Chinese liquor makers 'sober up' over bans

BEIJING - While China's high-end liquor makers are enjoying intoxicating profits, they face a frustrated stock market partly due to government vows to control official spending on banquets.

Stock dips swept the liquor sector listed on China's Shanghai and Shenzhen Stock Exchanges on Monday, sparing only a few.

Kweichow Moutai, Wuliangye and Luzhoulaojiao saw stocks tumble by 4.6, 5.8 and 6.1 percent respectively as of the end of trading.

Declines in other renowned liquor brands meant the sector suffered one of the biggest plummets seen in China's stock market on Monday.

The net profits of Kweichow Moutai surged 106.05 percent year on year to reach 3.42 billion yuan ($543.41 million) in the third quarter of 2012.

Wuliangye Group, a major competitor of Moutai, also recorded a net profit increase of nearly 90 percent in the third quarter, which the company attributed to price hikes and strong sales.

However, Moutai has gone through a string of price drops this year that have taken its average bottle price to around 1,500 yuan from about 2,300 yuan at the beginning of 2012.

It is said that Moutai's inventory has topped 20,000 tons. Industry insiders believe that unconfirmed information moved some dealers to lower prices in order to destock and cash in.

Moutai's wholesale price may drop below 1,200 yuan by next May or June, Tie Li, an liquor expert told Securities Daily.

A dealer in downtown Beijing, who declined to be identified, said that government restrictions on official consumption of high-end liquor have dampened sales.

Amid downturn worries, Chinese liquor makers tend to spend hundreds of millions on commercials to woo more hard-to-please drinkers.

Moutai spent 352 million yuan and Wuliangye 499 million to seize ad slots before flagship evening news shows when bidding opened on Sunday for right to advertise on CCTV, China's state-run television, in 2013.

Moutai, Wuliangye, Jiannanchun and Fenjiu spent a total of 1.72 billion yuan for commercials on CCTV in the bidding.