Modern tastes threaten spirit of tradition
For thousands of years, Chinese have drunk spirits with meals and during festivals.
Traditional drinkers are fond of white spirits (or baijiu ) which are high in alcohol content.
'Taking white spirits is a traditional habit. As the saying goes: What is a feast without white spirits?' said Nie Fengying , Shanghai representative of Shanxi Xinghuacun Fenjiu Distillery, China's second-largest distillery.
'Northerners and peasants prefer strong drinks with high alcohol content. There is no 'oomph' in a weak drink and they don't get any satisfaction from it,' Ms Nie said.
The market for white spirits in China is enormous.
'Traditional drinkers are northerners and people living in rural areas. We are talking about 900 million people,' she said.
However, drinking habits have recently taken on a new dimension as city dwellers and southerners turn to lighter spirits for reasons of health and climate.
'In the south, like Shanghai, people show a growing preference for beer and low-alcohol spirits. That's to do with the mild weather,' Ms Nie said.
Zhu Yeqing, translated as Bamboo-Leaf-Green and blended with Chinese herbs, sells well in Guangdong and overseas. It is one of Shanxi Fenjiu Distillery's famous brands. Xinghuacun Fenjiu is the other.
Shanxi Fenjiu Distillery produces spirits with alcohol content ranging from 28 to 53 per cent proof.
Tang Yifeng , secretary of Anhui Gujing Distillery's securities department, said: 'When it comes to baijiu, people prefer low-alcohol-content spirits as they are paying increasing attention to their health.' Anhui Gujing is China's fifth-largest distillery, producing baijiu with alcohol content ranging from 30 to 55 per cent proof.
Last year, sales of Anhui Gujing's Gujing Gongjiu brand, a 30 per cent-proof low-alcohol baijiu, more than doubled.
Sales of another low-alcohol spirit, this time 38 per cent proof, surged 34 per cent, while high-alcohol 55 per cent-proof baijiu grew 5.8 per cent.
Attempts by the Chinese Government to rein in consumer spending also encouraged sales of low-alcohol spirits.
'In 1994 and 1995, sales were flat, partly because of the policy of discouraging people from giving baijiu as gifts,' Ms Nie said.
Although the spirit still represents about one-quarter of the total alcohol consumed in China, it has lost some market share to beer and other alcoholic beverages.
Baijiu made up 29.1 per cent of China's total alcoholic drinks output in 1994, down from 36.6 per cent.
Beer, meanwhile, claimed 63.6 per cent of the market, up from 49.6 per cent, according to the China Statistical Yearbook 1995.
In the four years to 1994, growth in the consumption of baijiu slowed to 6.27 per cent on average, well below the 19.75 per cent growth in beer consumption, according to the yearbook.
Radical change in baijiu consumption is not expected in the near future, even though the drink is losing market share to beer and other alcoholic beverages.
Mr Tang said: 'It's not easy for the Chinese to change their drinking habits.' He said the situation mirrored that of Japan, where rice wine had maintained its dominant position in the face of strong competition from beer.
'I believe baijiu will do the same,' Mr Tang said.
Baijiu production grew 7.5 per cent on average in the three years to 1994. A total of 6.51 million tonnes were produced in 1994.
Of the more than 40,000 baijiu distilleries in China, only about 40 can produce more than 10,000 tonnes a year, with the remainder operating on a small scale.
'The biggest baijiu producer - Sichuan Yibin Wuliangye Distillery - accounts for only about 2 per cent of China's total sales,' Mr Tang said.
This underscores China's fragmented industrial bases, where industrial enterprises tend to develop on a regional basis, lacking a national perspective.
The austerity policies imposed since July 1993 have also hurt sales. 'Demand for baijiu has been affected by the country's macro-economic policies more than any other factor,' Ms Nie said.
'When the economy did very well in 1992, we had a good year as fenjiu was selling like hot cakes.
'When the government tightened the economy in the second half of 1993, the market was bad.
'But, for the first few months of this year, sales were very encouraging. During the 'Spring Festival' [Lunar New Year], we sold about 3,000 tonnes of fenjiu.' Shanxi Fenjiu Distillery's production is estimated at 13,000 tonnes this year, from 10,000 tonnes in 1992.
The trend towards lighter alcoholic drinks among city dwellers and southerners has prompted baijiu producers to lower the alcohol content of their products.
'To meet the expected change, we will focus on the production of low-alcohol baijiu,' Mr Tang said.
Anhui Guijing is considering building new production facilities for low-alcohol baijiu, which will be backed by the proceeds of the sale of B shares in Shenzhen this month.
Following the expansion, the company's production could reach 25,000 tonnes a year by 1998.
Marketing and expansion strategies will be crucial for baijiu producers in the face of growing competition.
In recent years, Shanxi Fenjiu Distillery's established brands have come under increasing competition from new brands such as Kungfu Jiejiu which have adopted highly aggressive advertising strategies.
Ms Nie said: 'To an extent, they have succeeded in making consumers more aware of their products.
'Old brands like ours tend to neglect advertising, as we assume we can continue to rely on our name.
'This is not true these days. Old brands need to advertise just as much.' Shanxi Fenjiu Distillery faced high tax demands because it was an established distillery, she said.
New distilleries did not have to pay high taxes, allowing them to spend more on advertising.
Shanxi Fenjiu Distillery is aware of the need to be more aggressive, and has in recent years strengthened its sales network in the towns and rural areas.
'We are going into production of wine, yellow liquor [huangjiu ] and beer on a small scale to cater to different drinking habits in the south,' Ms Nie said.
'I still believe the market's prospects are good. What we need to do is to advertise more.
'Drinking habits die hard, but they do change sometimes, as a result of advertisements.'