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China's liquor multi-billion business

Baijiu, which literally means “white liquor”, is a national treasure of China. The birthplace of the “white liquor”, which can range from 35% to 60% alcohol by volume, can be placed in Central China, in the Provinces of Sichuan and Guizhou, where the most important and reputable manufacturers are established. Still, its popularity is spread all around the country. It is possible to find baijiu at every banquet and celebration in China, from wedding receptions to social gatherings. Baijiu is also an essential part of the Chinese business culture and is traditionally served during intense business dinners to build trust and friendship. Besides, high-end baijiu also represents a prestigious gift offered to foreign presidents. It has been used for toasting during official diplomatic events, including the 1972 historic visit of US President Nixon to the Peoples’ Republic of China.

The production and consumption of this grain-based distilled spirit, made from sorghum, wheat, rice, corn, and fermented by using an agent called qu, can be dated back more than a thousand years and is the most consumed alcoholic drink in China. According to the latest data released by CADA, the China Alcoholic Drinks Association, the sales of baijiu accounted for 70% of the revenue in the alcoholic drinks manufacturers industry in 2020, followed from afar by beers and fermented wines.

Baijiu comes with different and rich flavors, such as the strong aroma (that accounted for more than half of baijiu’s sales in 2020), the sauce aroma (27% of the sales in 2020), and light aroma (15% of the sales in 2020), and differs across the different geographical regions: Sichuan is the largest baijiu manufacturer, with a total output of almost 3.7 million kiloliters, accounting for half of the country total production, and 53 manufacturers among the top 200 are established in the Province.

The total production output decreased from 13.6 million kiloliters in 2016 to 7.4 million kiloliters in 2020. The sales revenue in the industry reached 584 billion RMB in 2020, up from the 562 billion RMB sales in 2019. The number of manufacturers reduced from 1,600 in 2017 to 1,040 in 2020 due to the increasing consolidation and concentration of the market. Among these, 19 are large public companies listed in the Shanghai and Shenzhen stock markets, which together account for 41% of the market share.

The top manufacturers are Kweichow Moutai, with sales accounting for 17% of the industry total), followed by Wuliangye (10% of market share), Yanghe (4% of market share), and Luzhou Laojiao (3%), and are primarily focused on the production of high-end baijiu.

Kweichow Moutai is one of the most reputable baijiu manufacturers, with almost 95 billion (on a total of 98 billion RMB) coming from the sales of baijiu. Established in Zunyi, Guizhou Province, Moutai is one of the most valuable companies worldwide, with a market capitalization exceeding 2,600 billion RMB (around 400 billion USD). Moutai is a very prestigious brand, and its high-end baijiu bottles are considered a status symbol because of the high price, which easily exceeds 1,000 RMB.

Wuliangye, with its headquarters in Yibin, Sichuan Province, is the second-largest manufacturer, mainly producing strong aroma baijiu. The sales from baijiu accounted for 44 billion RMB, and the market value exceeds 1,160 billion RMB (around 170 billion USD).

Other large public companies with baijiu sales exceeding 10 billion RMB are Jiangsu Yanghe (Mengzhilan), Luzhou Laojiao, Shanxi Fenjiu, Beijing Shunxin (Niulanshan), and Anhui Gujing. Besides the most prominent producers, other smaller brands are also appreciated, such as the Shuijingfang, Laobaigan, Gongjiu, or lower-end baijiu like the Red Star Erguotou. ·

Today, the market requires baijiu manufacturers to innovate and improve their production technology constantly, and to pay more attention to new consumers, in China but also abroad: currently, the baijiu’s major consumer group is over 60 years old, with younger Chinese consumers showing less affection to the white spirit and preferring other alcoholic drinks, such as whisky and other western spirits.

The Chinese white spirit is also becoming more and more welcomed outside China, with an increasing number of foreign consumers starting to appreciate the strong flavor of baijiu. A World Baijiu Day, an event born from an idea of a Canadian living in China and celebrated on August 9th (from 8 “ba” and 9 “jiu”, sounding similar to baijiu), is held since 2014 to help people worldwide to better know the Chinese national spirit.


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