With last year's big profits and the continuing rise in demand, it looks like baijiu makers will have something to toast on this Chinese New Year. These companies have helped drive stock gains this year for China's consumer staples stocks.
Despite the uncertainty for China's economy, consumer staples was the only sector in China's key stocks exchanges which experienced positive returns in 2016. It is estimated that the sector will grow three times as quickly as their foreign counterparts.
"The baijiu sector will continue to outperform the industry fundamentally as it still has growing demand," said Mark Chen, an analyst at UOB Kay Hian Ltd.
Baijiu makers such as Kweichow Moutai Co. Ltd., Wuliangye Yibin Co. Ltd. and Luzhou Laojiao Co. Ltd. were at the forefront of the surge, dominating the gains in stocks.
Other members of the consumer staples sector such as dairy producer Inner Mongolia Yili Industrial Group Co. Ltd. and meat product seller Henan Shuanghui Investment & Development Co. Ltd. also saw a rise in stocks.
"Demand is now being buoyed by rising middle-class incomes," said Juliette Liu, an analyst from Yuanta Secruities Co.
And it looks like baijiu makers will be raking in more profit from sales by the end of the month as they have recently raised the prices of their products.
According to a trade official from Hunan Province, the new round of pricing could be a result of the anticipated sales growth during Chinese New Year, an overall smaller liquor production and rising demand for personal and business consumption rather than government production.
In addition, the rising manufacturing costs have driven companies to adjust their retail prices. A baijiu sales expert has revealed that the costs involved in the supply chain have gone up by 30 percent.
With its excellent performance last year and a steady growth this 2017, these baijiu makers are something to look out for.