Nation's No3 distiller Jiannanchun down but not out

PUBLISHED : Monday, 16 June, 2008, 12:00am
UPDATED : Monday, 16 June, 2008, 12:00am

Despite suffering 1 billion yuan (HK$1.13 billion) in direct losses from the May 12 earthquake, the Jiannanchun Group is confident of a bright future in the lucrative luxury end of the alcohol market.

The mainland's third-ranked distiller is based in Mianzhu, one of the areas worst hit by the massive tremor in Sichuan.

The province is a key alcohol production centre for the country and last year the province's output of 860,000 kilolitres accounted for 17.5 per cent of the nation's total.

Jiannanchun reported that one bottling workshop collapsed, two others were severely damaged and 40 per cent of its crude alcohol went down the drain after ceramic storage containers broke.

Group president Qiao Tianming said this year's sales targets would be tough to meet.

'Last year, sales revenue was 3.6 billion yuan. This year's target is 4.1 billion yuan. Because of the earthquake, this now seems impossible to realise,' Mr Qiao said.

He said the group would 'definitely' fall from its third rank in terms of financial performance this year and it would take at least two years to reach its pre-quake production and inventory levels.

However, the upside is that the yeast pool used to produce its 1514 brand survived and a new bottling production line imported from France will be running in two months, with capacity of 6,000 bottles per hour.

Jiannanchun has tailed Guizhou-based Kweichow Moutai and Sichuan-based Wuliangye in the high-end alcohol market for years.

At about 200 yuan for 500 millilitres, Jiannanchun's products are aimed at white-collar workers and are about half the price of its higher-selling competitors, which were unaffected by the quake. The group's public relations officer, Su Guo, said white-collar workers were a big market, had money to spend and were followers of convention.

'Drinking alcohol is a convention for formal social rites. The power of convention is huge in Chinese society,' Mr Su said.

'Also, traditional Chinese culture is undergoing a revival, if this year's introduction of statutory holidays for traditional festivals is a sign. I think more young people will like alcohol.'

Privately held Jiannanchun does not release financial figures but four listed Sichuan alcohol companies last year registered gross margins of 32 per cent to 64 per cent. And three reported a 20 per cent to 30 per cent year-on-year rise in net profit, despite price increases for grain, the raw material for alcohol.

'The grain costs are not a burden. You know, we make luxury goods,' Mr Su said.