Last week, market leader Moutai reported its weakest first-half profit growth since 2001, and the company is set to post its slowest annual growth since it listed, according to data from Thomson Reuters SmartEstimates. Rival Wuliangye is also struggling: analysts forecast the distiller’s 2013 profit growth will be the slowest since 2005.
Moutai declined to comment about its earnings or plans for the future, but a Wuliangye official, who declined to be named because he was not authorized to speak to the media, said the company was shifting its focus away from official and military channels and towards the wider consumer market.
Baijiu’s fall from grace, however, means it now has to jostle for unfamiliar clients in China’s $76 billion a year liquor market, where it has few devotees among the thirty-year-olds who drink most frequently and where imports such as plum liqueur from Japan’s Choya Umeshu Co Ltd and Chivas Regal Scotch whisky from Pernod Ricard SA are gaining popularity.
“Good baijiu is too expensive so I can’t afford it, while bad baijiu is way too strong, and drinking it can actually harm your health,” said Xu Chunhui, 26, a Shanghai-based construction engineer whose drink of choice is whisky.
In the near future, producers might need to bank on Baijiu becoming a hit in the West. But judging from how it’s been received so far, the best they can likely hope for is that it gets adopted as an alternative fuel source or paint thinner.