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2025-06-11 China’s booze business looks smashed

Last month the party banned alcohol entirely at official events; inspectors vowed zero tolerance. “One drink can make you lose your position,” an article in state media thundered.

The country’s brewers and distillers are starting to prepare for a permanent drop in consumer spending, and generational shifts in tastes. Will they make it to the end of the night?

China is still the world’s biggest market for booze. IWSR, a drinks data provider, reckons that in 2021 China necked around a fifth of all the world’s alcohol, producing about a quarter of global sales by value. But the outlook is grimmer than a pavement pizza. Production of baijiu, the country’s preferred tipple, has fallen by more than half since 2016, with demand at the lower end of the market slipping most. Production of beer, China’s second favourite drink, peaked in 2013. Companies tried to make up for lower volumes by selling pricier drinks but that strategy has dried up. Five of the seven biggest brewers in China saw sales fall last year. Sales of wine (never a mainstream pleasure) have slumped by two-thirds in five years.

Politics is one explanation. The party is still obsessed with making its members, of whom there are about 100m, lead more sober lives.

A sluggish economy is a second factor. Karaoke clubs, bars and restaurants closed in droves during years of tight lockdowns aimed at halting the spread of covid-19. Those that survived have had to deal with new problems. Households are choosing to save a higher share of their income than they did before the pandemic. A property crash, among other pressures, has caused consumer spending to plummet.

The third factor dragging down alcohol consumption is that Chinese young people, like their peers in much of the world, are simply less keen on drink than previous generations. They tend to care more than their elders about clean living; they are more sceptical of labels, often slapped on Chinese liquor, that say it is good for your health. These youngsters have their own vices: lately China’s fast-growing coffee chains have wowed fashionable urbanites with questionable soft drinks, such as pork-flavoured lattes and oolong teapuccinos. But the highs craved by today’s young are mostly caffeine- and sugar-based.

In particular, young people are rejecting China’s boozy workplace culture, which has historically required employees to down shots with the boss in order to get ahead.

For foreign drinkmakers, trade wars are worsening the pain. Between 2020 and 2024 China slapped tariffs ranging from 116% to 218% on Australian wine, causing imports to tumble. Last October customs officials raised levies on French cognac after Europe raised tariffs on Chinese electric vehicles—a big problem for the likes of Rémy Cointreau and Pernod Ricard. And this year American beer has also faced higher levies in retaliation for President Donald Trump’s tariffs on Chinese goods.

What to do? Companies both foreign and local are slashing prices. The retail price of a canned cocktail has slipped from over 13 yuan ($1.80) in 2022 to under ten yuan today, says Loren Heinold, who owns a business in Beijing that makes them. “That’s where the market has moved and everybody has moved with it, because the people that didn’t are dead.” Bud APAC, the listed Asian subsidiary of the world’s biggest brewer, AB InBev, is betting on its cheaper “sub-premium” brands to help its China business. It is also hoping more drinking at home will make up for declining sales in restaurants. Many off-licences will deliver a drink to nearby addresses within 30 minutes.

Some firms are hoping to hook young Chinese with novel tipples. In 2019, Bottle Planet, a distiller based in the south-western city of Chongqing, started selling a plum wine with a relatively low alcohol content that it hopes will tempt young women. Sales rose 30% last year, according to media reports. Kweichow Moutai is trying hard to shake its somewhat fusty image. Over the past three years, in partnership with other Chinese brands, it has launched baijiu-flavoured ice cream, coffee and chocolates.

China’s shrivelled alcohol market is now driven by “real” demand from people who actually enjoy drinking, reckons Ian Dai, a businessman in Shanghai. His wine firm sold around 40,000 bottles in the past 12 months, mainly to young urban professionals. “Before, you didn’t have a choice to drink. Like it or not, you just had to.” China’s boozers are fewer and pickier than before. But they may be having more fun.

2024-06-27 Who shaved $250bn from Kweichow Moutai’s market value?

Yet the most recent slide in the company’s share price, which is down by 14% since early May, does not appear to be related to anti-corruption campaigns. Moutai has not been subject to a recent state media hit-piece or government investigation. Its revenues grew by nearly a fifth in the first quarter, year on year, to 46bn yuan ($6bn). Net profit jumped by 16%, to 24bn yuan. Its margins remain as eye-watering as its booze. What is going on?

One has to do with the woes of formerly prodigious Moutai buyers. Property tycoons, said to have been among the biggest, are in the midst of a particularly severe dry spell. It may be no coincidence that bottle prices and house prices both peaked around the same time in early 2021, as Merchant Securities, a local broker, points out. Moutai’s flagship 106-proof firewater now goes for 2,200 yuan a bottle, from 2,700 yuan at the beginning of the year and 3,100 yuan three years ago.

An even quirkier explanation concerns a card game. Over the past few years guandan (which translates as “egg tossing” or “bomb tossing”) has become a fixture at banquets across the country. It is rumoured that even some of China’s most senior officials enjoy the game, in which two teams of two players attempt to empty their hands by playing high combinations of cards. Richard Liu, who founded JD.com, a large e-merchant, is a self-professed fan.

As a result, guandan skills have become indispensable for business dinners. Just as executives around the world have learned to play golf in order to entertain business partners, many Chinese businesspeople are practising the card game in order to make an impression at banquets. Bloggers in China have speculated that playing cards is replacing competitive drinking as the single most important banquet activity. They note that serious guandan players tend to stay sober. This might be keeping Moutai off more and more banquet bills.

There are more mundane explanations for Moutai’s declining market value. The firm is ramping up production at a time when consumer sentiment is weakening. It has poor control over its distribution. But if Mr Xi’s new economy features fewer property magnates and more young tech founders who view winning at guandan rather than getting sloshed as a prerequisite to signing deals, then this could really stick the knife into Moutai’s future growth.