China's top liquor makers brace for slowdown as anti-luxury drive bites

Tue Apr 2, 2013 5:09pm EDT
 
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By Adam Jourdan

SHANGHAI (Reuters) - China's largest makers of popular, fiery "baijiu" liquor are bracing for a slowdown this year after nearly a decade of heady growth as a crackdown on lavish official spending starts to hit home.

Analysts say the clampdown will force baijiu producers to offer cheaper brands and buy up less-glitzy local players to get around the government ban.

Despite healthy financial results for 2012, this year will be tougher, especially for industry leader Kweichow Moutai Co Ltd, whose prestige brand and high prices put it directly in the line of fire for official anti-luxury campaigns.

"Moutai is going to get hit harder because it's become the 'Ferrari' of alcohol. It's the brand that everyone is sort of scared to buy," said Shaun Rein, the Shanghai-based managing director of China Market Research Group.

Baijiu, a potent white liquor that outsells vodka worldwide, is prized in China at official banquets and as a gift to sweeten business ties. Sales and bottom lines have surged with China's luxury boom of recent years.

But since the middle of last year, the government has announced a number of policies to rein in official spending on luxury goods, including baijiu, which typically costs around $250 per bottle for premium brands, but can fetch into the thousands of dollars.

"The baijiu sector faces pressure unlike any it has seen before," the board of Kweichow Moutai said in its 2012 financial report released last week.

As a price comparison, luxury whisky The Dalmore, a bottle of which once auctioned for $190,400, ranges in price from around $58 to $230 on the Scottish distiller's website.   Continued...

 
An attendant holds a bottle of Wuliangye, one of China's most famous liquors, during the opening of its flagship store in Hong Kong in this December 6, 2010 file photo. China's largest makers of popular, fiery "baijiu" liquor are bracing for a slowdown this year after nearly a decade of heady growth as a crackdown on lavish official spending starts to hit home. Analysts say the clampdown will force baijiu producers to offer cheaper brands and buy up less-glitzy local players to get around the government ban. REUTERS/Bobby Yip