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December 8, 2009

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Home » Business » Consumer

Moutai's move kicks its shares upward

SHARES of Chinese liquor maker Kweichow Moutai rose 3.31 percent yesterday after it announced it would raise the prices of its products by an average of 13 percent from January 1.

A report from Shenyin and Wanguo Securities Co estimated the factory price of the most popular 53-degree Moutai liquor is likely to rise by 13.7 percent, or 60 yuan (US$8.78), to 499 yuan a bottle and a 15-year Moutai would attract the biggest price increase of 30 percent and cost about 2,500 yuan after the price adjustment.

The wholesale price is usually 300 yuan lower than the retail price.

The price hike is due to rising raw material costs, growing demand and the firm's business strategy to tap the peak festive season when liquor consumption normally climbs, the county's biggest spirits maker by market value said in a statement filed to the Shanghai Stock Exchange.

Analysts expect more liquor makers to follow Moutai's move and raise their prices to cash in on the prime sales season and also counter a higher consumption tax which was introduced by the government from August.

"Considering the leading market position of Moutai, we estimate it would trigger a new wave of price increases among other liquor producers later," said an Industrial Securities Co's report.

Shares of Moutai, based in southwest China's Guizhou Province, closed at 176.55 yuan in Shanghai trading yesterday.

Liquor prices have already been increased since the middle of this year as distillers passed on the additional cost to drinkers after China imposed higher consumption tax from August 1 this year.

It is estimated that an average 10-percent price increase could help to make up for the loss caused by the higher taxation.

Moutai's domestic rivals Luzhou Laojiao Co and Sichuan Swellfun Co have already raised the prices of their liquor products by about 10 percent ahead of the coming Chinese New Year.

There is usually high demand for liquor consumption in winter as it is regarded as indispensable for family banquets, corporate and other social occasions during the festive season.


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