Baijiu brands resort to deep discounting as wine sales surge in China

Baijiu producers have resorted to aggressive discounting in China to maintain sales volumes as consumers switch to beer and wine over the summer months.

Baijiu producers such as Maotai are resorting to deep discounts to sustain sales

Summer marks the peak retail season for beer and wine in China and, as a consequence, consumers reduce their Baijiu consumption as the weather heats up.

But this year the Baijiu industry is being hit particularly hard due to a combination of factors, and producers such as Mao Tai, Wu Liang Ye, and Lang Jiu have resorted to unprecedented price-cutting to try and retain their customers.

A large retailer of alcohol and tobacco in the Nan Kai District of Tianjin, China told a Jin Wan Bao reporter that Fei Tian Mao Tai, which has an alcohol by volume of 53%, now retails around ¥1200, whereas it was retailing for ¥1900 at its peak last year.

Wu Liang Ye (52% abv, 500ml) has seen an even more drastic price plunge of nearly 50%, having dipped from ¥1500 at its peak last year to ¥800 presently.

Online retailers have also taken to slashing the prices of their Baijiu, with one online retailer, Jiu Xian, offering an average discount of 60% off Baijiu brands such as Mao Tai, Wu Liang Ye, and Lang Jiu.

While summer has typically been the low-season for Baijiu sales, price drops this year have been particularly marked.

However, with prices now at their lowest for the last three years, consumers and businesses have been stockpiling Baijiu. Many of them are anticipating a surge in Baijiu demand in the upcoming festivities of the Mid-Autumn Festival (19 September) and the Chinese National Day (1 October) where Baijiu is commonplace for consuming at dinners and for using as gifts.

One retailer commented, Baijiu has a long shelf life, and by getting them now at a much cheaper price, it is going to save me over ¥20,000.”

A retailer from He Ping district believes that the reason for the downturn in the Baijiu industry is more than just seasonal consumption patterns and cites other factors, such as a ban on buying luxury goods among government officials, and the negative press surrounding “vintage” Baijiu – a term that has been abused in China due to the lack of laws governing the use of the term on Baiju labels.

Tougher driving laws have also been imposed the last two years, and a new lower threshold for drink driving has led many to replace Baijiu with non-alcoholic beverages.

In addition, over 20% of Baijiu consumers have now turned to drinking wine instead, contributing to the declining sales volumes of the fiery white spirit.

From the Mid-Autumn Festival period to the Lunar New Year of 2014, consumer demands for alcohol will be on the rise.

However, even though Baijiu will see some recovery in its prices, it is unlikely to surpass the hefty price tag of its yesteryears.