China’s best-selling spirit Baijiu seeks a foothold in the West

China’s best-selling spirit Baijiu seeks a foothold in the West

Tue, Jun 3 2014

By Leslie Gevirtz

NEW YORK (Reuters) – Just as Russia has its vodka, Mexico its tequila and Scotland its Scotch, China has its own distilled spirit, baijiu.

Baijiu is the world’s biggest-selling spirit category and represents a $23 billion market, according to research reports by McKinsey & Co and UBS.

But baijiu producers are seeking new markets in the United States and Europe as sales fall at home after a crackdown on wasteful spending in China.

The Chinese white spirit distilled from sorghum, wheat or rice, alone accounts for more than one third of all the spirits consumed in the world because China is the leading spirits-consuming nation, according to International Wine and Spirits Research.

Baijiu Moutai is China’s official drink. It is served at state diners and often used as a luxury gift. Produced by Kweichow Moutai Co Ltd, this baijiu can trace its history to the first century BC and was served to U.S. President Richard Nixon on his 1972 visit to China.

But China’s president Xi Jinping banned red-carpet receptions and boozy military banquets last year in an anti-corruption campaign. As a result, sales are down.

The brand was worth nearly $2.4 billion, surpassed only by Johnnie Walker Scotch, according to consulting firm Brand Finance. A 375 ml bottle sells for $160.

Baijiu “represents respect. It represents tradition. It represents wealth, ” explained Yuan Liu, a top executive at U.S. baijiu importer CNS Four Seasons Trading. He, and Manny Burnichon of Private Cask Imports, have embarked on expanding the U.S. market for the clear spirit drink beyond the nation’s Chinatowns.

Producers are trying to convince Westerners that baijiu is in the same category as whiskies and bourbons. It is certainly punching above its weight as far as alcohol is concerned. Most brown spirits top out at about 43 or 45 percent but baijius can range as high as 60 percent by volume with many of the premium bottles hovering in the low 50s.

Western palates may need some training to appreciate baijiu. Michael Pareles, manager at the U.S. Meat Export Federation in Beijing, initially thought it tasted like “paint-thinner,” he told Reuters in an interview last year.

But he added he eventually grew to like it.

“I believe that baijiu will eventually find a home outside of China, but it will need to be tweaked to meet the needs of the local market,” says Derek Sandhaus, author of “Baijiu, The Essential Gide to Chinese Spirits”.

“What needs to change is less the drink itself than how it is presented,” says Sandhaus, a native of Kansas who began drinking baijiu while working in China.

“In China, baijiu is served neat at room temperature, and almost exclusively with meals. In America and Europe, it is more common to take high-proof liquor in a mixed drink.”