Bottoms up

Kweichow Moutai likes to promote itself as the alcohol of choice for government decisionmakers (to be drunk only in responsible quantities at key brainstorming events, naturally).

Given that bond, the distiller can’t have been displeased when evidence began to circulate that Kweichow is owed Rmb5 million by the Ministry of Civil Affairs.

Eagle-eyed netizens were first to spot the ‘outstanding invoice’ in the notes to the company’s latest annual report. Embarrassed by the implication that officials were getting sloshed on credit, the Ministry quickly clarified the situation. It was all a silly mistake: what it really owed Kweichow was a receipt for donating to the relief effort after the 2008 Sichuan earthquake.

Then again, some decent free PR for China’s premium maker of ‘baijiu’ (or ‘grain wine’).

In fact, local journalists never seem to tire of stories about Moutai’s appeal.

Made from fermented sorghum, the liquor from mountainous Guizhou province occupies an iconic niche within China’s spirits industry.

Put simply, Moutai has prestige. “[It] gives face,” one of the firm’s employees told Southern Weekly magazine. “On more private and important occasions, only Moutai will do.” Moutai first became famous during the Qing Dynasty but its current success has much more to do with the tastes of China’s early communist leaders.

Kweichow traces the liquor’s political lineage back to 1935, when the Red Army’s ‘Long March’ to escape rival Nationalist forces took it through the town of Moutai. Initial usage was apparently medicinal, as soldiers poured it all over their damaged feet (it’s 53% alcohol after all).

Later, it started being poured down throats, as well.

Premier Zhou Enlai is said to have cemented its place in the alcoholic pantheon by serving it at the new government’s inaugural banquet in Beijing (after the Communist Party had won the civil war in 1949). It soon became one of the official gifts given to visiting dignitaries (like Henry Kissinger and Richard Nixon).

More recently, Moutai’s appeal has gone a little more mainstream. The Wall Street Journal put the baijiu (grain wine) market at $124 billion in 2010. Moutai itself had sales of $1.8 billion, reckons Xinhua.

That leaves multinational drinks firms envious, as well as rather keen to convert more Chinese to their own tipple. “We’re igniting a passion for scotch,” Diageo’s firm’s greater China boss Joe Tcheng explained at an investor day last week, according to the Journal. To help make that happen, Diageo has opened a ‘House of Johnnie Walker’ in Shanghai (where bottles of limited edition 1910 vintage sell for $2,000). Bloomberg reports Diageo has spent $3.2 million on the flagship store – its first anywhere.

Scotch already accounts for more than 80% of Diageo’s China sales, and the Johnnie Walker brand has done well in the blended whisky category (it competes mostly with Chivas Regal). But the UK drinks giant has been less successful in pushing its single malts, with the top three brands thought to be Macallan, Glenmorangie and Bowmore (none of which are owned by Diageo).

It is far from certain that the imported Scottish drams will ever dethrone the top baijiu brands. The real test will be when officials are seen to prefer a bottle of aged whisky to a vintage Moutai (grounds for hope: WiC hears that central bank governor Zhou Xiaochuan is a single malt connoisseur).

In case that transition takes longer than expected, the alcohol giants aren’t prepared to wait. LVMH already owns 55% of another baijiu maker (Wen Jun). And last year, WiC wrote about London-listed Diageo’s efforts to get a majority stake in the Sichuan grain alcohol distillery Shui Jing Fang. That deal has yet to receive government approval, as Shui Jing Fang ranks third after Moutai and Wuliangye in the high-end baijiu category.

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