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Business
Print Edition> Business
UPDATED: January 28, 2013 NO. 5 JANUARY 31, 2013
A Time to Reflect
Pestered by scandals over quality, Chinese baijiu makers seek a rebirth
By Lan Xinzhen
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DE-SHELVING TOXIC LIQUORS: A staff member at a supermarket in Shanghai removes Jiugui liquor products from shelves after high levels of plasticizer were found in the popular drink (FAN JUN)

Li Dongmei, a liquor salesperson at Majiapu outlet of Merry Mart in Beijing, has seen a drop in sales at the store recently. Because her income is directly tied to sales, fewer customers mean less take-home pay.

Days between New Year Day and the Spring Festival, which falls on February 10 this year, used to be the high season for the sale of liquor. During this time, Chinese often visit relatives and friends and present liquor as gifts. For Li, it was a time to apply pressure on liquor producers and delivery companies to ensure her shop had adequate stock.

But this year, she has had plenty of time to reflect on those more handsome times. Promotions are proving fruitless, and discounts and two-for-one sales have failed to deplete stock, leaving sales as cold as this year's Beijing winter.

According to figures released by the Ministry of Commerce (MOFCOM), both the sales volume and price of various liquors have dropped in the past two months. In some liquor shops the price of Moutai, dubbed the "national liquor," has dropped by 25 percent. A year ago, Moutai sold for 2,000 yuan ($318) a bottle, but many retailers are now selling the liquor at less than 1,400 yuan ($223).

The year of calamity

On November 19, 2012, products from Jiugui Liquor Co. Ltd. were found to contain toxic plasticizer at a level 260 percent higher than the permitted limit, enough to damage the immune and digestive systems. Days later, excessive amounts of toxic plasticizers were found in some famous China liquors including Moutai, Wuliangye and Yanghe, dubbing 2012 the "year of calamity" for the liquor industry.

"The drop in liquor sales may be due to the news that some liquors are blended with alcohol or with a higher-than-permitted level of toxic plastic additives," Li said.

In the past, Li would show customers how to differentiate between real and fake alcohol to ensure the brands they purchased were legitimate. Today, customers are more concerned with the amount of plasticizers in their liquor.

A plasticizer helps improve the taste of a beverage, but excessive amounts could damage the immune system.

"In the past, customers were afraid of buying liquor from illegal producers or buying fake products, but now they don't even trust legal producers," said Li.

The scandals severely punished liquor producers on the stock market. From November 19 to December 5, stock prices of 13 listed liquor companies fell by 17.63 percent on average, and 100.13 billion yuan ($15.94 billion) in value was evaporated.

Jian Aihua, an analyst with the industrial research institution CIConsulting, thinks liquor producers did not take the initiative to open up to inspectors fast enough to clear their names, undermining consumer confidence. The toxic plasticizer scandal began in November last year. "If continued, it will not only delay the recovery of the liquor market, but also intensify the crisis of confidence present among consumers," Jian stressed.

End of a golden decade

As one of the world's six distilled spirits (the other five are brandy, whisky, rum, vodka and gin), Chinese liquor, or baijiu, is brewed with grain. It is renowned all over the world for its unique production technique and long history.

The development of Chinese liquor experienced two golden eras. The first was in the 1980s. In 1988 the Chinese Government freed control of liquor prices, and producers began market-oriented operations. From 1990, the prices of famous liquors kept growing. By the end of 1996 the average retail prices of the eight most famous brands of liquors had risen by 144 percent, and their annual output rose by 78 percent from 1989 to 1997. A lot of new breweries popped up across the country and existing breweries—especially the more famous ones—expanded production. The brewery industry was experiencing unprecedented prosperity.

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