When someone shares with you something of value, you have an obligation to share it with others.
Thursday 16 October 2008
China’s Trump Dragon sees solid growth in 2009 despite softer economy
Trump Dragon Distillers, a maker of traditional Chinese alcoholic beverages, sees solid profit growth in 2009 despite signs of a less robust economy as any slowdown won’t keep tipplers away from their favourite drink. PDF
China’s Trump Dragon sees solid growth in 2009 despite softer economy
16 October 2008
(XFN-ASIA) - Trump Dragon Distillers, a maker of traditional Chinese alcoholic beverages, sees solid profit growth in 2009 despite signs of a less robust economy as any slowdown won’t keep tipplers away from their favourite drink.
Zhou Tao, deputy chairman and joint chief executive officer of Singapore-listed Trump Dragon, said that the company is aiming to expand its production of mid-range quality baijiu, a traditional distilled alcoholic drink.
“Our sales of baijiu will not be hurt by the weakening economy,” said Zhou.
He said a slowdown will cut into sales of high-quality baijiu, but it will boost demand for mid priced products where the company is already planning an expansion.
“We believe that demand for mid-priced baijiu will increase as purchasing power is curtailed. We will seize the opportunity to expand production capacity of our mid-level baijiu and expand our brand’s distribution into more provinces in China,” Zhou said.
“Baijiu is a traditional Chinese alcoholic drink. It is widely consumed at commercial functions, business receptions and wedding banquets. Chinese people have a deep-rooted tradition of drinking baijiu on formal occasions,” he said.
Trump Dragon is based in Zhoukou city in central China’s Henan province, now China’s most populous province and its biggest consumer of baijiu.
The company listed its shares on the Singapore exchange last month in an offer that raised net proceeds of 34.1 mln sgd.
Most of the company’s baijiu is sold within Henan province but Trump Dragon is looking to expand into nearby provinces such as Hebei and Shandong in north China and even Guangdong in the south.
Baijiu production requires grain and grain costs have been rising. Asked about the impact of those higher costs, Zhou said the price hikes could be absorbed.
“It is true that we use grains such as wheat and rice husks as our materials, but these things just account for 10 pct in our total costs,” Zhou said.
Packaging materials, particularly glass and ceramic bottles, are among the key costs. So far the rising costs have been passed along to customers.
“We successfully raised retail prices in the first half of 2008 to offset rising material prices,” he said.
The company’s revenue for the year ended June 30 was 717.3 mln yuan, up 33 pct year-on-year. Net profit climbed 64 pct to 140.8 mln yuan.
The company’s annual capacity of baijiu is now 36,876 metric tons but once the company’s planned production facilities are in place, capacity will rise to 100,000 tons.
Zhou did not say when Trump Dragon would reach this level as the company is now in discussions with the Zhoukou government about the purchase of additional land for this expansion.
The company has two major product lines – premium and regular baijiu. The premium line includes eight varieties of mid- to high-quality products, which account for 60 pct of the company’s total revenue. Its regular line has 60 different products which account for 40 pct of revenue.
“The premium series products are sold at prices around 200 yuan per bottle and the price of the regular varieties range from 20 to 80 yuan,” Zhou said.
High-end baijiu is made of fine grain alcohol while normal grain alcohol is used for lower qualities.
While baijiu is popular in China – particularly in the northern and western regions – the sector is highly competitive. There are about 40,000 baijiu producers in China with more than 3 mln brands.
Shanghai-listed distiller Guizhou Maotai, which is based in Guizhou in the southwest, boasts having China’s most coveted brand. Its top line of “luxury” baijiu carries a retail price of more than 800 yuan.
“Guizhou Maotai is a good model for us but it has something that can’t be copied. It has a peerless brand image and it’s remote location is actually an advantage. Still, there is much to learn from their operation,” Zhou said.
Zhou noted that baijiu has caught the attention of foreign liquor companies. Last year, global liquor giant Diageo raised its stake in Sichuan Chengdu Quanxing Group, the parent company of Shui Jing Fang, one of China’s leading brands, to 49 pct from 43 pct.
“Internationalization is the trend for baijiu. We chose to list our shares in Singapore partly for this reason. We want to use the Singapore market to promote our brand to the world,” said Zhou.
