---
title: "Yuan Renguo Steps Down, Li Baofang Overhauls Moutai's Distribution Channels"
description: "Yuan Renguo, who spent his career helping Moutai overcome difficulties, faced his own challenges. Nearly a year after stepping down as chairman of Moutai Group, Yuan was removed from his positions in the Guizhou Provincial Committee of the Chinese People's Political Consultative Conference (CPPCC). From a frontline liquor worker to the top leader of Moutai, the 63-year-old Yuan is a figure of both legend and controversy. During his 18 years at the helm, Moutai overtook Wuliangye domestically and surpassed global giant Diageo to become the world's top liquor company, with market value once exceeding one trillion yuan."
author: "黄嘉祥"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2019-05-15"
language: "en"
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# Yuan Renguo Steps Down, Li Baofang Overhauls Moutai's Distribution Channels

> Yuan Renguo, who spent his career helping Moutai overcome difficulties, faced his own challenges. Nearly a year after stepping down as chairman of Moutai Group, Yuan was removed from his positions in the Guizhou Provincial Committee of the Chinese People's Political Consultative Conference (CPPCC). From a frontline liquor worker to the top leader of Moutai, the 63-year-old Yuan is a figure of both legend and controversy. During his 18 years at the helm, Moutai overtook Wuliangye domestically and surpassed global giant Diageo to become the world's top liquor company, with market value once exceeding one trillion yuan.

**Yuan Renguo, who spent his entire career helping Moutai overcome difficulties, faced his own challenges.**
Nearly a year after stepping down as chairman of Moutai Group, Yuan Renguo was removed from his positions as a standing committee member of the 12th Guizhou Provincial Committee of the Chinese People's Political Consultative Conference (CPPCC), deputy director of the Economic Committee, and a member of the provincial CPPCC.
From a frontline liquor worker to the top position at Moutai Group, the 63-year-old Yuan Renguo is undoubtedly a figure of both legend and controversy. During his 18 years at the helm of Guizhou Moutai, he overtook Wuliangye domestically and surpassed global liquor giant Diageo to become the "world's top liquor company." The listed company's market value once exceeded one trillion yuan, with Moutai Group's revenue growing 48-fold and net profit increasing 68-fold.
**Success and failure are intertwined.** Moutai's brilliance cannot be separated from the marketing system built by Yuan Renguo, but it also became a breeding ground for corruption among distributors. Several Moutai executives from the Yuan era were investigated. Since Yuan stepped down in 2018, traces of his influence have been gradually erased, and Moutai's original distributor system has undergone a "major cleanup." As of the first quarter of 2019, a total of 533 distributors had been revoked by Guizhou Moutai.
"Now in Guizhou, Yuan Renguo has become a sensitive topic, and most people avoid discussing him," a former Moutai employee in Guizhou, Chen Zhe (pseudonym), told Times Weekly. "Yuan's contribution to Moutai was still significant."
The correction of the marketing system from the Yuan era continues, and the market is watching closely to see who will receive the "confiscated" Moutai liquor quotas.
On May 5, Moutai Group announced the establishment of a wholly-owned marketing company, which immediately caused an uproar. The market questioned that this move involved serious related-party transactions, eroded the listed company's profits, and harmed corporate governance. Guizhou Moutai's market value evaporated by over 100 billion yuan in just three days.
What is the intricate connection between this storm triggered by marketing reform and Yuan Renguo? In the year of striving for the 100-billion-yuan revenue target, how will Moutai balance the interests between the group and the listed company?
Over the past few days, Times Weekly reporters have repeatedly called Guizhou Moutai's board secretary office and board secretary Fan Ningping, but the calls went unanswered. Reporters also sent letters to Guizhou Moutai regarding Yuan Renguo's whereabouts, the establishment of the marketing company by Moutai Group, and adjustments to the marketing system, and contacted Moutai's relevant personnel, but received no response by the time of publication.
**Success in Marketing, Chaos in Channels**
Let's rewind to the summer of 1998. The Asian financial crisis swept the region, severely impacting the domestic liquor industry. Moutai, once a "daughter of the emperor who never worried about marriage," began to worry. By July, only one-third of the 2,000-ton sales target had been achieved.
That year, Moutai Distillery underwent restructuring, and the 42-year-old Yuan Renguo was appointed general manager of Guizhou Moutai. Tasked with a critical mission, Yuan decided to focus his first efforts on the marketing system. A month later, Moutai established a sales company, and Yuan personally selected 17 marketers to form the first marketing team in Moutai's history, breaking the planned economy's sales system.
After training, this marketing team, known as the "daredevil team," quickly deployed to markets across the country. Yuan himself even cooked a home banquet, inviting heads of local sugar and liquor companies to drink "solidarity liquor," hoping they would help Moutai overcome its difficulties.
By the end of the year, Moutai not only completed its sales tasks on schedule but also achieved its best performance in history. That year became the starting point of Moutai's rise and a turning point in Yuan's career at Moutai. He was seen as the successor to Ji Keliang.
