China's emblematic liquor brand Moutai has taken a direct hit from the expansion of the government's prohibition policy and shifting consumption trends among Generation Z.
According to the Financial Times (FT) in the U.K. on the 11th (local time), the wholesale price of China's representative baijiu "Feitian" 500 ml fell to 1,620 yuan (about 330,000 won) this month, the lowest in 10 years. Third-quarter revenue was 39 billion yuan, almost unchanged from a year earlier, the lowest growth rate since 2016. Net profit was 19 billion yuan, flat.
In May, the Chinese government expanded a prohibition policy banning luxury public expenditure that includes alcohol. This means baijiu, which Mao Zedong enjoyed and which had been a fixture at diplomatic events for decades, has disappeared from official occasions. Jennifer Song, a Morningstar analyst, said, "With the prohibition policy coinciding with an economic slowdown, the entire baijiu industry is on a downward trend," and noted, "Moutai, too, has fallen away from being a symbol of premium consumption and has not found a new breakthrough."
Founded in 1951, Moutai once became the world's largest liquor maker and was called a barometer of Chinese consumer sentiment. Its share price surged from 2015 to 2021, sending its market capitalization soaring, but it has since halved from the 2021 peak. The stock has fallen 8.8% over the past year, and the recovery has been slow as the domestic economy remains sluggish. The company announced a share buyback worth 3 billion yuan, but it was not enough to restore market confidence.
Shifts in Generation Z's consumption culture are also posing a major challenge to Moutai. Recently, Moutai held a "Generation Z consumption interpretation" forum to discuss ways to attract younger consumers. The event unveiled new products such as Moutai ice cream and branded toys, but the response from younger generations was tepid. Generation Z prefers lighter alcohol or nonalcoholic drinks over baijiu, which is seen as a symbol of corporate drinking culture and authoritarianism. As no-alcohol culture spreads across many universities and workplaces in China, baijiu is losing ground.
Euan McLeish, a Bernstein analyst, said, "Despite the drop in wholesale prices, margins remain high, but distributors are shouldering the pricing burden." Moutai is controlling supply to maintain its premium image, but mid- to low-priced lines such as the "Series" saw sales fall 8% this year and plunge 34% in the third quarter. Even the low-priced brands launched to broaden the consumer base have underperformed.
Experts say it is difficult for Moutai to be perceived as a "luxury good and investment asset" as it was in the past. Song said, "As prices rise, people stockpile; when they fall, they unload—this behavior keeps repeating and is heightening market anxiety." They note that for Moutai to grow again, it must go beyond its premium brand image and win over new consumer segments.
Experts said, "In an era that values health and moderation, how Moutai reinvents itself is the key to survival," adding, "If it fails to recapture consumer sentiment, it will be hard to break out of a prolonged slump."