China's Booze Business Looks Smashed

First terrified officials went off the lash; now young people are going dry.

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Something was missing when Kweichow Moutai, the world's most valuable spirits company, held its annual shareholder meeting in May. Participants were not served its famous baijiu, a fiery sorghum-based liquor. They supped on blueberry juice, instead.

This was probably wise: China's Communist Party is in the midst of yet another campaign to stamp out excessive drinking (and other sorts of extravagant behaviour) among Chinese officials. Last month the party banned alcohol entirely at official events; inspectors vowed zero tolerance. "One drink can make you lose your position," an article in state media thundered.

China's appetite for booze is prodigious. In the early 2010s, party officials and businessmen cemented deals over baijiu-fuelled banquets; middle-class urbanites gave each other fancy foreign wines; revellers bought giant pyramids of beer bottles at karaoke bars.

The crackdown on officials having fun is only one of a cocktail of factors that are now dragging down alcohol consumption. The country's brewers and distillers are starting to prepare for a permanent drop in consumer spending, and generational shifts in tastes. Will they make it to the end of the night?

China is still the world's biggest market for booze. IWSR, a drinks data provider, reckons that in 2021 China necked around a fifth of all the world's alcohol, producing about a quarter of global sales by value. But the outlook is grimmer than a pavement pizza.

Production of baijiu, the country's preferred tipple, has fallen by more than half since 2016, with demand at the lower end of the market slipping most.