Maotai Flavor Liquor Is Popular: Many Listed Liquor Enterprises May Enter The Industry And The Pattern Will Change

After a sharp correction at the beginning of the Year of the Ox, the liquor sector of A-share has slowly risen since mid March.

Wind data shows that since March 10, the overall increase of liquor index has reached 37.53%.

During the more than one month period, the Spring National Sugar and Wine Fair (hereinafter referred to as "Sugar and Wine Fair"), which was suspended for one year due to the epidemic, was restarted and successfully held in Chengdu in April.

At this year's sugar and wine conference, "hot sauce and wine" became the hottest theme, attracting wide attention from participants. A researcher told the reporter that the "soy sauce and wine craze" rising in recent years will impact the future liquor industry pattern.

"Sauce and wine fever" swept over many places

"A few days ago, the sugar and wine party was going to be a sauce and wine party," quipped a medium-sized private wine researcher to reporters.

The researcher is not alone in holding similar views. According to the feedback from various institutions after the meeting, the "hot sauce and wine" was indeed an obvious feeling for the participants of the Sugar and Wine Fair.

For example, the food and beverage team of CSCI said, "On the whole, there are two very obvious feelings: 1. The high-end military is competing, and the price of 1000 yuan will lead to or accelerate the expansion. The secondary high-end has not slowed down, but the competition has intensified; 2. The sauce and wine craze is unstoppable, and the dividend period is expected to last more than 10 years."

The food and beverage team of Huachuang Securities also said in the news of the meeting, "Under the trend of hot sauce and wine, the sauce and wine sector will be the focus of the 2021 Chengdu Spring Sugar Fair, and the number of forums will increase significantly. The professional theme exhibition of sauce and wine," Heart of sauce and wine ", is hot on the spot, and the sauce and wine exhibition has become a phenomenon level event."

"Hot sauce and wine" is not only reflected in the venue, but also reflected in the market data. According to the statistics of institutions, the compound annual growth rate of income/output of Maotai flavor liquor in 2017-2019 was as high as 26%/22%, which was significantly better than other flavor types. As a contrast, the Luzhou flavor type and the Qingxiang flavor type have almost zero growth in the same period of time.

The survey summary of some liquor dealers and experts obtained by the reporter also shows that Maotai flavor liquor is hot in some regions of the country matching the high growth data.

For example, a Henan liquor expert said at a recent institutional research meeting that drinking soy sauce wine "has formed a certain trend in Henan": "Now some consumers prefer to drink 300-500 yuan soy sauce wine rather than 1000 yuan Luzhou flavor."

In another survey summary of Henan liquor dealers, a Henan businessman pointed out that at present, the sales amount of Henan soy sauce wine has accounted for more than half.

"In 2020, there will be more than 20 billion yuan of soy sauce wine in Henan Province, and more than 40 billion yuan of liquor in the whole Henan market, accounting for half of the total amount, of which Maotai accounts for the largest part, but the amount is not as good as Luzhou flavor. Now, as long as Maotai does not collapse, there will be no problem with the whole soy sauce wine." said the liquor magnate.

According to the statistics of institutions, Henan, Shandong, Guangdong and other provinces have become important markets for liquor consumption at present, and soy sauce wine accounts for 50%, 50% and 20% of the local cities. In addition, as the origin of soy sauce wine, Guizhou has always been the base of soy sauce wine consumption, and 90% of the local market share is occupied by soy sauce wine.

"Shandong and Henan are big provinces of liquor consumption, with few local strong brands, and foreign brands of soy sauce wine are expanding rapidly; Shandong has a good foundation of soy sauce wine consumption due to the influence of Lupai soy sauce wine; Guangdong has developed economy, frequent business exchanges, and high-speed development of high-end soy sauce wine." Oriental Securities explains the reason.

It is worth mentioning that when an analyst from a seller investigated Sichuan, the base camp of Luzhou flavor liquor, in March, he also said that the future trend was "hot sauce liquor".

So, why has the "sauce and wine craze" started to rise in the past two years?

"One is the consumption demand of medium and high-end liquor brought by Moutai, and the other is that Maotai flavor liquor is better in liquor quality," said the aforementioned researcher.

Huaxi Securities also pointed out that behind the sauce and wine craze is actually the consumption upgrade. The original driving force for its consumption upgrading is better products and better consumption experience on the whole.

"For consumers, the soy sauce wine is' strong (high degree), has a taste of wine (more aggressive aroma), but has no alcohol problem (less physical burden after drinking) '." Huaxi Securities said.

