China liquor maker Kweichow Moutai Co Ltd plans to invest as much as 950 million yuan (US$135.7 million) this year, mainly on production expansion to meet surging market demand.

The nation's second-largest spirit maker said it needs 700 million yuan this year to add 2,000 tons in output of its liquor, the company said in a statement to the Shanghai Stock Exchange yesterday.

This includes a 64.08 million yuan raised through an earlier share sale, while the rest will be funded by the company. Moutai aims to have an additional 10,000 tons of output in its 11th Five-Year Plan ending in 2010, contributing to a total capacity of about 30,000 tons by then.

"Moutai's products have been short of supply on the market over the past two years," said Mao Changqing, an analyst from CITIC Securities Co Ltd. "Competition in the high-end market is getting more furious and the expansion is crucial for remaining in the leading position."

Kweichow Moutai plans to allocate 250 million yuan for building a new industry park this year. Total investment will be up to 950 million yuan when it is completed by 2010.

China liquor makers, including Kweichow Moutai, Wuliangye Yibin Co Ltd and Shanxi Xinghuacun Fen Wine Factory Co Ltd, have been focusing on the development of high-end spirits as profits in low-end markets are being squeezed by chaotic competition.

The high-end liquor industry, where each bottle is priced at more than 300 yuan, is estimated to grow 15 percent year on year on average, led by Wuliangye in terms of sales, Mao said.

Moutai achieved sales revenue of 7.2 billion yuan with a 47 percent growth last year from a year earlier after increasing its price by 12 percent. Net profit jumped 83.18 percent to 2.8 billion yuan during the same period.

(Shanghai Daily March 14, 2008)