Wuliangye fights to stay high(1)
Wuliangye Yibin may be the biggest wine producer in the rapidly expanding Chinese liquor market, but to investors, it is coming across as a fumbling giant trying to defend its territory against more nimble competitors like Kweichow Moutai.
Analysts who track the liquor industry have attributed Wuliangye's problem to its close relationship with parent company, Wuliangye Group, and various inter-group affiliates.
Although Wuliangye's output volume, at 90,000 tons in 2008, was three times that of Moutai's, it trailed behind its archrival in both sales and profit. Moutai's sales, at 8.24 billion yuan in 2008, were 310 million yuan higher than Wuliangye's. And its profit, at 5.39 billion yuan, was nearly double that of its much bigger rival.
There was even greater disparity in both companies' earnings per share. Moutai's EPS was 4.03 yuan for 2008, about eight times more than that of Wuliangye's.
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As for brand value, while both firms enjoy instant recognition in the high-end segment of the market place, Moutai's popularity far exceeds that of Wuliangye's at the bourses, analysts said.
At current share prices, Moutai has a market capitalization that is twice as large as Wuliangye's. Interestingly, when Moutai listed in 2001, its market capitalization was only half of that of Wuliangye's, which listed in 1998.
Stock analysts said Wuliangye's problems center around the company's management system wherein executives who have dual responsibilities fill key positions at both itself and its parent.
"The company's unreasonable management system is its worst enemy," Teng Wenfei, a beverage analyst at Shanghai Securities, told China Daily.
Indeed, nearly all the high-level executives at Wuliangye also occupy important posts in Wuliangye Group. As the Wuliangye 2008 financial report showed, the majority of the 20 members of Wuliangye's management committee, including its chairman and executive directors, had executive roles at Wuliangye Group as well.
What's more, their annual bonuses are mainly based on their performances and achievements at the parent company, not the wine making unit, as per the policy of the Yibin State-owned Assets Supervision and Administration Commission, which holds 100 percent share in Wuliangye Group.
