Baijiu plays game of risk and reward
Many major baijiu brands are effectively state-owned, which means they can be conservatively run, unwilling to break into new territories. We ask what this means for the future of the category.
*This feature was originally published in the May 2026 issue of The Spirits Business magazine.
It’s been a year since the Chinese government imposed a ban on alcohol at official events as part of a campaign to promote frugality and discipline among officials. The move has had a major impact on the country’s national spirit, baijiu, which has long benefitted from its presence at government events.
The category has suffered from a multitude of factors in the past decade, including government restrictions, a slowdown in alcohol consumption and economic headwinds. Amid the slowdown, a report by Bloomberg from this January claimed that the world’s biggest spirits firm, Diageo, is planning to exit its baijiu business. The UK-based drinks company increased its shareholding in the company behind Shui Jing Fang baijiu in 2019, at a time when the category was experiencing major growth. Diageo has not commented, but the report came a month after the company reported a 56% sales drop for its Chinese white spirits in the six months to December 2025. The revenue loss was blamed on market policy changes in China that affected spirits consumption, namely the ban on alcohol at official events.
The ban in May 2025 followed a tightening on alcohol consumption that was introduced in 2012 after Xi Jingping was elected as the Communist Party leader. As part of his Eight-Point Regulation initiative, only high-end liquor was prohibited during official functions to combat corruption, affecting more expensive baijius. Alcohol production and consumption have continued to decline since then, reflecting not only policy enforcement but also generational, economic, and cultural shifts toward moderation.
IWSR data shows that baijiu consumption saw its volumes drop by 5% in 2024, with premium-and-above brands up by 4%, while the standard-and-below tier dropped by 8%. For 2025, IWSR’s forecast data shows a 3% volume drop for the baijiu category, and a 2% compound annual growth rate (CAGR) volume drop of 2% from 2024 to 2029. The premium-plus segment is expected to be stagnant over the same period, while standard-and-below is predicted to fall by 3%.
Baijiu educator and consultant Yuchen Zhong notes that while the crackdown in 2012 caused a decline for the industry, “it quickly rebounded because the Chinese economy was booming. Realistically speaking, the anti-corruption ban was not that strict back then. But last year, the no-alcohol rule was really tough and strict. It’s not limited to high-end baijiu anymore; it’s no alcohol at all, not even a beer.”
Derek Sandhaus, founder of Ming River baijiu, explains that the industry hit a peak in 2012, when the anti-corruption reform caused a “loss of about 30% of the baijiu market within a month of that change”.
He also noted that this came on top of changing consumption habits, as “younger generations in China are drinking less baijiu than older generations”. Last year’s government restrictions, on top of the downward Chinese economy, has caused baijiu volumes to “go down by more than half” from 2013 to 2025, Sandhaus believes. “It’s still like huge numbers, five, six billion litres but much lower than like the 14 or 15 [billion litres] of 12 years earlier.”
He says a lot of the major players in the baijiu sector are “experiencing pain in a way that they haven’t in the past”.
Government ownership
One of the biggest structural problems in the baijiu industry, according to Sandhaus, comes down to the way the companies operate. “Most of the major distilleries are owned or managed in some form by the government, which means that the funds they’re working with are state funds. So, unlike with a private business, they’re much less risk averse. At the same time, you’re seeing a shift in the baijiu industry over the past 10 years, and there are certain demographic and political changes to the industry. The industry itself, at least among the major players, is set up in such a way to disincentivise innovation and experimentation, which would be a normal response to shifting demographics.”
Sandhaus believes that because of the way many businesses in the industry are structured, with middle management on five-to 10-year contracts, there exists a lack of “personal stake in the long-term health of the company”. He explains that there might not be any rewards for opening new markets, for example, as the industry has had the same customer base in China for the past 20-30 years. “The kind of work that it would take to innovate among new markets, start appealing to younger demographics, more international demographics, those are the kind of efforts that they don’t have the roadmaps and are potentially very expensive.” Using Diageo for example, as a “Western liquor company”, Sandhaus says the firm could see growth potential in Asia and invest millions to develop those markets. “If they don’t work out, they can absorb that loss. It’s not the only investment that Diageo is making in their growth at the same time.” But with a Chinese company, a loss of investment could “potentially put you on the hook for mismanaging state funds”.
