(Yicai Global) Feb. 6 -- Kweichow Moutai Co. [SHA: 600519], China's signature high-end Maotai liquor maker, issued its first big red flags this year, punishing 10 defaulting distributors. Among them, five were denied dealership contracts, Chinese liquor industry news portal Jiuyejia reported.
The high-end distiller required its regional dealerships at all provinces and autonomous regions nationwide to circulate the penalties to all distributors by Feb. 4 at aKweichow Moutai conference held Feb. 2, as media reported, citing a provincial regional manager at Kweichow Moutai.
Kweichow Moutai's sales staff conducted a study and inspection in January of 12 markets -- Beijing, Shanghai and the provinces of Guizhou, Hunan, Jiangsu and Guangdong -- and punished 10 dealers for three kinds of defaults. For non-compliance cases this year, such as driving up the price of Moutai liquor, Kweichow Moutai imposed the penalty of declining to renew dealer contracts for this year. One seller each in Zunyi, Guizhou province, Shanghai and Changsha and Hunan province, respectively, and two distributors in Guangzhou, Guangdong province suffered imposition of this penalty, per the circular.
Dealers with infractions such as pushing up Moutai prices last year were punished with a 15-percent reduction of their supply quota for their contracts this year and a fine of 20 percent of the performance bond per the 2017 contract. One dealer each in Henan province and Nanjing, Jiangsu province, respectively, and two distributors in Shanghai received the penalties.
Dealers whose non-compliance stems from poor management, such as inconsistency in Moutai liquor inventory data, were punished with a reduction of 5 percent of their supply quota for their 2018 contract and a penalty of a 10 percent performance bond per the 2017 contract. One dealer in Beijing suffered this sanction.
Kweichow Moutai will suspend contract sales of Moutai liquor for five dealers who were punished with reduced supply quotas for their 2018 contract from the date of punishment, the circular said. These sellers can renew their contracts again after rectifying within the stated time and gaining approval from the company.
The report did not provide the identities of the dealers penalized.
Kweichow Moutai must strictly implement the new prices and must not touch the red line again, Li Baofang, general manager of Moutai Group, said at Kweichow Moutai's 2017 dealership conference. Kweichow Moutai will continue to strengthen market regulation and price controls as in the first half of last year. If the company finds any noncompliant dealers, it will impose the severe punishment of revoking them and they will be ineligible to reapply.