With targets of 200 billion yuan in revenue and 100 billion yuan in net profit, are Kweichow Moutai's reform goals too aggressive? Recently, 'King of A-shares' Kweichow Moutai released its 2022 annual report. Amid weak consumption due to the pandemic, Ding Xiongjun, the youngest leader in Moutai's history, delivered a near-perfect performance in his first full fiscal year. In 2022, Moutai achieved operating revenue of 124.1 billion yuan, up 16.87% year-on-year, with a gross margin of 94.19% and net profit of 62.716 billion yuan, up 19.55%, and a net margin of 52.68%, a nine-year high. In 2022, Moutai's daily net profit reached 172 million yuan. Additionally, Moutai set an ambitious goal to 'double' its revenue and profit by 2025 (200 billion yuan in revenue and 100 billion yuan in profit). However, this encouraging performance and plan did not bring market euphoria. While marveling at the surging results, people also worry deeply about Moutai's aggressive expansion. Are Moutai's reform goals too radical? The channel reform vision is grand, but will it disrupt the existing ecosystem and lead to negative consequences?
Capacity Dilemma: Restructuring Product Matrix Moutai's 'national liquor' title is deeply ingrained, and its high business certainty and strong brand moat make both its products and listed company shares highly sought after. Moutai's industry positioning is inseparable from its historical adherence to a 'high quality, high taste' route, making it a 'sturdy不倒翁' in market turbulence. In 1988, when China liberalized price controls on famous liquors, many companies chose to turn 'famous liquor into people's liquor' with low-priced products to embrace the mass market, but Moutai insisted on a high-end positioning. Over decades, Moutai has steadily served as the golden key to high-end social interactions. In the late 20th century, when some leading liquor companies used OEM strategies to expand rapidly through licensing, Moutai stubbornly focused on the high-end market,牢牢 holding onto high-end users through opinion leader marketing, and remained standing amid industry scandals. In 2013, due to policies like 'restrictions on three public consumption', the liquor industry faced a collective downturn, especially affecting high-end liquor sales, with some brands even experiencing price inversions. While many high-end liquors had to discount, Moutai stabilized its performance and channel morale by opening up agency rights and increasing sales rebates. Ultimately, Moutai safely navigated the 2013 industry crisis, and its price firmness was again deeply impressed upon the market.
Moutai's price resilience, besides its high-end positioning, is also due to capacity gaps. Although Moutai has been expanding capacity in recent years, capacity release takes time (and even if capacity increases, market supply can still be artificially controlled to maintain scarcity). The official guide price for the scarce Feitian Moutai is 1,499 yuan, but actual market transaction prices reach around 3,000 yuan. Moutai actually has no product competing in the thousand-yuan price band. To address Feitian's capacity ceiling and Moutai's strategic gap in the thousand-yuan band, on January 18, 2022, Moutai launched Moutai 1935, occupying the 'vacuum' price band and providing an opportunity for expansion. As Moutai's first product in the thousand-yuan band, Moutai 1935 has an ex-factory price of 798 yuan per bottle and a market guide price of 1,188 yuan, sold through Moutai's self-operated e-commerce channel iMoutai and allocated to distributors. The launch of Moutai 1935 was a wise move. It not only enriched Moutai's product structure, allowing more consumers to access Moutai, but also created a user reservoir for Feitian through 'taste training' in the thousand-yuan band. Moutai 1935 has gained market recognition, with sales reaching 5 billion yuan in 2022 according to the financial report. The company has high hopes for Moutai 1935, planning for it to become a 'ten-billion-yuan super single product' in 2023.
To achieve performance growth, relying solely on 1935 is insufficient given Feitian's production ceiling. The expected post-pandemic consumption boom did not materialize, so price increases become inevitable. But raising prices is not easy for Moutai, as it faces multiple pressures from policies, consumers, and distributors. Therefore, Moutai needs new ways to 'gently raise prices in disguise'. In 2022, in addition to 1935, Moutai released the Tiger Year zodiac liquor and the new premium Moutai. The new premium Moutai, retailing at 4,599 yuan, not only forms a complete product ladder with 1935 and Feitian, consolidating Moutai's dominance in the ultra-high-end segment, but also serves as a disguised price increase. Additionally, Moutai's 24 solar terms liquor and 100ml Moutai are also ways to raise prices in disguise.
Many say that Moutai 1935 and the new premium Moutai show Moutai's 'ambition' to reform its product system. But some have doubts: will Moutai's excessive development of repackaged liquors to raise prices in disguise dilute Feitian's brand value, outweighing the benefits? As is well known, Feitian is Moutai's main force. With the growing strength of products above and below Feitian, will it divert Feitian users? Will it change Feitian's current market supply-demand situation? It should be noted that the supply-demand gap for Feitian Moutai is partly due to capacity ceilings and partly due to artificial scarcity caused by channel hoarding.
Channel Dilemma: Heavy-Handed Direct Sales Moutai is a liquor, but another major reason it is snapped up is its financial attributes similar to luxury goods. Buying Moutai is even considered an investment by some. The purchase price of Moutai has been rising over time. In 1981, Moutai experienced a price inversion with an ex-factory price of 8.4 yuan and retail price of only 7 yuan. Since then, the retail price has soared: 106 yuan in 1990, 350 yuan in 2004, 1,000 yuan in 2010, and now 3,000 yuan. New Moutai is expensive, but aged Moutai is even more so. The scarcity of Moutai leads to a gap between the guide price and circulation price, opening up more considerable bargaining space for aged liquor. After buying Moutai and storing it for over a decade, old Moutai can easily sell for twice the price of new Moutai. The almost transparent price system of Feitian Moutai even makes hoarding Moutai a 'good business'. With its status as a high-end social symbol, unbeatable taste, and reliable collectible value, it's hard for Moutai not to be popular. Flying to buy Moutai, hiring full-time staff to call and grab Moutai... Under heavy temptation, Moutai never lacks such incredible stories.
