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Kweichow Moutai takes seat among FMCG elite with top 50 entry

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Baijiu distiller Kweichow Moutai has muscled its way onto a list of the world's leading FMCG companies after boosting sales by 25% last year.

Kweichow Moutai has moved up the spirits industry rankings in the past few years

Kweichow Moutai has moved up the spirits industry rankings in the past few years

The owner of China's top-selling baijiu, Kweichow Moutai took 46th spot in OC&C Strategy Consultants' latest Global 50 report. It is the spirits group's first time on the annual list, which ranks companies by global grocery sales, knocking out Brazilian food giant BRF.

Kweichow Moutai has moved up the spirits industry rankings in the past few years as it recovers from anti-extravagance measures implemented by the Chinese Government that hit high-end sales. A turnaround in average selling prices for baijiu in China saw the company in 2017 move past Johnnie Walker owner Diageo in terms of market capitalisation. However, today's debut on OC&C's list shows Kweichow Moutai is now competing on the same level as some of the world's biggest manufacturing companies.

According to the list, Kweichow Moutai made US$9.8bn in grocery revenues in 2018, just behind Danish brewer Carlsberg, which made $9.9bn. The company is the only dedicated distiller in the top 50.

OC&C said Kweichow Moutai's entry showed the current strength of the Chinese food & drink sector, despite recent reports of the country's slowing economy. According to the consultancy group, Chinthe country's F&D sector is growing at nearly double the rate of its global peers as middle class consumers in the country's third- and fourth-tier cities grow. Western companies have yet to penetrate these cities, "leaving them ripe for the picking by local players", OC&C said.

Other influences include a heavy investment in product innovation and a push into emerging markets.

"These three factors ensure that there will no doubt be more Chinese entrants to the Global 50 in coming years," OC&C continued.

The consultancy group warned, however, that profits at Asian FMCG companies are under greater pressure compared to global peers and that increased domestic competition is hurting margins.

Food & drink giant Nestle remained top of the OC&C list. Proctor & Gamble was second with PepsiCo holding on to third spot. The Coca-Cola Co dropped one spot to ninth, however, OC&C said the company was a "star player" for the year as the soft drinks maker readjusted its portfolio to target health & wellness trends and made a major move into coffee with the purchase of Costa Coffee. According to OC&C, four of the top ten M&A deals in FMCG last year were for coffee.

The consultancy group also questioned whether zero-based budgeting (ZBB) is falling out of favour with the FMCG industry after a proponent of the accounting system, Kraft Heinz, ran into trouble last year. OC&C said most of the Global 50 that use ZBB have improved profit margins since adoption but that the system seems to stifle organic sales growth.

The end for ZBB, the end of the wine & spirits combo and the end of provenance - The just-drinks Analyst


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