Sales of baijiu, China’s national tipple, are on the rebound
|SHANGHAI
AVENUE PÉTAIN, a tree-lined boulevard of grand mansions and Art Deco towers in Shanghai’s old French concession, was once one of the city’s most prestigious residential streets. Hengshan Road, as it is now called, is today full of bars and restaurants. The most intriguing used to be the Moutai club, a secretive outfit catering to political bigwigs that decorated its walls with pictures of Deng Xiaoping and other luminaries quaffing firewater. Their glasses may have contained a special blend of Moutai, an expensive brand of baijiu, a liquor distilled from sorghum.
Alas, this pleasure palace has since shut down. A crackdown on corruption by the government of President Xi Jinping has made it risky for officials to schmooze with businessmen over bottles of baijiu. Sales of China’s national spirit (and the world’s most popular hard liquor), which rose at double-digit rates from 2007 to 2012, were dealt a big blow. Annual growth in sales plunged to barely 3% in 2014 as purchases for official banquets and other forms of ostentatious boozing plummeted.
Baijiu is now making a comeback. Sales last year rose by roughly 7% (see chart). In a recent report, “The Hangover Fades”, Citigroup, a bank, estimates that profits for the three biggest manufacturers of baijiu—Moutai, Wuliangye and Yanghe—have jumped since the second half of last year. The bank also notes that baijiu continues to outperform beer on sales volume growth, “suggesting that Chinese consumers’ preference for baijiu remains intact.”
What explains the revival, given that the corruption crackdown continues? Andy Luo, a former manager of the defunct Moutai club, believes a boom in private consumption is the answer. Mr Luo, who now runs a popular restaurant in Shanghai, says the businessmen that frequent his current establishment prefer to drink baijiu, rather than whisky or other foreign spirits, with their Chinese food. “It’s a habit!” he insists. He also senses a shift towards swigging pricier premium brands.
If Mr Luo’s professional odyssey traces the fortunes of China’s national drink, then the future holds peril as well as promise for baijiu. He is right that private consumption is behind the recent renaissance. Fully half of all baijiu purchases in 2012 were made by the government, but that figure had collapsed to just a small fraction of the total by last year. But Mr Luo also observes that many younger patrons prefer to sip wine at business dinners, even rebuffing their elders’ offers of baijiu.
As foreign businessmen know all too well, drinking vast quantities of this foul-smelling, throat-burning local brew has long been an unavoidable part of doing business in China. Toasts of gan bei and endless rounds of baijiu are still popular with the old guard, to be sure. But the drink’s resurgence may only be temporary. Mr Luo offers this prediction: “it may take years, but these old habits will fade away.”
This article appeared in the Business section of the print edition under the headline "Proof positive"
