While a number of luxury brands in China such as automakers and fashion labels are starting to see a rebound from slowing sales growth, recent news on the continued precipitous decline in sales of products and services typically associated with fancy banquets shows that the government’s crackdown on corruption is still going strong.
Moutai baijiu, a staple of Chinese officials’ extravagant parties, has seen a major decline in sales growth since the start of the crackdown, and an article in Wall Street Journal‘s Money Beat says it hasn’t hit rock-bottom yet:
Kweichow Moutai Co.’s shares plunged by the 10% daily limit in Shanghai on Monday morning, after the company reported its slowest half-year gain since 2001. The maker of moutai, a high-end baijiu, or white liquor, said Friday its first-half net profit rose 3.6%.
“The result was lower than expected. As demand for high-end catering has slowed, the company will face greater uncertainty in stabilizing the prices of its products,” said Guotai Junan Securities in a note.
Meanwhile, shark fin soup is also taking a major hit. According to an Independent article, its sales have seen a 70 percent drop since the end of last year, according to Ministry of Commerce data. This rapid decline has also been attributed mainly to the crackdown:
Zhao Ping, the deputy director of the Department of Consumption Economy Studies at the Chinese Academy of International Trade and Economic Co-operation, believes up to 50 per cent of the drop in shark fin consumption is a result of cutbacks in government-related dining.
“Many companies host business banquets and their target is the government officials who have money and who have the authority to gain approval for projects,” Mr Zhao told the Xinhua news agency. “Since Chinese New Year this year, shark fin soup in the luxury hotels or restaurants has declined 70 per cent and the sales in some of the special shark fin restaurants … have declined by 50 per cent.”
Other products heavily associated with banquets such as bird’s nest soup, abalone, sea cucumbers, and flowers have all taken a hit as well since the crackdown started. As many retailers see a slight uptick in sales growth as they make their way through the second half of the year, it is becoming clearer that the effects of the crackdown and those of the economic slowdown are two very different factors.