China Consumer

Water to wine

Wahaha is expanding into the booming baijiu business

Wahaha w

It became apparent it’s not easy to make money in the China market when Coca-Cola saw the need to deviate from its traditional soft drink formulas and launch a health supplement drink (see WiC495).

The same logic may also apply to Wahaha. Meaning ‘children laughing’ in Chinese, Wahaha began life in the 1980s selling nutritional drinks that targeted Chinese kids.

The Hangzhou firm’s founder Zong Qinghou has been lauded by various compilers of wealth rankings as ‘China’s richest man’ several times. Nevertheless intense market competition has seen Wahaha expanding into different fields such as baby formula, bottled water and commercial properties.

Yet it still came as a surprise when consumers spotted that two new Wahaha brands of grain wine, or baijiu, went on sale during the Chinese New Year.

One of the new product lines was named after the founder’s family name and a 500ml bottle is selling for Rmb1,388($217). This is pricier than the indicative retail price of a standard bottle of Moutai, China’s most famous baijiu, news portal 36Kr reported.

“I drank Wahaha’s nutritional drinks when I was a kid and now I am being offered for purchase Wahaha’s rice wine. The company has indeed been growing up with me,” one of the most popularly liked comments on weibo suggested.

This is not Wahaha’s first foray into the liquor market. In 2013, when the baijiu sector was hit by Chinese leader Xi Jinping’s anti-corruption campaign, Zong announced a then counterintuitive plan to invest Rmb15 billion into the beleaguered spirits market.

Wahaha’s former foray into the baijiu market was not encouraging, China Securities Journal reported, as the plan was rapidly shelved. Wahaha subsequently made little mention of the initiative.

The company’s return this month to the very same market is indicative of the ‘growth pains’ it is going through, 36Kr noted. Its far earlier expansion into bottled waters, for example, has been met with stiff competition from Nongfu Spring, another fast-moving goods heavyweight based in Hangzhou.

Competition in the baijiu world is pretty feisty too. There are at least 18 listed firms in China with their own grain wine offering, including the most valuable A-share Kweichow Moutai. Many of them have seen their share prices double over the past two years. Perhaps that’s why Zong’s back in the market.

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