Zhou said Trump Dragon has not yet used the funds raised from its initial public offer but it is looking to make investments, and that could mean it will want to tap those funds.
“In the future, the baijiu industry will be streamlined. Only those big brands can survive,” he said.
1 comment:
China’s Trump Dragon sees solid growth in 2009 despite softer economy
16 October 2008
(XFN-ASIA) - Trump Dragon Distillers, a maker of traditional Chinese alcoholic beverages, sees solid profit growth in 2009 despite signs of a less robust economy as any slowdown won’t keep tipplers away from their favourite drink.
Zhou Tao, deputy chairman and joint chief executive officer of Singapore-listed Trump Dragon, said that the company is aiming to expand its production of mid-range quality baijiu, a traditional distilled alcoholic drink.
“Our sales of baijiu will not be hurt by the weakening economy,” said Zhou.
He said a slowdown will cut into sales of high-quality baijiu, but it will boost demand for mid priced products where the company is already planning an expansion.
“We believe that demand for mid-priced baijiu will increase as purchasing power is curtailed. We will seize the opportunity to expand production capacity of our mid-level baijiu and expand our brand’s distribution into more provinces in China,” Zhou said.
“Baijiu is a traditional Chinese alcoholic drink. It is widely consumed at commercial functions, business receptions and wedding banquets. Chinese people have a deep-rooted tradition of drinking baijiu on formal occasions,” he said.
Trump Dragon is based in Zhoukou city in central China’s Henan province, now China’s most populous province and its biggest consumer of baijiu.
The company listed its shares on the Singapore exchange last month in an offer that raised net proceeds of 34.1 mln sgd.
Most of the company’s baijiu is sold within Henan province but Trump Dragon is looking to expand into nearby provinces such as Hebei and Shandong in north China and even Guangdong in the south.
Baijiu production requires grain and grain costs have been rising. Asked about the impact of those higher costs, Zhou said the price hikes could be absorbed.
“It is true that we use grains such as wheat and rice husks as our materials, but these things just account for 10 pct in our total costs,” Zhou said.
Packaging materials, particularly glass and ceramic bottles, are among the key costs. So far the rising costs have been passed along to customers.
“We successfully raised retail prices in the first half of 2008 to offset rising material prices,” he said.
The company’s revenue for the year ended June 30 was 717.3 mln yuan, up 33 pct year-on-year. Net profit climbed 64 pct to 140.8 mln yuan.
The company’s annual capacity of baijiu is now 36,876 metric tons but once the company’s planned production facilities are in place, capacity will rise to 100,000 tons.
Zhou did not say when Trump Dragon would reach this level as the company is now in discussions with the Zhoukou government about the purchase of additional land for this expansion.
The company has two major product lines – premium and regular baijiu. The premium line includes eight varieties of mid- to high-quality products, which account for 60 pct of the company’s total revenue. Its regular line has 60 different products which account for 40 pct of revenue.
“The premium series products are sold at prices around 200 yuan per bottle and the price of the regular varieties range from 20 to 80 yuan,” Zhou said.
High-end baijiu is made of fine grain alcohol while normal grain alcohol is used for lower qualities.
While baijiu is popular in China – particularly in the northern and western regions – the sector is highly competitive. There are about 40,000 baijiu producers in China with more than 3 mln brands.
Shanghai-listed distiller Guizhou Maotai, which is based in Guizhou in the southwest, boasts having China’s most coveted brand. Its top line of “luxury” baijiu carries a retail price of more than 800 yuan.
“Guizhou Maotai is a good model for us but it has something that can’t be copied. It has a peerless brand image and it’s remote location is actually an advantage. Still, there is much to learn from their operation,” Zhou said.
Zhou noted that baijiu has caught the attention of foreign liquor companies. Last year, global liquor giant Diageo raised its stake in Sichuan Chengdu Quanxing Group, the parent company of Shui Jing Fang, one of China’s leading brands, to 49 pct from 43 pct.
“Internationalization is the trend for baijiu. We chose to list our shares in Singapore partly for this reason. We want to use the Singapore market to promote our brand to the world,” said Zhou.
Zhou said Trump Dragon has not yet used the funds raised from its initial public offer but it is looking to make investments, and that could mean it will want to tap those funds.
“In the future, the baijiu industry will be streamlined. Only those big brands can survive,” he said.
Post a Comment