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Affordability: The Appeal of 200-Yuan Baijiu Over Pricier Moutai

Against the backdrop of decreased expectations in residents’ incomes, a trend toward rational consumption, and intensified competition within distribution channels, this year’s Spring Festival baijiu consumption has shown a weak recovery. Consumers are seeking both quality and affordability, emphasizing value for money. Additionally, overall alcohol consumption has seen some downgrading.

“It’s not that people can’t afford Moutai, it’s that this baijiu (Tuopai Tequ 50s Vintage Edition) offers better value for money.” On February 12th, an employee at a liquor store in Jian Nan Wholesale Market in Mianyang, Sichuan, told Caijing reporters that this baijiu offers great value for money. The company’s warehouse is already out of stock, with only a small amount of inventory left in the store.

Compared to the sold-out Tuopai Tequ, Caijing reporters noticed that many local baijiu brands in the store, such as Mianyang Fenggu Liquor, have poor sales, with even some liquor with a production date in 2021 still on the shelves. “For high-end liquors like Feitian Moutai, Wuliangye, and Guojiao 1573, there is still essential demand. But for mid-range liquors, there is overall pressure, with the value-for-money factor becoming the primary consideration,” said an analyst from Guolian Securities specializing in food and beverage.

Consumers are becoming more rational, prioritizing value for money, and even well-known liquors are being sold out.

During the Spring Festival, traditionally the peak season for baijiu sales and an indicator of the baijiu market, consumers are showing more rational behavior, demanding both quality and affordability, and preferring high-value products from well-known distilleries.

“Our best-selling baijiu offers the best value for money. It sells for 220 yuan per bottle here, while it’s 594 yuan per bottle at major supermarkets outside,” an employee at a liquor store in Jian Nan Wholesale Market in Sichuan pointed out a bottle of Tuopai Tequ (50s Vintage Edition 480ml) to Caijing reporters.

Tuopai Tequ (50s Vintage Edition) is a product launched by Shede Winery (600702.SH) and sells well in Mianyang. During the Spring Festival, the reporters also drank this baijiu at a relative’s house. The popularity of this baijiu is mainly due to its high value for money. On the one hand, its offline price of 220 yuan is cheaper than on e-commerce platforms like JD.com and Pinduoduo. On the other hand, this baijiu is not only brewed from pure grains but also contains more than 30% of original liquor aged for 10 years.

“This baijiu is really good. Our warehouse is temporarily out of stock now. Only a small amount of inventory is left in the store,” the employee told Caijing reporters. The reporters found that the production date of this Tuopai Tequ was very recent, December 2023. Meanwhile, many other baijiu products in the store had production dates as early as 2021, indicating slow sales.

In fact, Mianyang also has a local distillery, Fenggu Liquor, which should have a competitive advantage in its home market. However, according to the above-mentioned employee, Fenggu Liquor sells only averagely in Mianyang. “Its products are neither high nor low. Customers don’t fancy the low-end baijiu priced at tens of yuan. As for the so-called high-end Fenggu Liquor priced at several hundred yuan, it lacks value for money and is not worth the price. Because compared with similar products from other famous distilleries, it is much cheaper,” the employee said.

Consumption downgrading intensifies competition among major distilleries.

In addition to seeking better value for money, another characteristic of baijiu consumption during this year’s Spring Festival is a general downgrade in consumption, such as a decrease in the grade of baijiu used at weddings.

During the Spring Festival, traditionally the peak season for weddings in China, Caijing reporters also attended a friend’s wedding banquet. They noticed that Wuliangye was served as the baijiu. This product belongs to the Wuliangye series and is priced at around 260 yuan per bottle on JD.com. Previously, most baijiu used at local weddings in Mianyang cost around 300 to 400 yuan per bottle, indicating a general downgrade in baijiu consumption.

In fact, not only the market for baijiu used at weddings has experienced consumption downgrading, but even the market for mass-market baijiu in clear bottles is facing sluggish sales. “My recent research found that the entire market for baijiu in clear bottles is declining severely. This includes products like Niulanshan Erguotou, Laocunzhang, and Jiang Xiaobai,” said baijiu expert Xiao Zhuqing to Caijing reporters.

“Originally, the main consumers of baijiu in clear bottles were migrant workers. Now, with the real estate industry facing a downturn, many migrant workers on construction sites have no work or very little work to do and have returned to their hometowns. The overall decline in sales of baijiu in clear bottles is also due to the lack of purchasing power among migrant workers, who dare not spend,” Xiao Zhuqing explained.

At the same time, competition within the entire baijiu market is intensifying. To compete for the Spring Festival baijiu market and achieve a good start to the year, major distilleries are engaging in close combat and launching large-scale promotions. In order to cater to the trend of rational consumption and better value for money, major baijiu brands have not hesitated to offer significant discounts, such as direct price reductions, buy-three-get-one-free promotions, free baijiu with dining expenditures, and various creative marketing strategies like scanning QR codes to receive red envelopes.

For example, in the Sichuan market, during this year’s Spring Festival, Langjiu’s Honghualang Ten-Year offers consumers better red envelope rewards and channel rebates than its core product, Shuijingjian from Jian Nan Chun, thus forming a competitive advantage in value for money and achieving significant growth in banquet orders and overall baijiu demand during this year’s Spring Festival.

According to recent research by Guolian Securities, with value for money becoming the primary consideration in consumption, baijiu brands such as Qinghua 20, Shuijingjian, Honghualang Ten-Year, and Shuijingfang Zhen Nian 8 have relatively better sales performance, and Luzhou Laojiao 60th Anniversary Edition Tuopai Tequ, as a substitute product for Guojiao 1573, also performed well.

“Overall, recently (during the Spring Festival), the company’s receipts and sales are quite good, and the company’s channel inventory has always been low,” a senior executive from Jin Hui Jiu (603919.SH) told Caijing reporters. ”

The company’s overall sales during this year’s Spring Festival are still good and should be better than last year,” said a person from Quanxing Liquor.

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