Wuliangye announces price hike
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Wuliangye Yibin Co, China's second biggest maker of white liquor by market value, said it plans to raise its liquor prices from this Saturday, following its archrivals' recent price increases.
The liquor maker said it would raise its ex-works price by a range of 8.5 percent to 10.3 percent.
Recently, a group of domestic liquor makers raised their product prices after Kweichou Moutai, the nation's leading liquor maker, announced in early December it would lift its prices by 13 percent from Jan 1.
Luzhou Laojiao Group Co, Shanxi Xinghua Cun Fen Chiew (Group), Jiangsu Yanghe Distillery Co Ltd, and Chengdu Swellfun Marketing Co Ltd, then all raised their prices by 5 to 15 percent.
Analysts attributed the price hikes to rising raw material and energy costs and rising demand in the run-up to the Spring Festival, during which high-end white liquor is often used as gifts.
In addition, the central government's recent decision to increase the consumption tax on liquor sales has squeezed liquor makers' profit margins, laying the ground for the price rises.
"There is no better time to raise the price, as all major high-end liquor makers have raised their prices in order to scoop more profits from the sales peak during the Spring Festival," said Qu Jia, an industry analyst with First Capital Securities.
What sets it apart from other products is that a steady price increase in high-end liquor is acceptable as consumers are extremely loyal to the brands.
Although Wuliangye said it expected the price rise to affect its business this year, analysts are optimistic about the company's performance in 2010.
"Through this price hike, Wuliangye's net profit in 2010 will jump 52 percent year-on-year, and in 2011 there will be further growth of 22 percent," said Tong Xu, an analyst with Shenyin & Wanguo Securities.
Tong said he expected Wuliangye's sales to reach 9,530 tons, 11,900 tons and 13,200 tons respectively from 2009 to 2011.
"As there is still a great shortage of premium white liquor, Wuliangye has decided to increase its first-class liquor production volume by 1,500 tons to 11,500 tons this year, and it will produce 15,000 tons in 2011," Tong added.
Wuliangye expects a net profit of 2.72 billion yuan throughout 2009, or an above 50 percent increase year-on-year. Shares of Wuliangye edged up 0.38 percent to 31.56 yuan on Friday.
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