Kweichow Moutai, the stock king, is no exception.
The industry that exceeded expectations in the first quarter of this year is undoubtedly liquor. Whether it is a first-line famous wine or a second- and third-tier brand, there is nothing to say, but why is it not reflected in the stock price? Because the sense of capital is smart enough and keen enough, this beautiful quarterly report is a reflection of the liquor industry, and it will go downhill in the future.
Some people say that the liquor industry is a false prosperity. I don’t agree. The liquor industry has been a real boom in the past few years, a super boom based on price increases. Take Luzhou Laojiao as an example. Touqu and Tequ, the two most representative high-volume products, have doubled in terminal retail prices in the past few years, and the high-end product Guojiao has also been driven by price increases. Because of the rise of Pinduoduo, many people like to make fun of consumption downgrades. The liquor industry can smash their faces. To say that the most typical representative of consumption upgrades is undoubtedly liquor.
It is precisely because of the excessive prosperity of the liquor industry in the past few years that many investors who do not know how to do it think that liquor is yyds and the most powerful track. They all ignore one point. The business model of liquor determines that it is also a cyclical industry.
From 2010 to 2013, the most beautiful cubs in the market were two liquors and traditional Chinese medicines. At that time, liquor was even more crazy than it is now. Now Maotai is crazy enough, and its retail price has just reached that level. At that time, the price is only. At that time, the most hyped stock in the stock market was Jiuguijiu. Countless liquor dealers have experienced a roller coaster on the stock.
We all know what happened after the great boom in 2013. Controlling the consumption of Sangong is just the fuse to puncture the bubble. This industry depression has taken three or four years to slowly recover, and a new one started in 2016 and 2017. The boom cycle continues to this day.
The representative of prosperity based on price increases is Dong’e Ejiao. There is no logical difference between Kweichow Moutai and Dong’e Ejiao. The difference is the audience. No matter how enthusiastic and crazy you are about Kweichow Moutai, no matter how disdainful and contemptive you are towards Dong-E-Ejiao, Moutai’s stock price will likely far underperform Ejiao in the next two or three years. The reason is simple: Liquor is in the recovery period after excessive prosperity, and Dong’e Ejiao is in the recovery period after the bubble burst, the difference is that the former is in the downward recovery and the latter is the upward recovery.
Why does the business model of liquor determine that it is a cyclical industry? The sales model of manufacturers-agents-distributors-terminals, coupled with the industry prosperity driven by price increases, is often a turning point when price increases encounter a bottleneck.
This model is too simple and clear. It will strengthen itself when it ascends the channel, and all levels are willing to press the goods. After the excessive prosperity reaches its peak, it starts sideways or goes down the channel, and it will also accelerate the collapse of itself, yes, and pyramid selling. The pattern is very similar. To be more precise, the price-driven prosperity itself is the expected hype, and there is no logical difference between the hype of tulips and the hype of Pu’er tea.
In theory, if the price can be raised forever, then the agent and distributor terminal can keep pressing the goods. As long as the price increase is greater than the capital cost, it is fine. In fact, this is impossible. It started on its own. Funds are costly. Without the expectation of price increases, all channels are reluctant to suppress goods. Manufacturers can only increase promotions and incentives for sales goals, which is equivalent to reducing prices in disguised form, and then each channel will reduce prices in disguised form in the same way. The purpose is to digest inventory. Only then will everyone know that wine is for drinking. A new round of destocking cycle has begun. The length of this cycle depends on the prosperity of the previous economic cycle and future consumption power. The more prosperous the last round, the greater the pressure on destocking this round, and the more uncertain the future economy, the greater the pressure. Some people say that the recent slump in liquor terminals is only a short-term factor under the influence of the epidemic. If it was said in 2017, it would be no problem, but now it is different. It may be like the consumption of Sangong in 2013. It is the driving force behind the bubble. It was the straw that broke the camel’s back.
Don’t be surprised if you see single-digit growth or even negative growth in many companies in the liquor industry in the next year or two.
In this downturn in the liquor industry, there is a high probability that the first to be hit are those second- and third-tier brands whose brand power is not strong in the past few years and have been expanding vigorously in the past few years. How good their sales figures were in the past may be in the future. First-tier brands such as Maowuluyang will be affected much less, but it will not be too good, and there may also be examples of negative growth among them.
The next few years are likely to be a cold winter for baijiu, and the sooner this winter comes, the sooner it will pass. If it is as hard as Dong’e Ejiao, it will be as embarrassing as him in the end. If the bubble of Dong’e Ejiao is punctured and repaired a few years earlier, it is estimated that it will reach a new high.
Don’t hold Dong E E Jiao now, just use him as an example. Traditional Chinese medicine and baijiu are the most beautiful children in 2010-2013. After four or five years of industry restoration, liquor has finally ushered in a super prosperity and it has continued to the present, while traditional Chinese medicine has experienced a decline for more than ten years. It is a sign of recovery. Can’t usher in his great prosperity?
The potential and prospects of traditional Chinese medicine are actually far better than that of liquor. Fewer and fewer people drink alcohol, and more and more people will take medicine, especially in the context of an aging age.
Don’t spray me on Chinese medicine for stepping on liquor, it’s just my personal understanding, it’s not necessarily right, let the market verify it.
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