Comparison And Research Of Luzhou Laojiao Co., Ltd And Shanxi Xinghuacun Fen Wine Factory CO., Ltd Based On Financial Analysis

The wine-making industry in China has a history of several thousand years. White spirit, unique liquor produced in China and among the six world-renowned distilled liquors, is never a follower of others. Early in the mid-1960s, we started our history of systematic research on the flavor styles. In the third Liquor Tasting Conference in1979, the definition and classification of flavor styles were made for the first time:soy source flavor type (Maotai flavor) represented by Maotai; strong flavor type (Luzhou flavor) represented by Wuliangye, Luzhoulaojiao, and Yanghe; Fresh flavor (Fen flavor) represented by Shanxi Fen Wine; Maotai-luzhou flavor and other flavors.Luzhoulaojiao is surely the birthplace of Chinese strong flavor liquor, and is home to the1573National Treasure Pits which is the longest in history and in use. Its integrity is also protected best during the years. As a representative of strong flavor white wine producer, the company was listed among the first batch of the National Non-material Cultural Legacy in2006and is the only company which possesses "Double National Treasures". The wine-making industry of Shanxi Fen Wine dates back to over5000years ago. There is a saying that the Fen Wine is a must when you choose which to drink. Typifying the fresh liquor in China, Fen Wine was once the leader of Chinese white liquor industry.This paper takes Luzhoulaojiao and Shanxi Fen Wine as the research targets. Because the two companies both have long histories and are representatives in different flavor styles. This paper builds a basic data base which is based upon relevant financial figures of the two companies from their respective2007to2011annual reports. The samples of the industry come from the13listed white spirit companies classified by Shenyin Wanguo Securities. An overall comparative and systematic analysis is made on20financial indexes in the Chinese white spirit industry and Luzhoulaojiao Co Ltd and Shanxi Fen Wine Co Ltd in terms of the following five abilities:profitability, cash-making ability, value-making ability, growth capacity and risk management capacity. Besides, a deep analysis is conducted on the significance of certain critical financial index figures. Improved DuPont Analysis is applied to figure out the reasons for the changes of the respective ROE of Luzhoulaojiao and Shanxi Fen Wine within5years. In addition, the annual financial strategies adopted by the two companies as well as the reasons for their strategic changes are analyzed by applying the financial matrix theory.This paper finds out, through relevant comparison and analyses, the respective advantages and disadvantages of the two companies in the above-mentioned aspects as well as their respective strong points and week points compared to the average in the white spirit industry, with a purpose of providing useful references to the managerial personnel, stakeholders, report consumers, investors, as well as researchers in the industry. Other liquor-making companies can find this paper useful in their financial analysis and further improvement of traditional analytical methods.