The shop assistant pulled out a dragon-shaped, wooden box, safely ensconced behind a padlocked glass cupboard, and opened it to reveal a small, red, 500-ml bottle.
“298,000 Yuan [about Rs.32 lakh],” he said in hushed tones. Only more surprising than the rather considerable price tag was his revelation that one bottle had been purchased just a week ago; the identity of the customer was, of course, “a company secret”.
It’s not for no reason that the small bottles of fiery, sorghum-fermented, white liquor brewed in the distilleries of this remote town have acquired a reputation of mythic proportions across China.
For long the preserve of China’s Communist Party (CPC) elite, the exclusive — and notoriously hard to acquire — Maotai liquor (also spelled Moutai) is the most prized of all Chinese baijiu (white spirits).
Maotai has, in the last decade, gained currency among China’s newly wealthy as the ultimate symbol of social status and political power, in part because the very act of procuring a hard-to-find bottle demonstrates not only deep pockets but also the extent of one’s political connections, or guanxi.
The surging demand from prosperous Chinese has made the Kweichow Moutai Company, the biggest State-supported brewer of Maotai, a multi-billion dollar enterprise — and the heartbeat of this dusty town that sits between the Chishui river and the northern mountains of Guizhou, a province which is, ironically, China’s poorest.
The town itself is perpetually enveloped by the strong, distinct aromas of the sorghum-derived liquor. At its centre sits the sprawling headquarters of the Kweichow Moutai Company, located along the banks of the Chishui, whose waters are said to be a crucial ingredient in the brewing of the liquor.
But for many, the bottles that emerge from the sprawling Kweichow Moutai factories have also become synonymous with the opulence of official government banquets — and, some say, of the rampant corruption that greases politics and business in China today.
So when new President Xi Jinping launched a corruption crackdown targeting “excessive formalism, hedonism, bureaucratism and extravagance”, it was unsurprising that one of his first edicts was to ban the serving of liquor at government functions.
In the nine months since Mr. Xi issued his directive, the liquor industry is in an unusual state of flux after an unprecedented golden decade of growth, distillers in Maotai told The Hindu in interviews.
The corruption crackdown appears to be taking effect, surprising some who, inured to similar warnings in the past that achieved little, hadn’t taken the threat seriously.
Distillers were, however, still divided on the key question that many in China, from political scientists to journalists, are debating: is Mr. Xi’s corruption campaign here to stay, or will it, as some critics say, fizzle out in the absence of more meaningful political reforms?
For the distilleries in this busy town, this is a question that will likely determine whether their businesses survive. Maotai is a dusty town whose economy revolves entirely around the liquor industry. The town sits beside a newly-paved six-lane expressway that runs from the provincial capital Guiyang — a reflection of the importance invested in the town’s future by the local government.
Billboards and giant glass bottles displaying the town’s most expensive brands line the highway from Guiyang, providing a jarring backdrop to the paddy fields and villages of a province that is China’s poorest in terms of per capita income. One billboard shows the actor Jackie Chan displaying a bottle of Kweichow Moutai’s finest.
Kweichow Moutai’s factories produce only 10,000 tonnes annually. At one-fifth of the estimated national demand, the limited supply has bestowed the brand with the sense of exclusivity that drives its popularity among the Chinese political and business elite.
Yet, despite the demand, the company’s profits, which rose by as much as 73 per cent in 2011 and 50 per cent in 2012, grew by a more modest 21 per cent in the first quarter of this year. he company’s profits in 2012 were a sizeable 13 billion Yuan (around Rs.13,850 crore or $ 2.1 billion).
This year, for the first time in almost a decade according to distillers, the prices of Kweichow Moutai’s prized product have actually fallen, by more than 50 per cent. The cheapest product, which was selling for 2,200 Yuan (around Rs.23,450) is now being purchased for 1,400 Yuan (around Rs.14,900).
Locals say the slump has coincided with Mr. Xi’s directive, underscoring the extent of the links between the luxury liquor industry and Chinese officialdom.Other distilleries have fared even worse. In the first six months of this year, profits of the liquor industry in China grew by a mere 0.57 per cent, down from last year’s 55 per cent rise, albeit totalling a still sizeable $ 6.5 billion 39.7 billion Yuan ($ 6.5 billion or Rs. 42,500 crore).
Some of the smaller breweries that operate in the shadow of the Kweichow Moutai Company are hopeful that the campaign may bring about a much-needed correction in an industry where prices have been over-inflated by corruption and excess.
“In China, this industry has become all about status and price, and not about quality,” bemoans Zhang Xiaowen, a fourth-generation brewer and Maotai native who distills a range of sorghum-liquor that ranges from a modest 60 Yuan (around Rs. 640) per bottle to 50-year-old spirits that sell for 3,000 Yuan (around Rs. 32,000).
The industry, he says, is also grappling with a massive underground spurious liquor market that has proliferated this past decade, driven by the mad scramble for exclusive brands from the newly wealthy as well as from rising officials looking to curry favour. One Kweichow Moutai Company representative estimates that 90 per cent of all bottles served in Beijing’s restaurants are fakes.
But even as Maotai’s distillers are bracing themselves for hard times as a result of Mr. Xi’s crackdown, the arrival of the new Chinese President has, however, surprisingly boosted the profits of brewers further upstream on the Chishui river.
Sales of nearby Xishui county’s local product, Xi Jiu, have soared during the crackdown, distillers say, and have become a favourite order for provincial governments from Guizhou to Tibet. Sales of Xi Jiu crossed three billion Yuan (Rs. 3,200 crore) in 2012 — more than twice that in 2010.
The reason? One brewer explained, “If there’s one liquor that’s a safe gift to give today, it’s one that bears the President’s name”.