7.5 percent in the second quarter from a year earlier, the second straight deceleration, according to data from the statistics bureau.
Most Chinese provinces reported first-half growth below annual targets that in some instances were already lower than last year’s goals, according to data compiled by Bloomberg News. Guizhou was the poorest province in China, according to China’s National Bureau of Statistics, citing the latest GDP per capita statistics available in 2011.
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