Baijiu sales growth in China propelled by banquet demand

The distributors’ average advance payments grew by 7% YoY in Q3 2023.

Seven baijiu companies in China posted an average sales of 19% year-on-year in the third quarter of 2023, stemming from higher demand for banquets, according to CGS-CIMB’s report.

The distributors' average advance payments also increased by 7% YoY and 19% quarter-on-quarter (QoQ) in the same period. This indicates confidence in sales forecasts for the fourth quarter of 2023 (4Q23F) and the first quarter of 2024 (1Q24F), said CGS-CIMB.

The consumption of liquor continued to grow in Q3 2023 as businesses in the entertainment segment recovered.

Most baijiu prices also remained stable during the quarter, which also expects lower sales in the fourth quarter. But with the upcoming Chinese New Year approaching in February 2024, it is expected that baijiu firms will increase marketing expenses and offer incentives to consumers to boost sales. 

The stock broker said the overall baijiu sector is considered attractive, with the Shenwan Liquor Index trading at a relatively low 12-month forward P/E of 26x, which is below its historical average of 35.6x since 2019.