Summary: The town of Maotai, famous for producing China's national liquor baijiu, is facing a significant economic downturn. This is due to a government crackdown on official banquet drinking, a broader economic slowdown reducing consumer spending, and shifting preferences among younger generations away from strong alcohol. These factors have severely impacted sales for the major state-owned distillery, Kweichow Moutai, and the hundreds of smaller local producers.
Main Topics Covered:
1. The economic and cultural decline of Maotai, China's "liquor capital."
2. The specific causes of the downturn: an official ban on banquet drinking, China's economic slowdown, and changing consumer tastes.
3. The struggles of the baijiu industry, focusing on the falling fortunes of Kweichow Moutai and smaller local distilleries.
4. The failed attempts to revitalize the town through tourism and the product's lack of success in foreign markets.
Maotai Dispatch
The Good Times Are Over in China’s Liquor Capital
Once celebrated for its fiery spirits, the town of Maotai has reeled from a bad Chinese economy, changing tastes and a crackdown on boozy official banquets.
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The gigantic factory stretches for more than a mile along the river bank, belching steam laced with the aroma of China’s “national drink” — a gullet-searing grain spirit that, according to local lore, helped propel Mao Zedong to power, smoothed Richard Nixon’s 1972 visit to Beijing and turned a remote mountain valley into “the liquor capital of China.”
But, drenched for decades in the fumes and profits of its booze business, the town of Maotai in China’s southern Guizhou province is now nursing a bad hangover.
A nationwide ban on drinking alcohol at official banquets, an economic slowdown that has cut expense account boozing and the more health-conscious habits of a young generation with little appetite for 100-plus-proof alcohol have dented the fortunes of the state-controlled Kweichow Moutai, the town’s biggest employer with more than 30,000 workers, and hundreds of smaller, private distilleries scattered throughout the mountains.
All produce much the same product: a highly potent colorless drink made from sorghum and known as “baijiu.” The most famous brand is Moutai, a name derived from an archaic English transcription of Maotai, the Chinese name for the riverside town where it is made.
Once a sleepy, one-factory backwater, Maotai has had an expensive makeover aimed at attracting Chinese tourists and buyers for local booze. Its central district is filled with ersatz traditional wooden buildings stuffed with baijiu stores and baijiu-themed restaurants.
Behind the state-controlled distillery, however, most of the hundreds of shops selling different brands of baijiu along a long shopping street are empty. Anxious sales staff, desperate for business, shout at passers-by, offering free tastings and discounts on purchases of baijiu ladled from large earthenware vats.
Yuan Yuan, who sells baijiu for the Qianzui Winery, a small producer, said sales picked up slightly before Chinese New Year on Feb. 17 but were down by at least a third compared with last year. A long funk by Chinese consumers worried by the falling value of their homes has curbed their spending on nonessential items, including alcohol.
Ms. Yuan used to handle sales from an office at her distillery, where she received a reliably steady flow of orders. Today, she drums up business from a street stall next to a hill decorated with a giant bottle of Moutai. Her distillery’s baijiu bottles — white ceramic with a red label — look almost identical to those of Kweichow Moutai but sell for just a few dollars each.
“The economic climate has hurt us badly,” Ms. Yuan said.
An acquired taste, the baijiu from Maotai, prized for its “sauce aroma,” tastes like grain alcohol blended with soy sauce and leaves its malodorous smell on the drinker’s breath for hours or even days.
“Under no, repeat no, circumstance should the president actually drink from his glass in response to banquet toasts” of baijiu, President Nixon was advised before his arrival in Beijing by his deputy national security adviser, Alexander Haig. (He ignored the warning.)
Unlike many other Chinese products, from electric cars to stuffed toys, baijiu has struggled to break into foreign markers and relies almost entirely on domestic sales. For a time, these were so strong that Kweichow Moutai’s share price skyrocketed to make it China’s most valuable company, ahead of tech giants like Alibaba and Tencent.
