Unpaid deliveries: China's liquor kings get on with it

By Sue-Lin Wong SHANGHAI, May 12 (Reuters) - China's leading baijiu makers are having to stomach record short-term debts owed by distributors of the famous sorghum-based spirit as the country's liquor kings pay the price of restructuring their distribution networks to revive sales.

Baijiu distributors are literally re-learning their trade as the era of bulk orders from the government ends, following a clamp-down on lavish official spending. The distributors previously acted primarily as logistic channels, moving baijiu from factories to large government and military buyers. They now find themselves in unfamiliar territory - getting individual retailers and retail chains to buy their goods. And even at discounted prices, it is hard work.

"The manufacturers have to help finance the distributors, but I think in the past, that was never the case," said Torsten Stocker, Hong Kong-based partner at consultancy firm A.T. Kearney. Demand is "turning to more normal consumer channels, and a lot of distributors have to learn how to deal with that, and they have to actually sell, instead of just fulfil orders," Stocker said.

Kweichow Moutai, China's top producer of high-end liquor, saw its total receivables rocket to an all-time high of 3.01 billion yuan ($484.81 million) in the first quarter of 2015, up 500 percent from a year earlier. Total receivables for its main competitor Wuliangye Yibin were also elevated, at 8.13 billion yuan, though they were off the record 9.58 billion yuan in the first three months of 2014.

The high receivables may be a one-off if baijiu takes off in the mass market. On a positive note, Moutai posted an 18 percent jump in first-quarter net profit from a year earlier, its fastest quarterly growth since 2013. Baijiu makers can no longer rely on the premium segment of the market, after Beijing removed budgets for high-end liquor at official banquets. The retail price of Moutai's flagship product, the Feitian 53 degrees, has fallen to around 900 yuan a bottle from 2,200 yuan in 2012 before the government's austerity drive, according to analysts. ($1 = 6.2086 Chinese yuan renminbi) (Additional reporting by Tripti Kalro in BENGALURU; Editing by Ryan Woo)