China and the World

Tequila’s shot

Will Xi trip to Mexico boost drink’s China sales?

Tequila w

Reminiscing to WiC about his time spent in China, an American businessman recalled one incident in the early 1990s. Keen to build better relations with local officials, he decided to try something new. Rather than just host the usual banquet, he would end the evening with a tequila party.

None of his guests had drunk tequila before. As a result they were soon alarmingly inebriated. In fact, the American began to suspect his plan had backfired when the city’s chief of police was reduced to crawling around the karaoke parlour on all fours.

Unsurprisingly the host was a little nervous when he got a call from the same man the next day. Fortunately there was no mention of a headache and the tone was jovial. “Great night,” said the police chief. “When’s the next tequila evening?”

Perhaps quite soon, it turns out. During Xi Jinping’s recent visit to Mexico last week, one of the main announcements was that the Chinese market will be opened up to tequila imports. Until now the fiery drink has been largely unavailable on Chinese shelves due to a rule preventing the import of tequilas that exceed an alcohol limit of 200 milligrams per 100 millilitre. Given that the most well-known tequilas tend to contain alcohol in excess of 300 milligrams, that has excluded most of the agave-based drink from being sold. Indeed, the afore-mentioned party-loving American executive had to bring it into China via personal trips from Hong Kong.

But now that tequila is going to be more readily available, will it actually appeal to Chinese drinkers? Police chiefs aside, some are sceptical that it will suit local palates. Four years ago, CNN also examined the prospects for tequila sales in China, noting that the Mexican distiller Armando Rojas – maker of the Los Valores brand – was hopeful of cracking the China market. Yet Rojas said he knew he would face a struggle, even if sales restriction were lifted.

The vast majority of Mexico’s tequila exports go to the US, where legions of students and young people maintain the ‘slammer’ culture by downing the product neat, and chasing it with a lick of salt and a bite of lemon. The drink appeals to other consumers too, mixed into margaritas.

But in China, the likes of Rojas are starting from scratch and a lot of consumer education will be needed to ramp up demand. While CNN was interviewing the distiller at a Hong Kong food fair, a Chinese trader approached his stand, mistaking a bottle of tequila for vodka. Somewhat despairingly, Rojas says to camera: “There is no tequila culture here.”

Chinese tastes have evolved with time. Thirty years ago, beer was nicknamed ‘horse urine’ by many drinkers or seen as a drink for women or those who couldn’t cope with ‘proper’ liquor (known locally as baijiu). But today the beer market is huge, and few such prejudices – gender-driven or otherwise – exist. For tequila distillers, it’s not impossible that some drinkers in China will embrace their product. But it may take time to get them interested.

In fact, Xi made commitments to purchase $1 billion worth of Mexican products last week, with most analysts seeing pig farmers as the bigger winners from his visit.

The purchases are part of an attempt by Beijing to improve ties with Mexico, a manufacturing rival to the Chinese that was hit hard by China’s entry into the WTO in 2001.

The two economies continue to compete, with Mexico trying to fight back with businesses that benefit from closer proximity to the US market, like just-in-time textile production or goods that are expensive to ship longer distances.

As Chinese wages rise, the labour cost differential with Mexican producers is also beginning to narrow.

But Mexico still frets about its trade balance with the Chinese. It says it imported $57 billion of goods but exported to China just $5.7 billion (only 1.5% of Mexico’s total exports).

Beijing doesn’t dispute that Mexico runs a deficit, but its own statistics have China’s surplus considerably lower at $18.36 billion.

Then again, whichever figure you use, it’s going to take a lot of tequila drinking to balance Sino-Mexican trade…

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