Song Mingzhen, the manager of the Brand Department of Dalian Lian Second Distillery in Inner Mongolia, said that the profits of local liquor enterprises in Dalian are being further eroded. Regarding the characteristics of the mid-to-low-end baijiu consumer group, for enterprises mainly producing mid-to-low-end baijiu products, they need to adopt the following methods to solve problems: The high-end baijiu consumer group is mainly composed of government and business people. These people don't pay for their own drinks; either it's paid by the finance or unit reception expenses, or it's given as a gift by others, so the price has no effect on them. Some even take advantage of the continuous price increase of high-end baijiu for collection and investment. For gift givers, even if the price rises, they still have to bear these prices to get things done. Even if individuals pay for consumption, due to their strong purchasing power and low price sensitivity, they will not switch to mid-to-low-end baijiu because of the price increase of high-end baijiu.
Firstly, adjust and optimize the product structure of the enterprise. For an enterprise, a reasonable product structure is the biggest guarantee to reduce enterprise risks. When certain products of an enterprise have low profit margins, the enterprise needs to timely launch higher-priced products and form a product combination. Therefore, for a baijiu enterprise, the ability to promote new products is crucial. In the process of product structure adjustment, enterprises should adjust the salary system and evaluation scheme for sales personnel.
Case analysis: The case of Dalian's baijiu enterprises is actually a microcosm of China's baijiu industry. Affected by the continuous rise in raw material prices, many baijiu enterprises mainly producing mid-to-low-end baijiu have been severely impacted, struggling to move forward. However, the consumers of mid-to-low-end baijiu are those with low income. Two major characteristics of these consumers determine that it is difficult for mid-to-low-end baijiu price increases to be effective: one is that they basically pay for their own baijiu consumption; the other is that they have low purchasing power and high price sensitivity. Therefore, once the price increases, they will feel unable to accept it and resist.
"Dalian has 40 to 50 baijiu production enterprises, most of which are small and medium-sized in scale, producing mid-to-low-end products, lacking brand support, and these types of enterprises are the easiest to be affected by rising costs. Preliminary estimates show that about 50% of local baijiu enterprises are on the brink of survival." An insider said that some Dalian baijiu enterprises have already ceased production or are semi-operational. Liu Zhaoyou, Secretary-General of the Dalian Beverage Enterprise Association, also said that currently, Dalian baijiu enterprises indeed face difficulties, and the baijiu industry may enter a reshuffle period.
I once mentioned in a training session for distributors of a baijiu enterprise why high-end baijiu can raise prices at will, sometimes increasing by dozens of yuan per bottle or even hundreds of yuan, yet the market remains unaffected, while low-end baijiu dies as soon as prices rise. In fact, the fundamental reason lies in the difference in target groups and consumption patterns between high-end and low-end baijiu.
Case background: "Now, we are almost at zero profit. If we don't raise prices, we won't be able to continue much longer. But raising prices is easier said than done," said a responsible person from a Dalian baijiu enterprise, shaking his head in lament. Why can domestic top-tier baijiu brands like Maotai and Wuliangye continuously raise prices without hesitation, while Dalian's local baijiu enterprises struggle painfully? A price increase of just 1 yuan per bottle, or even a few jiao, takes a full seven months.
Half of the local baijiu enterprises are struggling on the brink of survival. Currently, it is the traditional peak sales season for baijiu, but for most baijiu production enterprises in Dalian, this golden season brings them little joy.
"The pressure of cost is too great. Many products are almost at zero profit, and the enterprise is barely maintaining operations." Recently, when visiting Dalian Liquor Co., Ltd. located in the Jinzhou New Area, its vice president Yang Dalian introduced that in the past year, alcohol prices have risen from 5000 yuan per ton to 7200 yuan, and the prices of sorghum, rice, and other brewing grains have also increased by 20%. Labor, transportation, packaging costs, and all other costs have risen, causing production costs for baijiu enterprises to increase by about 30% year-on-year.