Since 1998, when Moutai established the 'special distributor + exclusive store (counter)' sales model, distributors have been 'indispensable' in Moutai's scarcity journey, as they have both the motivation and capability to earn excess profits by hoarding goods. The various chronic problems in Moutai's distributor channels have long been criticized by netizens. Some Moutai leaders have attempted channel reforms, but ended up empty-handed and even in trouble themselves. From Moutai's 2022 annual report, it's easy to see that the pressure of channel reform is being transferred to distributors. As of the end of 2022, Kweichow Moutai had 2,084 domestic distributors, a decrease of 5 from the previous year, and 105 overseas distributors, an increase of 1. Wholesale agency channel revenue was 74.394 billion yuan, down 9.31% year-on-year. This contrasts sharply with Moutai's overall revenue growth of 16.87%.
To complete channel reform, besides reducing others' power, Moutai needs to boost its own, so direct sales channels have become the main driver of Moutai's revenue. Moutai's direct sales channels include offline direct-operated stores (about 36 nationwide, with annual quotas of 10-30 tons), group purchase channels (for large corporate clients), and online direct sales platforms (i.e., self-operated e-commerce iMoutai). Annual report data shows that in 2022, Moutai's direct sales channels achieved revenue of 49.379 billion yuan, up 105.49% year-on-year, accounting for 39.79% of total revenue. As of the end of 2022, the iMoutai digital marketing platform had over 30 million registered users, achieving sales revenue of 11.883 billion yuan with a gross margin of 95.26%, becoming a key part of direct sales channel reform. iMoutai has built an S2B2C online-offline integrated sales model, where Moutai (S端) sells multiple products from the Feitian series and sauce-flavor series online, supported by over 1,300 offline B-end distributors for delivery and self-pickup, covering C-end users comprehensively from online to offline.
The exploration of new channels not only means diversified sales methods, enhanced stickiness with younger groups, and stronger brand-consumer connections, but also means seizing power from distributors and increasing the voice of direct sales, as well as bringing tangible high gross margins. By 2025, Moutai has set a target revenue of 200 billion yuan. With distributor channels not rising but falling, Moutai's direct sales channels will inevitably have to shoulder the heavy responsibility.
The sword is drawn, and Moutai's aggressive self-operated channels have also raised deep market concerns.
Moutai's products are not always in short supply; they also have periods of sluggish sales. In 2013, during the industry downturn, to solve sales difficulties, Moutai opened up operating rights. Applicants only needed to pay a 30 million yuan deposit, have annual turnover of over 35 million yuan, and have no criminal record for the legal representative to become a Moutai distributor. These heavily invested distributors not only provided stable performance for Moutai but also formed a huge marketing group. Although Moutai distributors have long been criticized as a breeding ground for corruption, they have indeed become a 'collaborative body' that created the Moutai myth in historical development. This large group of distributors, with layers of added value, can pool various resources and capabilities, using their customer resources to help the company expand markets, build the brand, maintain customer groups, reduce risks, enhance brand competitiveness, and together create Moutai's industry legend. They are Moutai's huge traffic buffer pool, keeping the supply and demand of Moutai liquor in a delicate dynamic balance.
Undoubtedly, channel flattening and direct sales are the main themes of reform, but if distributors feel a crisis from the rapid advance of direct sales channels and begin to accelerate releasing goods, a single move could affect the whole, and Moutai's price myth could be broken. Without distributors' flexible channel control, can Moutai maintain its lofty posture? If direct sales channels cannot dynamically manage market supply and demand, will it break the current supply-demand state and make Moutai no longer scarce? Once Moutai's financial attributes collapse, a domino effect of brand collapse will follow. From Moutai's passionate future plans, to achieve the doubling by 2025, channel reform may not be so gentle. Is Moutai, rapidly switching tracks, killing the goose that lays the golden eggs? Many investors worry that the whip harshly applied to distributors will eventually fall on Moutai itself.
These series of question marks make people see gloom behind Moutai's 2022 performance. Investors' concerns are not unfounded. Since March, the price of 53° Moutai has fallen below 2,700 yuan, a drop of nearly 30% from last year's high of 3,800 yuan. Along with the price decline, Moutai's stock price has also been sluggish. Currently, across the industry, expectations for high-end liquor are low, coupled with economic issues and climate problems, Moutai is under frost, but it cannot be completely separated from the impact of Moutai's channel reform. From Moutai ice cream to iMoutai, Moutai may have gained some social increment, but cultivating liquor users is a long-term process, and user growth in the short term is limited. Against this backdrop, Moutai's rapidly rising direct sales are also snatching food from distributors' mouths. This shift can certainly bring higher profit margins, but it is limited. The real social inventory and capacity of Feitian may be far higher than the brand's imagination. If Moutai's reform is too drastic, putting pressure on distributors, Moutai's soaring performance may need to be exchanged for a painful brand cost. Therefore, some investors suggest not to use short-sighted political achievements at the expense of long-term interests. For such a huge enterprise, slow reform may be more stable than rapid advancement. However, it must also be acknowledged that all reforms come with pain. For enterprises daring to reform, we should give patience and tolerance, and wish Moutai to go steadily and far.