Several liquor enterprises have entered the market

In addition to consumption upgrading, the aforementioned researcher also told reporters that Maotai flavor liquor is also a "better business" for liquor manufacturers.

According to the data of China Food Network, in 2019, the production capacity of Maotai flavor liquor was about 550000 kiloliters, the sales revenue was about 135 billion yuan, up 22.7% year on year, and the profit was about 55 billion yuan, up 22% year on year.

In 2019, Maotai flavor liquor achieved 21.3% of sales revenue and 42.7% of profits with 7% of the production capacity in the liquor industry.

Because of this, in recent years, all kinds of domestic capitals have focused on the "better business" of Maotai flavor liquor, and many of the entrants focus on other flavor liquor enterprises.

Swellfun (600779. SH) is the latest listed liquor company. On the evening of April 9, Swellfun announced that the company had signed a joint venture project framework agreement with Liang Mingfeng and Guowei in Chengdu. Swellfun plans to jointly invest with Liang Mingfeng to establish a new joint venture company, tentatively named Guizhou Swellfun Guowei Wine Co., Ltd.

It is reported that the registered capital of the joint venture is at least 800 million yuan. Swellfun contributed in cash, accounting for 70% of the registered capital of the joint venture, and Mr. Liang Mingfeng contributed in kind, accounting for 30% of the registered capital of the joint venture.

The relevant person of Swellfun told the reporter that according to the current plan, Guowei Company will be responsible for the future production, and Swellfun will be mainly responsible for the channel. As for the planned production capacity and future orientation of soy sauce and wine products, they have not been determined yet.

Shuijingfang is far from the only listed liquor company involved in soy sauce liquor in A-share market. According to incomplete statistics by the reporter, since 2010, liquor enterprises including Wuliangye (000858. SZ), Yanghe Shares (002304. SZ) and Jinshiyuan (603369. SH) have also distributed soy sauce wine.

In June 2016, Yanghe Group acquired a Maotai flavor liquor enterprise named Guizhou Guijiu, which is also the first strategic M&A project of Yanghe during the "13th Five Year Plan" period.

In 2019, the President of Yanghe said at the annual marketing work conference that 2019 would be the year when Yanghe Maotai flavor liquor products will be fully distributed. It is necessary to focus on promoting the nationwide distribution of Maotai flavor liquor, and take the leading products of your liquor as the "assault gun" to fully penetrate the national market, including the key markets in and outside your province.

It was also in the same year that Yanghe said that its planned production capacity of expensive liquor was 5000 tons. At present, the brand is in the cultivation stage and its sales volume is not large.

The above statement has also been confirmed by Yanghe Stock. The person told the reporter that at present, "the overall scale and volume of your liquor is not very large, and the sales volume in surrounding areas may be better, and it is planned to arrange e-commerce channels."

In contrast, Wuliangye, another head liquor enterprise, entered the Bureau of Maojiu earlier. As early as the middle of 2010, Wuliangye launched Yongfu Sauce Wine.

It was reported at that time that Wuliangye attached great importance to the operation of Yongfu sauce wine. In addition to postponing the time of listing for several times, we also set up a separate business unit and established a separate marketing and accounting system.

However, people from Wuliangye said to reporters recently, "Wuliangye has not made soy sauce wine, and now it is only a few years ago."

The A-share listed liquor companies that are interested in "soy sauce wine" still have this fate. At the 2019 Sugar&Wine Fair, Jinshiyuan launched the high-end Guoyuan crystal V series with a price of more than 1000 yuan.

Jinshiyuan said at that time that the company had started to research and develop Maotai flavor products since 2001, and finally it was finalized as Guoyuan V9 with elegant Maotai flavor style. The liquor body was high-quality old base liquor that had been used for more than 10 years, and the price was only half of the market price of Maotai at that time.

The 2020 annual report of Jinshiyuan shows that the sales growth of V series last year has exceeded 50%. At the performance exchange meeting on April 19 this year, the management of Jinshiyuan said that the sales of V series in the first quarter of 2021 had reached about half of the sales of last year. Among them, the elegant Maotai flavor V9 accounts for 40% of the sales of V series.

When answering the question of "how to promote V9", Jinshiyuan said that the business market is the top priority at present. Due to the high acceptance of V9 consumers, it is now less difficult to promote than expected.

"The V series is mainly for the promotion and upgrading of the company's products. At present, V9 has more group buying channels. Later, it was not considered to launch medium and high-end soy sauce wine of hundreds of pieces ". The relevant people of Jinshiyuan said to reporters that elegant soy sauce is the company's own characteristic of development," there is no need to get close to traditional soy sauce. If consumers like the taste of our products more, we will stick to our own way. "

"There must be exchanges with Guizhou Maojiu. As for mergers and acquisitions (liquor enterprises), it depends on the future fate," said the person.