Entering Moutai at age 19, Yuan started as a frontline liquor worker and held various positions, including supply and marketing, publicity, factory office director, workshop director and party branch secretary, assistant to the factory director, and deputy general manager. He was highly regarded by Ji Keliang, who believed that "for an enterprise like Moutai with traditional craftsmanship, leaders must go deep into the grassroots and draw nourishment from production. I came this way, and my successor should do the same."
Everything fell into place. In 2000, Yuan Renguo took over from "Moutai godfather" Ji Keliang and became the new helmsman of Guizhou Moutai. The following year, Yuan led Guizhou Moutai to the capital market. That year, Guizhou Moutai's revenue was 1.618 billion yuan, with net profit of 328 million yuan.
At that time, Moutai was not yet the big brother of the liquor industry, while Wuliangye had been the leading brand in China for many years. In 2001, Wuliangye's revenue was 4.742 billion yuan, and Moutai was only one-third of that.
After Yuan took office, Moutai began a rapid ascent. In 2017, Guizhou Moutai achieved revenue of 58.2 billion yuan, a 35-fold increase from 2001, and net profit of 29 billion yuan, an 84-fold increase.
When reviewing the brilliant achievements of the past 20 years, Moutai attributes them to "Moutai marketing created the Moutai phenomenon, and the Moutai phenomenon created the Moutai legend." Behind the Moutai myth, distributors played an indispensable role.
At the 2017 National Distributor Symposium held in December 2017, Yuan Renguo summarized Moutai's 20-year marketing journey: The distributor team grew from 146 in 1998 to over 2,000 domestic distributors and specialty stores, with the marketing network covering all prefecture-level cities and over 30% of county-level cities. There were 104 overseas agents, covering 66 countries and regions. The company's sales staff grew from the initial 17 to 553, plus over 20,000 distributor marketing personnel.
"No matter when, Moutai must adhere to a market and customer-centric approach, never forget the hard work of distributors, and never abandon the view that distributors are gods and benefactors," Yuan said at the meeting.
Multiple distributors told Times Weekly that during Yuan's tenure, he had good relationships with distributors. Every time they went to Moutai for meetings, the hospitality was particularly thoughtful, and they were respected. But ultimately, merits cannot offset faults, and history will judge.
**The Moutai myth was built on marketing, but its chaos also began with channels.**
Starting in mid-2016, Moutai liquor was in short supply, causing retail prices to soar. The 53-degree Feitian Moutai rose to over 2,000 yuan, with a price difference of hundreds or even over a thousand yuan between ex-factory and terminal prices, creating huge profit margins. Distributors hoarded goods, scalpers speculated, and chaos such as channel crossing and counterfeits occurred frequently, pushing the market to the brink of losing control.
To avoid losing control, Yuan Renguo introduced a package of measures to strengthen management of distributors. In late April 2017, Moutai's marketing company issued two disciplinary documents, reporting and holding accountable 82 non-compliant distributors. This iron-fisted approach became one of Yuan's key tasks in his later years at Moutai.
However, unlike before, this time Yuan failed to end well.
Everything came to an abrupt halt late on May 6, 2018. That day, Moutai Group's cadre meeting lasted until after 11 p.m. Li Yifei, member of the Standing Committee of the Guizhou Provincial Party Committee and head of the Organization Department, announced at Moutai Group: one, Li Baofang was nominated as chairman of Moutai Group, with the appointment subject to legal procedures; two, Yuan Renguo would no longer serve as chairman of Moutai Group.
**"Moutai Does Not Want to Be a 'Corrupt Liquor'"**
Regarding the sudden departure of Yuan Renguo, Moutai stated it was "a normal retirement, please do not speculate excessively," and Yuan himself responded to media that he left "due to age." Nevertheless, the sudden end of the "Yuan Renguo era" became more complicated due to corruption and bribery cases involving Moutai's channel chaos.
During Yuan's tenure, incidents of officials, Moutai executives, and employees intervening in distributor agency rights for personal gain occurred from time to time.
Times Weekly reporters found that from 2008 to 2018, several senior executives, including former Guizhou Moutai general manager Qiao Hong, former Moutai Group deputy party secretary and deputy general manager Fang Guoxing, and former Guizhou Moutai CFO and deputy general manager Tan Dinghua, were sentenced for accepting bribes of over ten million yuan. Many cases involved providing help to Moutai liquor distributors or suppliers, or operating Moutai specialty stores in the names of relatives.
Chen Zhe told Times Weekly that among Moutai liquor distributors, many were employees and their families, or had connections with local officials.
Provincial and ministerial-level officials also fell over Moutai liquor. Since August 2018, Guizhou Province issued a notice on self-inspection and cleanup of cadres' illegal involvement in Moutai liquor operations, investigating party members and cadres who used their positions or influence to invest in shares, become special distributors, resell Moutai liquor, or intervene in Moutai liquor operations through recommendations, approvals, or official letters. Many cadres in Guizhou have already been removed from office due to Moutai liquor involvement.
In fact, after Yuan stepped down, his successor Li Baofang immediately launched a drastic reform of Moutai's marketing system. Financial reports show that as of the first quarter of this year, the number of distributors decreased by 533, with 437 revoked in 2018 alone. As of the end of the first quarter of 2019, Guizhou Moutai had 2,454 domestic distributors.
