Baijiu: from toasting profit to cutting prices

Dealers in Chinese high-end native alcohol, or baijiu, have been forced to seek new strategies after price drops triggered by the government's recent curbs on lavish spending.

"We are switching from targeting government and military officials to real estate businessmen," said Zhang Zeyu, a 48-year-old sales manager with Kweichou Moutai Group, in southwestern Guizhou province.

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Moutai, a staple of elegant Chinese banquets, is the benchmark of high-end baijiu, which was widely consumed by government officials.

"It was easy to sell to local government organs, but now we have to be more focused on Beijing and Shanghai, where more can afford Moutai," Zhang said.

During its heyday, Moutai was hard to keep on shelves. Now, the manufacturer is allowing Zhang to order more inventory. But she said she turned down the offer.

"It (baijiu) is just not as profitable as it used to be," she said.

The number of her employees has shrunk from 100 two years ago to fewer than 40 now. "It's hard to pay the salaries, as there's hardly much profit left," Zhang said.

For instance, Zhang's top seller, Flying Moutai, which has 53 percent alcohol by volume, has had its price slashed. A bottle that easily cost over 2,000 yuan in 2011 was only 1,200 yuan last year, said Zhang.

"We even sold bottles for 800 yuan during this Lunar New Year," she said, noting that this price is barely above wholesale.

Many luxury liquor brands have been struggling this year. Kweichou Moutai announced in March a sales target of 43.9 billion yuan ($7 billion) with only 9 percent growth this year - the lowest in the past five years. In late April, market giant Wuliangye released its annual report, saying revenues in 2013 totaled only 24.72 billion yuan, a drop of 9.13 percent from a year earlier.