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Baijiu sales recover as China’s political winds shift

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Baijiu sales recover as China’s political winds shift

Chinese business & finance

Baijiu sales recover as China’s political winds shift

Rice wine maker that shares name with president tracks drink’s return to favour

Ceramic vessels age baijiu liquor at Kweichow Moutai’s distillery in Guizhou province © Bloomberg

A Chinese distillery that shares a name with Xi Jinping, the president, saw sales of its fiery liquor surge after a Communist party congress installed Mr Xi as leader five years ago.

China Xijiu is a 65-year-old distiller of baijiu, the ubiquitous Chinese grain liquor that for decades was a staple of official banquets. By a stroke of fortune the Chinese character for “Xi” is the same used to write the president’s surname. 

That did not stop Mr Xi from launching a crackdown on state-funded banqueting after assuming power, which caused sales of high-end alcohol — including Xijiu — to drop.

“We reached Rmb3bn [$450m] of sales in 2012, but then the whole baijiu market changed and our sales halved,” said Zhong Fangda, Xijiu’s general manager.

However, as China gears up for a party congress held next month that will consolidate Mr Xi’s status as China’s top leader for another five years, the baijiu market has seen a sustained recovery, and Xijiu says sales have turned a corner. 

“Sales began to recover in 2014, and this year’s will be Rmb3.5bn, which will be the highest in our history,” said Mr Zhong.

China’s baijiu sales have rebounded in the past two years, a resurgence analysts attributed to ordinary consumers buying more expensive varieties, and a return of banqueting in the private sector.

That recovery has propelled shares in China’s best-known distiller, Kweichow Moutai to record highs this year, pushing its market capitalisation past Diageo, which owns the Johnnie Walker brand, making Kweichow the world’s largest liquor company. It bought Xijiu in the late 1990s.

The rebound wraps up a gloomy few years for baijiu, when the drink was associated with excess and lavish entertaining, and corruption. When Mr Xi launched his anti-graft campaign at the start of his term, Chinese fled from the drink.

Xijiu was completely wrongfooted by that political shift. To cash in on the leader’s rise in 2012, Xijiu launched a nationwide marketing campaign, buying space on billboards and paying more than Rmb300m for primetime advertising slots on state broadcaster China Central Television. The company said it was targeting total annual sales of Rmb8bn-Rmb10bn by the end of 2015.

“It’s a great pity that we couldn’t meet our sales goal,” said Mr Zhong.

At the height of Xijiu frenzy, bottles of the company’s 1988 vintage rose up to a third in price to Rmb800 in anticipation of the congress, as buyers purchased cases as investments. But now prices are now around Rmb600, offering a return barely above the rate of inflation.

Bill Bishop, an independent China analyst, bought a case of vintage Xijiu as an investment in 2012, calling it a “baijiu bet on Xi Jinping”. Now with one bottle left, he said: “I lost money but gained a few hangovers. But it was fun — the liquor’s not bad.”

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