Li Baofang's style is completely different from Yuan Renguo's. "Yuan Renguo was a typical businessman," a distributor told Times Weekly.
Many of Chen Zhe's Moutai distributor friends had their agency rights revoked. "Most of the revoked distributors are from Renhuai, Guizhou. They obtained distributor qualifications mainly through relationships with local officials or employees, but most entered when Moutai's market was not good."
"In the past, when Moutai was hard to sell, the company pushed sales staff to work hard, and some salespeople had no choice but to become distributors according to the rules at the time. But these Moutai employee distributor qualifications seem to have been cut off all at once last year," Chen Zhe told Times Weekly. He added that Moutai may continue to clean up distributors, and many of his distributor friends are worried.
Yuan Renguo has thus become a taboo topic. Many distributors, when interviewed by Times Weekly, deliberately avoided topics related to Yuan and the "cutting of vassals" among distributors, and some even refused to answer directly.
Zhu Danpeng, an analyst at China Food Industry, told Times Weekly that Yuan Renguo's positive role in Moutai's development cannot be denied.
Cai Xuefei, a senior liquor industry analyst, also told Times Weekly that Yuan Renguo was a contributor to Moutai's rapid development, but Moutai bears unshirkable regulatory responsibility for the irregular operations in channels during rapid growth.
Regarding the relationship between corruption and Moutai liquor, Yuan Renguo said in a 2016 interview for the anti-corruption documentary "Always on the Road" that anti-corruption has made Moutai better. Moutai also reiterated this stance: **Moutai liquor has no connection with corruption, and Moutai has never been, and does not want to become, a "corrupt liquor."**
Ironically, since the second half of 2018, rumors about Yuan being "investigated" have been rife. On May 5 this year, after Yuan was stripped of his positions in the Guizhou Provincial CPPCC, various rumors resurfaced. Moutai also tried to distance itself: "The former chairman's removal from the CPPCC has nothing to do with Moutai Group now."
This time, Yuan Renguo, caught in the whirlpool of public opinion, did not respond.
**Channel Correction in Progress**
On the other side, channel adjustments related to Moutai continue, but this time they have touched the interests of small and medium shareholders.
While cleaning up distributors on a large scale, Li Baofang is also building a new Moutai marketing system. At the 2018 distributor conference, he proposed that Moutai liquor faces new tasks, mainly to rationalize and improve the marketing system, focus on expanding direct sales channels, and promote marketing flattening.
On May 5, Guizhou Moutai Group Marketing Co., Ltd. was officially established. According to Moutai Group's official website, the establishment of the marketing company will complement social channels, promote the transformation of the marketing system, and the marketing company will focus on group purchases, supermarkets, and other terminal customers.
A stone stirred a thousand waves. Since Guizhou Moutai Group Marketing Co., Ltd. is a wholly-owned subsidiary of Moutai Group and independent from the listed company Guizhou Moutai, the market worries that the marketing company will compete with the listed company for profits, erode the listed company's profits, and harm the rights of small and medium shareholders.
On May 6, an investor with the Weibo handle "Moutai 900 yuan is not really high" complained to the Shanghai Stock Exchange (SSE), alleging that Guizhou Moutai was suspected of transferring benefits to major shareholder Moutai Group.
On May 7, the SSE issued a regulatory work letter to Guizhou Moutai, requiring the controlling shareholder to explain the main considerations for establishing a marketing company at the group level, the planned commercial activities and specific business model, and whether there are plans to operate the listed company's Moutai liquor.
The matter is still escalating. On May 8, the investor sent another complaint letter to the SSE. The investor, who has invested in Moutai since 2014, told Times Weekly that this complaint letter is different from the previous one. Moutai Group made two commitments in its prospectus: first, not to engage in horizontal competition; second, not to use its controlling shareholder status to transfer profits from the listed company.
"As investors, we mainly want to remind the SSE to urge Moutai Group to honor its original commitments and not think about transferring profits from the joint-stock company. Because the purpose of Moutai Group establishing a marketing company is to sell all or most of the planned volume of the 476 distributors that were taken back from the joint-stock company. We hope to dissuade Moutai Group from this idea. If they really do this, it would be a blatant transfer of profits from the listed company, completely deviating from the original commitments," the investor told Times Weekly. In fact, the joint-stock company is fully capable of absorbing this planned volume.
"Setting up a sales company is part of Moutai Group's previous 'marketing system adjustment,' but once it touches the interests of the listed company, shareholders will not stand for it. The final function of the sales company will depend on Moutai Group's response. As a leader in the liquor industry and a flagship of quality stocks in the Chinese securities market, it should not do anything to harm the interests of small shareholders," Li Changmin, chairman of Guangdong Xueqiu Investment Management Co., Ltd., told Times Weekly.
So, where will the reform of Moutai's marketing system go? Is Li Baofang's reform aimed at optimizing sales channels, or is it deliberately erasing Yuan Renguo's traces?
Source: Times Weekly
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