March 27, 2012

After Targeting Luxury Cars, Chinese Government Mulls High-End Booze Ban

After Annoucement, Moutai Shares Drop 6.5 Percent

Moutai is one of the most expensive baijiu brands in China

Moutai is one of the most expensive baijiu brands in China

Coming on the heels of last month’s announcement that it may require government offices to purchase only domestic auto brands, Beijing recently said it plans to ban officials from spending public funds on cigarettes and luxury alcohol. This comes as Beijing struggles to address rising public anger at profligate officials nationwide — anger that was on full display during the recent National People’s Congress, when eagle-eyed Weibo users shared photos of Communist Party representatives wearing Hermes belts and sporting Chanel bags.

While this isn’t the first time Beijing has announced plans to “cut off” officials from spending freely on high-priced baijiu and cigarettes, the announcement sent shares of domestic spirits brands tumbling. Well-documented as a banquet staple (despite previous official policies that stipulated the drinking of red wine), as well as a popular “gift,” high-end baijiu has been under the microscope in recent months. With prices for Moutai and other brands skyrocketing and two baijiu makers ranked among the top 10 most valuable luxury brands on a recent Hurun Report list, brands have grappled with how to get themselves away from the “L” word: Luxury. Much of this has to do with their coziness with the government and, in Moutai’s case, state-owned nature. As Moutai spokesman Ye Yuanhong defiantly told Chinese media in the wake of the ranking’s release, “Moutai has never claimed itself eligible to be considered a luxury brand. We don’t know anything about Hurun’s list, and wish to distance ourselves from it.”

Unfortunately for Ye, Moutai ended up on another recent Hurun list, the ten most popular brands for gift-giving in China, ranked fifth over Apple, and the only Chinese brand on the list.

Whether they’re truly luxury brands or not, the likes of Moutai and Wuliangye have already been affected by Beijing’s proposed ban. According to the FT, China Kweichow Moutai Distillery saw shares drop 6.5 percent in Shanghai, its biggest decline since January, while arch-rival Wuliangye Yibin, listed in Shenzhen, also fell 6.5 percent, while Jiangsu Yanghe Brewery dropped 5.8 percent and Luzhou Laojiao 6.5 percent.

Although few expect the proposed booze-ban to pan out, Beijing’s official moves look aimed at nipping growing public concern in the bud. Earlier this year, Shen Haixiong, a deputy to the Shanghai Municipal People’s Congress, called for a ban on Moutai at official banquets, saying that drinking the stuff was “an abuse of public funds.” Weibo users have also become more vocal in their criticism of spendthrift officials, with one writing, “If officials pay themselves, nobody will care what kind of drink they have. But how can they spend taxpayers’ money on drinking Moutai or Lafite?”

If it actually goes through, the ban will likely only hit very low-ranking officials, and may not even hit them that hard. Still, this week’s announcement and subsequent drop in baijiu shares indicates the fragility of their position relative to imported spirits brands and drives home the fact that — in Beijing and in public — “luxury” is still a four-letter word.

 

Beverage / Business & Finance / Culture / Food, Wine, & Spirits
Tag: baijiu, beijing, cigarettes, government... , More
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