BEIJING - China Kweichow Moutai Distillery Co, the parent of the world's second-largest listed distiller by market capitalization, forecast a 15 percent increase in output this year as the country's rising incomes boost alcohol demand.

"Even though we've raised prices quite a few times these past years, demand is still strong," Chairman Ji Keliang said in an interview in Beijing on Tuesday. "Our distributors keep requesting that we increase production."

Production will reach 30,000 tons this year after the distiller raised prices an average of 20 percent at the beginning of the year because of demand and the higher costs of raw materials, Ji said.

Profit for the maker of the 106-proof, sorghum-based spirit will exceed 8 billion yuan ($1.2 billion) this year, Ji said, without elaborating.

China Kweichow Moutai Co and Wuliangye Yibin Co are competing against overseas rivals including Diageo PLC in a liquor market estimated to grow about 5 percent to 4.4 billion liters in 2011, according to London-based researcher Euromonitor International.

The shares of China Kweichow Moutai, the nation's second-biggest listed liquor maker by sales, were up 0.4 percent at 199.55 yuan at mid-morning in Shanghai. The stock has climbed 19 percent this year, compared with a 0.3 percent decline for the benchmark Shanghai Composite Index.

Camus partnership

China Kweichow Moutai is on course to meet a previously announced target of 40,000 tons in annual production by 2015, Ji said.

It typically takes three years for the company's products to be sold after they are made at its factory in Renhuai in Southwest China's Guizhou province.

A distribution partnership with French cognac maker Maison Camus will boost Moutai sales overseas. Moutai sales in duty-free shops are "doubling each year", Cyril Camus, the fifth-generation head of the closely held cognac producer, said in an interview.

"I've seen many opportunities, not only just in selling our product into China, which we do, but also helping Chinese brands and Chinese products, industries, really find their way onto the foreign markets," he said.

Overseas growth

Moutai was credited with "disinfecting wounds" of Communist party soldiers during the two-year Long March that began in 1934, when the People's Liberation Army crossed 3,000 miles of mountains, jungles and deserts.

The company, which has been turning wheat and sorghum into 106-proof spirits since 1862, went public in 2001.

Sales outside China accounted for 3.5 percent of Kweichow Moutai's 11-billion-yuan revenue last year, compared with 3 percent in 2009, according to data compiled by Bloomberg. China Kweichow Moutai owns about 62 percent of Kweichow Moutai, according to the data.

The closely held parent earned net income of 7.9 billion yuan last year, Ji said.

Overseas Moutai sales will reach $100 million this year, and a 10 percent annual rate of growth is a possibility, said Ji, who has worked at the company for about 47 years.

"It's not possible that suddenly everyone accepts Moutai next year" because of its strong alcoholic proof and distinct flavor, Ji said. "I think growth of 10 percent every year is totally possible."

Moutai earned its cachet as the alcohol of choice of Chinese leaders and diplomats for toasting visiting dignitaries, including former US president Richard Nixon in 1972 and former British Prime Minister Margaret Thatcher.

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