Industry pattern will be impacted

Although there are already many other flavor liquor enterprises entering Maotai liquor, the aforementioned liquor researcher told the reporter that it is not easy for other flavor liquor enterprises to enter Maotai liquor.

"First of all, the production process of soy sauce wine is more complex, and there are relatively high requirements for the production environment. Although the production process can be copied to other regions, it is difficult to control the quality. This is certainly impossible to do in the north. In the south, there are not many regions that are suitable for making soy sauce wine. In short, you can draw concentric circles with Maotai Town, and the farther away from it, the worse the quality will be." The researcher said.

Everbright Securities also pointed out that compared with Luzhou flavor liquor and light flavor liquor, the production process of soy sauce liquor is complex and the brewing time is longer. Maotai flavor liquor takes Chishui River basin as the core area, with a strong concept of production area. In 2020, the production capacity of soy sauce and wine in the Chishui River basin will account for more than 85% of the national production capacity.

"Moreover, the investment and construction cost of soy sauce wine, especially Kunsha wine with high quality, is very high. Taking the production capacity of 10000 tons of Kunsha soy sauce wine as an example, its construction capital investment will need 2.5 billion yuan. After that, the annual brewing cost will still be 500 million yuan. Moreover, due to the limitation of technology, wine will not be produced in the first four years, and it will be sold and generated revenue in the fifth year. This does not include land acquisition difficulty, interest costs, storage and transportation costs, personnel costs, etc. " According to the researcher mentioned above, the cost of wine enterprises' personal involvement in sauce wine production and new production lines is very high, and few wine enterprises can get so much cash.

At present, the scale of Chinese sauce wine industry is still expanding rapidly. According to the prediction of Everbright Securities, from the perspective of capacity, most liquor enterprises have carried out capacity expansion since 2019, with a total planned output of 180000 tons. Considering three scenarios of optimism, neutrality and pessimism, it is expected that the capacity scale will reach 73/65/600000 tons in 2022, and the sales volume of soy sauce wine will be 44/39/36000 tons in 2026. Assuming that the average price of the industry maintains a growth rate of 4% - 6%, it is comprehensively estimated that the compound growth rate of the sauce wine industry revenue in 2019 - 2026 will be 15%/12%/10%, and the sauce wine revenue in 2026 will reach 3705/308.7/266.5 billion yuan, accounting for more than 30% of the liquor industry.

At the moment of rapid development of soy sauce wine, it is not easy for other flavor liquor enterprises to enter the market of soy sauce wine, nor is it easy to maintain their original market share.

West China Securities pointed out that in the face of demand explosion, soy sauce wine will subvert industry competition. The strong experience of soy sauce wine products makes the brand details and brand building work "not so important for the time being". Moreover, because of the direct realization of consumer cognition interception at the consumer end, soy sauce wine enterprises do not need to go to the same way as Luzhou flavor wine enterprises to do "meticulous channels and complex consumption cultivation", Instead, we only need to "do a good job in production capacity supply, coupled with rapid national investment attraction and horse racing enclosure".

"To some extent, this is another dimension reduction attack in addition to brand in the competition between Maotai flavor category and Luzhou flavor category - leading marketing can't fight against the trend of Maotai wine," Huaxi Securities said.

"In the future, almost all other flavored wines will be affected by soy sauce wine. Among them, high-end wines of other flavored wines may be less affected, because each high-end wine is worthy of the name of good wine, which will have full market competitiveness." The aforementioned researcher said.

However, the person also told the reporter that the performance of other aromatic wines, including Luzhou flavor, would not be greatly disturbed in the short term.

According to the published quarterly report of 2021, the performance of many liquor companies exceeded market expectations. Some institutions pointed out that the "structural prosperity of the industry will continue".

For example, Swellfun is expected to achieve revenue of 1.23 billion yuan in the first quarter, up 53.6% year on year, and net profit of 425 million yuan, up 119% year on year; Jinhui Liquor (603919. SH) realized a total revenue of 510 million yuan in the first quarter, up 48.4% year on year, and a net profit of 120 million yuan, up 99.3% year on year.

The highland barley wine (002646. SZ), which lost money in the first quarter of last year, also recently released the first quarter performance forecast. It is expected that the performance will turn loss into profit, achieving a net profit of 60 million to 80 million yuan.

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