Over the past five years the company has lost more than a third of its market value. It also lost three managing directors to Communist Party corruption investigations and two more to management shake-ups forced by disappointing results.
Flying Fairy, the company’s flagship product, sold for more than $500 a bottle before China’s biggest property developer collapsed in late 2021 and set off a long slump in real estate prices. Known as “liquid gold,” it served for years as a stable alternative currency widely used to bribe officials.
A bottle now sells for around $200.
That is still expensive — far more than what it costs to produce — and a surge in demand for alcohol ahead of Chinese New Year festivities braked an accelerating decline of Moutai’s price.
Flying Fairy’s loss of altitude, however, has still shattered the drink’s allure as a safe store of wealth for corrupt officials wary of holding cash and also for investors who had viewed buying up bottles of Moutai as a surefire bet.
Unable to unload unsold bottles on foreign markets, which last year gave China an immense trade surplus of $1.19 trillion but have little demand for high-octane sorghum spirits, China’s baijiu producers last year cut production nationwide by 12 percent, according to official statistics.
China first put a damper on the “baijiu” business in 2012, when President Xi Jinping, newly installed as the country’s top leader, restricted drinking at military functions as part of a campaign to curb graft and drink-fueled indiscipline. Drinking baijiu fell further out of favor in 2016 after several officials in the central province of Anhui died from alcohol poisoning following boozy banquets.
Starting last May, all alcohol, including Moutai, previously an indispensable feature of official and business banquets across China, has been banned at all government events.
“One drink can make you lose your position,” state media warned.
A large red slogan atop the entrance to Kweichow Moutai’s huge distillery sends a somewhat different message: “Love our Moutai. Win glory for the country.” The company, which is still highly profitable but unaccustomed to communicating with the world outside its fortresslike premises, did not respond to interview requests.
Hardest hit by the downturn, however, are the small, privately owned distilleries, whose bottles of grain spirit never fetched the astronomical prices commanded by the state-controlled giant.
Li Ling, 36, a manager for another small baijiu producer, said sales were down by nearly 50 percent compared with last year. But he still declared himself an optimist, saying he had been steeled against setbacks by growing up in a poor farming family. He and his three siblings all escaped farm labor by finding jobs outside the family village.
Whatever China’s current economic problems, Mr. Li said, there is no going back to past hardship. That people live much better now, he added, “is as obvious as a bug on a bald man’s head.”
Still, dozens of shops have shut down — or been shut down by government inspectors as part of a drive against counterfeit products and fraudulent sales techniques. An official notice on one shuttered store warned that it was illegal to claim to be a “special supplier of alcohol to the Communist Party or the military.”
The tight links between state business and baijiu, however, remain one of Maotai town’s main selling points.
Chinese Culture Liquor City, a sprawling hillside museum housed in a cluster of fake traditional pavilions, promotes baijiu by leaning heavily into the theme that drinking grain spirit, particularly Moutai, expresses national pride.
The museum features an A.I.-generated movie showing Americans turning their noses up at the Chinese drink at a 1915 trade fair in San Francisco, provoking fury from a representative from China, who smashes an earthenware container of baijiu onto the ground. The Americans, impressed by his fiery patriotic spirit, decide to take a taste and declare the Chinese alcohol excellent.
About 20 years later, according to local legend, Maotai helped revive Mao’s battered troops during the Long March. Passing through the town in 1935, exhausted Red Army soldiers are said to have treated their wounds and lifted their spirits with baijiu.
These days, eager to win young customers, Kweichow Moutai has developed baijiu-scented ice creams and a Moutai-flavored latte.
Yuan Qingqing, a manager at Jinjiao, a private distillery employing more than 2,000 workers, acknowledged that the “market is shrinking.” But he added: “China will never abandon baijiu. We have over 5,000 years of history, and baijiu has a very long history, too.”
Li You contributed reporting from Shanghai.
Andrew Higgins is the East and Central Europe bureau chief for The Times based in Warsaw, on temporary assignment in Shanghai.
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