SHARES of Chinese liquor maker Wuliangye hit a nine-month high yesterday after it announced it would raise product prices by 20 to 30 percent to offset rising costs and to tap demand.

The Sichuan Province-based company will increase prices on its Wuliangye premium product series from September 10, according to a statement it filed to the Shenzhen Stock Exchange yesterday. The price increase aims to counter higher costs for raw materials and labor as well as tap stronger demand, the distiller said.

Shares of Wuliangye rose 2.5 percent to close at 40.40 yuan (US$6.30) yesterday and notched the biggest gain in three weeks.

The retail price of Wuliangye may hit 1,100 yuan per bottle after the price increase, up from 889 yuan now, according to distributors.

Domestic producers of liquor, or baijiu, have been increasing high-end liquor prices since last year as higher inflation pushed up prices of wheat and sorghum, necessary ingredients for brewing. China's Consumer Price Index, the main gauge of inflation, hit a 37-month high in July of 6.5 percent.

Last year, Kweichow Moutai increased liquor prices by 24 percent and distiller Fenjiu Group raised its products by 20 percent earlier this year.

"Benefitting from a rapid growth in domestic demand for high-end consumer goods, demand for high-end liquor continues to outstrip supply," said Hu Chunxia, an analyst at Guotai Jun'an Securities Co. "There is room for a further price increase and other competitors are likely to follow."

Despite the higher cost, the top three liquor makers saw strong rise in earnings in the first six months.

Source:shanghaidaily