Maotai Brand Blocks METRO: Value Game of Zero Supply

Recently, Kweichow Moutai Group "blocked" foreign retailer Metro, which banned distributors from the country's Moutai supply to Metro, because the price of Maotai sold by Metro was too low, disrupting Maotai's price system and brand image.

“This matter began after the National Day in 2005. Metro declamated Moutai at a low price, destroyed some areas of the market, and caused dissatisfaction among many dealers and sales staff in the region. At the end of last year, Maotai Winery announced that it would ban the supply of Metro.” Maotai Group Chairman Yuan Renguo told reporters. When reporters asked dealers in Guangzhou, Beijing, and Harbin, respectively, the defendant’s “injunction” was not cancelled.

Metro "low wholesale"

For Maotai, the world’s largest “pay-as-you-go” commercial company, Metro does not seem to want to give up, and negotiations between the two sides are still sawing.

When Kweichow Moutai’s “blocking order” has not been lifted, and Metro, which recently opened in Guangzhou, Maotai has reappeared in the store's latest promotional campaign. Huang Zhongjie, a public relations manager for Metro, declined to comment on which dealer Maotai was from.

Mr. Feng, who heads the Moutai office in Guangzhou, told reporters that Metro's Tianhe shopping mall in Guangzhou has Maotai liquor for sale. There are two possibilities. First, Metro reported that Moutai had to discontinue goods beforehand and saved a large amount of goods in advance; There are also individual dealers who are arbitrarily supplying goods regardless of the headquarters arrangement. Mr. Feng said that Metro used Maotai to engage in “speculation” to attract consumers. For example, the market price of 53-degree, 500-ml Moutai is generally 328 yuan or 338 yuan, while in the METRO sold 285 yuan, or even 276 yuan.

It is understood that as a "national wine" brand, Maotai has set a guide price system for distributors throughout the country. A northeastern distributor said frankly that METRO's Maotai was sold at a price close to the ex-factory price. And if other supermarkets follow suit, the consequences will be disastrous.

“This is actually a game in which commercial enterprises based on warehouse-based wholesales use their price as a lever to sell products and maintain their brand value with brand-name goods.” Kang Youzheng, chief operating officer of Qizheng Fine International Consulting, told reporters. Metro's international warehouse-style supermarket is actually a retail business that carries out wholesale business. Its commodity prices are lower than those of ordinary supermarkets and stores. It is actually a wholesaler's role.

The world’s largest “pay-as-you-go” merchant chain adopts a retail format that integrates supermarkets and warehouses into one. This eliminates the need for independent warehouses and distribution centers for traditional retail companies, enabling them to quickly replenish their operations and ensure the efficient, low-cost operation of supermarkets.

Huang Jiangming, a retail industry expert and associate professor at the Business School of the National People's University of China, told reporters that Metro had profited mainly from membership fees, high volume sales, and the elimination of renovations and promoters, and its gross profit could reach about 20%.

According to Wang Tao, a consulting company of the subsidiary, Metro's purchase contract terms are similar to those of Carrefour and include some store entrance fees and annual fees. The management style is similar to that of Wal-Mart, emphasizing centralized authority, and the headquarters is responsible for purchasing pricing and ordering. The usual practice of national procurement for Metro, Carrefour and Wal-Mart is to compare prices in different regions and find the lowest point for bulk purchases. And they will ask for suppliers, similar goods must be lower than the prices of other supermarkets.

Maotai's sales system features

"This is a value war of both sides, not a price war." Kang Youzheng told reporters that wine is not an ordinary consumer goods, many liquor brands have a certain high value-added, but also has regional and cultural connotations. Taking the name of wine as the most important promotional product, this pricing model will sooner or later have problems. Perhaps at the Metro mall, not only the price of a type of liquor in Moutai is low, but Maotai will react first. This is because Maotai, as a brand of liquor-like pyramids, attaches great importance to its own brand value and controls the market's price system.

In China, alcoholic products are monopoly products. Similarly, similar to the traditional liquor distribution channels, there are several levels of Moutai wine sold and managed by regional distributors. The dealers also sell through self-built boutiques, high-end restaurant restaurants, specialty sugar and alcohol company stores, and supermarket shopping malls.

Although Maotai does not advocate entering supermarket stores, there is also a small amount of sales. The Maotai Factory also managed and promoted the entire market through the management of distributors in various regions. Once a regional market causes problems due to dealer sales, the manufacturer will solve the problem as soon as it is sold.

According to some dealers, in order to ensure that the supply of products exceeds demand, Maotai's supply will often be less than the market demand. Especially during the hot season, more prices will be raised. At present, there are still about 500 tons of Maotai wine in the country.

On the one hand, "the emperor's daughter does not marry," and on the other side it is a low-price strategy for supermarket stores. Some retail companies usually purchase several suppliers of the same product in a certain area at the time of purchase, and then pass each other's psychological warfare price to obtain the lowest purchase price.

Zhang Jisheng, owner of Lisheng Tobacco and Liquor Company in Jilin, told reporters that his approach to counteracting this down-price tactic was simple, reducing or no longer supplying to malls and supermarkets. He sells more wine directly to each liquor and tobacco franchise store, and can cash in with them now. There are no promotion fees, miscellaneous fees, and these conditions are sufficient for them to increase more revenue. There are more than 200 tobacco and alcohol stores in Changchun City, Jilin Province. This market is big enough. Last year, only one of them reduced the amount of 400-500 million yuan for supermarkets and shopping malls, accounting for half of their total supply.

Maotai dealers believe that the characteristics of Maotai's sales system also determine its ability to compete with sales terminals.