China's top baijiu maker faces sobering reality as austerity trims profits

The Star

14-06-2025

China's premier liquor distiller Kweichow Moutai – a brand that had, over decades, become synonymous with sumptuous feasts – is heeding a renewed mandate for austerity from Beijing, distancing its products from the extravagant hard-drinking lifestyle with which it had been linked in the public consciousness.
Management at the company, valued at 1.86 trillion yuan (US$258.73 billion), has pledged to comply with strictures stressing thrift – guidelines that have helped to remove Moutai's expensive baijiu liquor from government banquets and narrowed the firm's profit margin further.
Senior executives vowed to remain vigilant against the risks of corruption at a company meeting on Tuesday, where Moutai chairman Zhang Deqin invoked classic Chinese texts to argue the liquor must promote culture, health and harmony.
'With the baijiu , rites and traditions are upheld, the aged are nourished and joy is shared,' Zhang said, citing the Book of Rites and the Classic of Poetry, both of which date back centuries.
Moutai's notoriously strong liquor – around 50 per cent alcohol by volume – has been the drink of choice for China's officials and executives since the early years of the Communist Party.
After revolutionary leaders Mao Zedong and Zhou Enlai developed a taste for the spirit during their time in the southwestern province of Guizhou, the distinct white bottles have been given as official gifts to visiting dignitaries and become a fixture at lavish dinners.
Zhang's remarks followed a March revival of orders to curtail inordinate expenditures on dining, showy official junkets and other entertainment. Most notably, President Xi Jinping has reiterated an eight-point code of conduct - first released in 2012 - to ensure officials do not hold costly receptions at the public's expense. As an SOE it must toe the party line on austerity, even at the cost of its sales
The Central Commission for Discipline Inspection, the party's top anti-corruption organ, has republished up to 80 detailed rules related to the topic, including a ban on party and government dinners and meetings held at popular visitor attractions.
'Working meals should serve ordinary dishes in a home-cooking style. High-end dishes should be avoided, along with cigarettes and high-end liquor,' reads one rule.
Moutai's leaders are likely to feel more pressure than most to demonstrate their fealty to official directives. Within the last decade, company chairmen Yuan Renguo and Gao Weidong were given separate prison sentences for bribery; Yuan, placed under investigation in 2019, died of a cerebral haemorrhage in 2023.
These developments may spell lean times for Moutai. One of China's largest listed companies by market capitalisation, the company has earned a sizeable profit from the rich and powerful - and the heavy drinking of political cadres.
'Moutai's expensive baijiu and its political duty as a state-owned enterprise (SOE) are seen as at odds,' said Tang Dajie, a senior researcher with the China Enterprise Institute think tank in Beijing.
'As a profit-making company it certainly hopes more customers, including officials, can drink its products,' he added. 'But as an SOE it must toe the party line on austerity, even at the cost of its sales.'
When Moutai held an annual shareholder reception in May, tables no longer groaned under rows of heavy white bottles. Instead, orange juice and other non-alcoholic drinks were served.
Explaining the change, Moutai's Zhang said at the Tuesday meeting that as an SOE, the company must implement Beijing's decisions to combat waste. He went so far as to support a de facto baijiu ban at official functions and dinners being enforced in many localities, as well as gatherings held by other SOEs.
The company also conducted a management overhaul this week, promoting younger executives to reform the firm's sales and marketing strategies.
But Tang, the researcher, pointed out that Moutai cannot control how its baijiu is consumed, and its high prices are largely determined by the market.
'It has better taste and quality, and many people stock up on Moutai baijiu as an investment,' he said. 'Though Beijing's austerity push is correct, the government should not intervene in market activities.'
The push to trim spending has come at an inopportune moment for Moutai, as muted economic activity has further quelled consumers' thirst for liquor.
A May report from Soochow Securities said the company's years-long streak of double-digit revenue and profit growth will end in 2025.
Accordingly, prices have been dropping since 2024. As of Wednesday, on several liquor trading platforms, the price of a bottle of 25-year-old Moutai had fallen below 2,000 yuan (US$278), half what had been demanded in more prosperous times. - SOUTH CHINA MORNING POST