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Baijiu is distilled from sorghum, wheat or rice. Photo: Bloomberg

China's Baijiu makers eye overseas markets to increase revenues

With mainlanders consuming more imported spirits, local distillers have lost market share


Baijiu, a flammable, pungent white liquor averaging a 110-proof wallop, is the world's most consumed form of liquor, thanks to its popularity on the mainland, but for the first time distillers are looking to develop export markets.

According to data from International Wine & Spirit Research, mainlanders drank more than 11 billion litres of baijiu last year, and the spirit, distilled from sorghum, wheat or rice, accounted for more than one-third of all spirits consumed in the world.

But as a new generation of mainland drinkers discovers the imported spirits that were unavailable to their parents, baijiu risks losing that market share unless it creates new markets overseas.

"Baijiu hasn't been marketed to the West yet but I think it can be," said James Rice, the managing director of Sichuan Swellfun, a baijiu maker in Chengdu in which London-based beverage multinational Diageo has taken a sizeable stake.

"People are interested in China and here's a piece of Chinese culture that can go right to your dinner table."

The opportunity has also attracted small entrepreneurs like David Zhou, who founded Washington-based Everest Distillery to import a baijiu and rebrand it for sale domestically.

"We really want to go for mainstream US consumers and we do believe they can accept it," Zhou said.

But Rice, and other distillers, have to deal with a major challenge: baijiu tends to make a terrible first impression.

"I thought it tasted like paint-thinner and felt like a liquid lobotomy," said Michael Pareles, a manager at the US Meat Export Federation in Beijing. "However, like many other things in China, I eventually grew to like it."

Torsten Stocker, the head of greater China consumer practice at Monitor Group in Hong Kong, was sceptical about prospects for overseas expansion. But he suggested the liquor could be better distributed to the swelling overseas Chinese community, which now depends on duty-free stores in airports to stay stocked.

Baijiu's punch makes it a tough sell in Western bar culture where people drink on an empty stomach. So does its fuel-like odour and its aftertaste. But the history of alcoholic beverages shows that nearly any taste can be acquired.

"Tequila has a very unusual flavour compared to more popular spirits," said Derek Sandhaus, an industry consultant and author of a forthcoming book on baijiu appreciation.

"But through clever marketing, good cocktails, and good management, it's earned a place on the bar shelf. I see no reason why the world's most popular spirit can't do the same."

But an adjustment is still probably necessary.

Matt Trusch, a former mainland resident, founded a distillery called Byejoe USA that imports baijiu base from the mainland and then refilters it to make it more drinkable.

"We've made it much more palatable to American tastes," Trusch said.

Vinn Distilleries in Portland, Oregon, founded by a family of ethnic Chinese immigrants from Vietnam, is reproducing a generation-old baijiu recipe, and Vinn President Michelle Ly has marketed it to non-Chinese consumers. Curiously enough, she said a group of investors had approached her with an idea to export her baijiu to China.

Sandhaus thinks the best avenue for developing drinkers overseas is to follow the model of Japanese sake and market baijiu as the alcohol to drink with Chinese food. But he added that there was no need for distillers to rush.

"It will still be a very long time before baijiu stops being a very lucrative business in China," he said.

This article appeared in the South China Morning Post print edition as: Baijiu producers seekto boost drink overseas