Sichuan Swellfun plans to double down on the "Zhen Niang No. 8" product this year, while launching the "Water Well" series of products for around 200 yuan to expand the product line. Company chairman Fan Xiangfu revealed that the recruitment of the company's general manager has entered the later stage. The company stated that it is very concerned about the investigation results of PwC and has contingency plans to ensure normal operations will not be affected.
In the current environment of slowed trend in the structural upgrading of consumer preferences and intensified competition in the stock market of the baijiu industry, Sichuan Swellfun (600779.SH) plans to focus more resources this year on the core product, the Zhen Nian No.8 baijiu, which is priced in the low-to-medium range of 300-400 yuan per bottle and targets large orders.
Jiang Leifeng, the deputy general manager of Sichuan Swellfun, stated at the company's 2023 annual shareholder meeting today that the company plans to double down on its efforts to promote the Zhen Nian No.8 baijiu. This product is a large single-item product priced in the low-to-medium range of 300-400 yuan per bottle. The company also introduced a new product line of 'Shui Jing' series products, which cost around 200 yuan per bottle.
(Caption: Scene of the Sichuan Swellfun 2023 annual shareholder meeting. Photo by Zhu Wanping, Caixin)
Compared to the company's previously determined core strategy of cultivating high-end brands, the latest strategy of the above-mentioned company seems to have undergone some slight adjustments. Despite still claiming that this year, Sichuan Swellfun will continue to shape its first line of super high-end products(Priced at over 2000 yuan) and high-end products such as Jing Tai (Priced at over 500 yuan) and Dian Cang (Priced at over 800 yuan), it still strives to continuously create value.
In fact, the Zhen Nian No. 8 baijiu was the main driving force behind Sichuan Swellfun's performance growth last year, and it was also the main "contributor" to the company's achievement of its annual operating objectives. According to the company's financial report, sales revenue of the Zhen Nian No. 8 baijiu product achieved double-digit growth last year, exceeding the overall revenue growth rate of the company.
This year, there has been no significant improvement in the overall consumption situation of the baijiu industry, with insufficient effective demand and overcapacity and high inventory still being common issues in the industry. "From the perspective of consumption scenarios, the situation of wedding banquets this year is not ideal, and there are even fewer wedding banquets than last year; business consumption is also recovering slowly in coastal areas." said a senior executive of Sichuan Swellfun at the shareholder meeting.
Regarding this year's operational strategy, Jiang Leifeng further stated that white spirit products priced in the range of 150-400 yuan are currently benefiting from the present environment compared to other price ranges, with growth rates being higher in the 300-400 yuan price range. Therefore, the company will continue to focus resources on core big-ticket items, specifically the Zhen Nian No.8 baijiu, and plans to "double down" on this product in key cities while expanding the distribution of effective stores.
At the same time, Sichuan Swellfun believes that baijiu products priced in the 150-300 yuan range are experiencing double-digit growth and present opportunities. Therefore, this year the company will also launch more Shui Jing series products priced around 200 yuan. On the one hand, this is to supplement the product portfolio, and on the other, it is to cater to the current environment and consumer demand.
(Caption: Scene of the Sichuan Swellfun 2023 annual shareholder meeting. Photo by Zhu Wanping, Caixin)
Inventory in channels is another issue of concern for investors. Regarding this, a senior executive of Sichuan Swellfun acknowledged that the channel inventory has indeed increased slightly compared to the same period last year, but it is still within the company's standard range. Furthermore, when viewed from an industry perspective, it is relatively good.
Senior officials of Sichuan Swellfun also stated that the company will not "force goods into channels" but will focus on whether the baijiu is consumed. "We will not stock up because stockpiling has the consequence of causing instability in the value chain and ultimately damaging brand value."
The issue of appointing a general manager is still a concern for shareholders this year. In February last year, Zhu Zhenhao, the former general manager of Sichuan Swellfun, resigned due to personal health reasons. A few days later, Mark Anthony Edwards from Diageo, the major shareholder, acted as an interim general manager of Sichuan Swellfun. However, in early April of this year, Edwards also announced his resignation, and currently, Jiang Leifeng, the deputy general manager of Sichuan Swellfun, is acting as the general manager. Regarding the progress of appointing a general manager, Fan Xiangfu, the chairman of Sichuan Swellfun, stated at the shareholder meeting that the selection work for the company's general manager has entered the final stage, and an announcement will be made once it is settled.
It is worth mentioning that at today’s shareholder meeting, Sichuan Swellfun also deliberated on the proposal regarding the renewal of PWC Zhong Tian, the audit service provider, which is currently under regulatory investigation for involvement in the Evergrande fraud case. Several listed companies, including PetroChina, PICC, and China Railway, have recently cancelled their cooperation with PwC. Shareholders raised objections to this, and senior executives of Sichuan Swellfun responded that the appointment of an auditing institution is managed by the company's audit committee, which pays close attention to the investigation results of PwC Zhong Tian and its influence. In addition, the company also has standby plans to ensure that the PwC problems will not affect the normal operation of the company.