Will the world drink more baijiu in 2022? Beyond Kweichow Mao-tai and Wuliangye, how Chinese liquor brands are targeting millennials, Gen Z and the Western market

Across dining tables in China, diners toast (or taunt) each other with a tiny shot of the distinctively pungent baijiu. The sorghum-based Chinese liquor commonly produced in the country’s southwestern Guizhou province has played a key role in China’s drinking culture since the Ming dynasty. Today, baijiu is often cited as the world’s most frequently consumed liquor, thanks largely to the country’s population, 1.4 billion strong. With a market cap of US$69.2 billion, distillers Kweichow Moutai surpassed London-based multinational Diageo to become the world’s biggest liquor maker back in 2017 and has continued to grow ever since. Several home lockdowns due to Covid-19 last year didn’t cause China’s growth to falter, with GDP up and growth accelerating, the baijiu industry included. Although sales were impacted in the first half of 2020, the spirit’s revenue from the local market still increased by around HK$27 billion (US$3.5 billion) compared to 2019. Too good to drink? How rare whisky became the tipple to trade Valued at US$373 billion as of October 2021, Kweichow Moutai has retained its position as the world’s most valuable spirit brand. The second most valuable brand, Wuliangye, also Chinese and also a maker of baijiu, stands at US$144 billion. Steffi Noël, a Shanghai-based research project leader at Daxue Consulting, attributes the stock price increase to the company’s excellent financial figures and straightforward business model. She says, “At least seven to eight companies in the baijiu industry have great financial conditions. Return on equity for Mao-tai and Wuliangye can reach as high as 35.6 per cent and 22.9 per cent respectively. The industry also has an easy business model. Unlike technology, health or other industry’s annual reports, baijiu’s business model is easy to comprehend, and is straightforward, with a 90 per cent profit margin.” She also notes that the spirit’s position in the market in China is “a special case” and that such stock price surges in alcohol companies in overseas markets are non-existent. Shui Jing Fang, which means “the distillery by the well”, is recognised as one of the oldest baijiu distilleries in China with more than 600 years of continuous production. Looking to get on the bandwagon early, Diageo bought the brand’s parent company outright in 2013, and has since upped its stake from nearly 40 per cent to 60 per cent. By 2029, China’s high-end liquor industry is expected to be a 160 billion yuan [US$25 billion] market Steffi Noël, research project leader at Daxue Consulting Yet for a key industry brand, Kweichow Moutai has long been regarded as a luxury status symbol. In 2018, auction house Christie’s became the first international auctioneer to host a baijiu auction in China, featuring 178 lots of Kweichow Moutai. According to Ned Zhang, an auction specialist, prices can range from 2,000 yuan (around US$290) to more than 300,000 yuan (around US$43,600) a bottle. Overall, the highly anticipated event eventually raised more than 25.5 million yuan (US$3.68 million). Yay or nay: are celebrity brands actually good for the tequila industry? Noël believes there is still room for the industry’s giants to grow: “Famous and high-quality enterprises represented by Kweichow Moutai, Wuliangye and Luzhou Laojiao have gained a firm foothold in the industry based on their respective comparative advantages, actively deploying and seizing mid-to-high-end – especially high-end – markets. By 2029, China’s high-end liquor industry is expected to be a 160 billion yuan [US$25 billion] market. The demand for high-end baijiu such as Mao-tai is higher than the supply, which explains why there is still room for price increases.” Reported to be China’s paramount leader Deng Xiaoping’s favourite baijiu brand, Sichuan-based Luzhou Laojiao is the oldest continually operating distillery in China, and is also among the top four most valuable spirits worldwide. The historic distillery now plans to expand its reach with a classic strong-aroma variant – Ming River – exclusively targeting consumers outside mainland China. Derek Sandhaus, co-founder of the Ming River brand, says, “We have created a name and packaging that is more accessible for the international market, but respects the product’s heritage. Our sales numbers confirm that many more people are drinking baijiu in the US in the past couple of years. Typically, Americans like their liquor in cocktails, and that’s how most bars and restaurants serve our product.” Our sales numbers confirm that many more people are drinking baijiu in the US in the past couple of years Derek Sandhaus, co-founder of Ming River Smaller brands are also profiting from increased demand. Lina Zhu, a representative for Tangniang, a distillery based in Mao-tai town in Guizhou province, says, “While international imports and exports were affected during the pandemic, especially for Western spirits and wines, the supply of baijiu continued to meet the demand in the domestic market. We have seen an uptick of interest since our launch. The overall status has elevated beyond a dinner drink; it is a symbol of a generous and sincere gift as well as a mark of our Chinese culture.” Some smaller brands seek to repackage themselves for a new age group. In 2018, young adults aged between 25 and 34 years accounted for the highest consumption of the spirit, according to a study by Global Data. Does a whisky’s age really matter? How barrel-ageing became Scotch standard Jim Boyce, founder of World Baijiu Day and owner of several wine and spirits blogs, notices a growing shift for brands to target the young. “In terms of the China market, there is lots of talk about growing interest among the younger generations in local brands and products, so people are hopeful that will inspire more focus on baijiu and spin-off products such as cocktails and canned mixed drinks.” Sandhaus highlights that education will be key. “Almost nobody knows what baijiu is,” he says, “even people who have lived in China and tried it before usually only have a cursory understanding of the category. Ironically, we do best pitching it to people who have never tried it before, because they don’t bring with them any misconceptions about what baijiu is and should be.” Chinese distilleries are also joining forces with global spirits to build stronger awareness and interest among younger and overseas consumers. Diageo developed a “new-to-world whisky” in 2019, as part of a new joint venture with Jiangsu Yanghe Distillery, China’s third-largest baijiu distiller. Created by Diageo’s Scotch whisky master blender Craig Wallace and China Alcoholic Drinks Association’s Chinese baijiu master Zhou Xinhu, the whisky was made through a “unique” production method, which includes “softening” whisky through Chinese ceramic pot maturation. Buffalo Trace Distillery, a Kentucky-based distillery that is part of the Sazarec Company, launched a limited release of a baijiu-style spirit aged in just three new American oak casks as part of its ongoing Experimental Collection of spirits. Hong Kong’s best new bars of December, reviewed – from QCG to Wood Ear “There has been a lot of interest in the baijiu-style whisky. I think many were surprised that we had been thinking about baijiu that long ago as most local spirits producers and consumers are not familiar with the category,” says Amy Preske, the distillery’s public relations manager. As Boyce shares, the theme of the World Baijiu Day project is to go beyond “ganbei”, the practice where shots are taken neat, “bottoms up” style. He says, “There are many ways to introduce baijiu to consumers, especially those who are unfamiliar with it.” Want more stories like this? Follow STYLE on Facebook, Instagram, YouTube and Twitter.