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China's baijiu market in tough time

02-21-2013 09:00 BJT

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Their stock prices are down, their sales volumes are down, and their shop prices are suffering too. China’s top liquor makers are in trouble. The problems are linked to the government’s campaign against excessive spending on official parties. One analyst in Shanghai says that should result in more normal prices for the famous Chinese baijiu.

Very different from previous Spring Festivals, a bottle of Kwechow Moutai like this in Shanghai is now selling for around 1,500 yuan, 25 percent less than in 2011.

Store managers say sales of the premium baijiu are down by 30 percent compared to the same period last year. A similar decline has also hit another top brand, Wuliangye.

These famous brands are usually all over the place on important occasions in China such as the Spring Festival, but Chinese consumers say they didn’t see them around as often this year as before.

Mr. Shen, consumer, said, "Previously we would have a new year party every year, with Baijiu and red wine. But this year our meeting was cancelled to save money."

Wang Xiu, consumer, said, "We used to have a new year party outside Shanghai for two or three days. But we did it here in our office this year, and without Baijiu."

China’s government has called on officials to reduce excessive consumption, especially public spending on wining and dining. Shanghai media say some 30 percent of hotel and restaurant bookings for new year celebrations this year were cancelled. Just about everyone agrees this is a primary reason for the liquor industry’s fall.

Li Weifeng, CEO of Shanghai International Wine Exchange, said, "Official spending has a leading role. If the government drinks less, business people will drink less, and then everyone else will do the same."

The China Alcoholic Drinks Association says that last year about 1.5 percent of Chinese liquor makers took in more than 70 percent of the industry’s profits. Li said the restrictions on consumption of expensive liquors may change that.

Li said, "Chinese consumers don’t see the value in liqour itself, but in its social function. If the price is not high enough, they will not buy it. If official spending is restricted, that will make Baijiu become Baijiu again, and people will buy it just because it tastes good and has a rare high quality."

Kweichow Moutai last month lowered its revenue target for this year to 42 billion yuan, 8 billion yuan less than the figure announced last July。

Editor:Zhang Jianfeng |Source: CCTV.com

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