He adds: “In a downturn that is affecting the entire industry, you’re not going to be blamed if the overall trend numbers are down and you’re doing the same thing that you’ve done in the past. If you do something different and the numbers are bad, you will get blamed for the thing that you did.”
Some companies have made efforts to grow internationally, including the likes of Maotai, Wuliangye, and Fenjiu, but it remains challenging when it comes to the high cost of shipping, as well as taxes and tariffs, and consumer perception of the category. As Qiqi Chen, managing director for UK distributor for baijiu brands including Fenjiu, Cheng International, notes: “The price is always challenging because of the importing tax and the cost of storing the goods in the UK.”
US distributor CNS Imports, which distributes brands like Maotai, Wuliangye, Luzhou Laojiao, and Shui Jing Fang, has noted that the sales of premium products have slowed over the past year, likely due to price increases. Mid- and low-priced brands are performing better, says Steaven Chen, principal of CNS Imports.
He notes several things affecting baijiu sales in the US, including the slowdown in China, and “the [US] administration’s erratic messaging on tariffs” which has stymied planning for growth. “The uncertainty is probably the biggest challenge in the US,” he says. “Tariffs have been impactful, and the prices are being absorbed between the brands, us, and our retail customers. Everyone has had to squeeze margins to minimise prices increasing too drastically on the shelf. Shelf prices are indeed higher than pre-tariff.”
However, he notes demand for baijiu in the US remains stable, with the industry in the “normal slow period” after the holiday season. “The period before Chinese New Year this year performed as expected. We don’t foresee strong growth but a stable market.”
Within travel retail, there has also been a noticeable drop in demand for higher-end baijius, according to Bel Sun, general manager of Camus’ baijiu portfolio, Spirit of China, which distributes Kweichow Moutai in the channel. “We see the higher-priced products decrease a little bit more than the lower-priced ones,” she explains. Sun notes a “big shift” in how people spend their money overseas when they travel, adding that they have become “more conservative”, and are comparing prices online before purchasing. Speaking about whether brands are now seeking to expand outside of their homebase, Sun says: “International distribution was a strategic ambition for Chinese baijiu brands, not just global duty free but to be exported in international locations, like in the airports, that’s part of building the brand, building the image. But now that the domestic market is really under pressure, I feel that’s becoming a new market opportunity for growth.”
Lower-ABV products
Meanwhile, some companies have made efforts to widen their consumer base, launching lower-ABV products and collaborations. Wuliangye is among those brands, bringing out a 29% ABV spirit, and partnering with Hong Kong singer-songwriter G.E.M. to front a campaign to target younger drinkers. Other companies that have tapped into lower-ABV products including Yanghe Distillery and Gujinggong. For the UK market, Fenjiu focuses on its lower-ABV Silk Road series, which was created for overseas markets. The range includes the 28%-ABV Rose and Bamboo baijius, which are targeted at cocktail bars.
Yuchen Zhong has also seen some distilleries launching flavoured baijius, from peach to mango, as well as targeting longer serves like Highballs or baijiu mixed with fruit juice. He has also noticed brands innovating in how they sell baijiu, citing the example of the product being sold as a 50ml measure from a tap in a machine, like beer. “Now lots of people are investing in this area,” he adds, noting its prevalence in major cities in China. “Lots of craft-beer brands or craft-beer bars went bankrupt recently, so they probably got all the technology and machines from there and source the baijiu from smaller distilleries where they can control the price. They not only sell baijiu, but beer and fruit liquor, even wine and whisky.”
He points out that one of the biggest-selling brands in China, Gujinggong, has launched its own baijiu-tap-shop business in its home province of Anhui.
What’s evident is that baijiu’s dominance in China is so vast and so engrained in its culture that the category is here to stay. “One thing that’s clear is that baijiu, certainly local in China, is so strongly associated with celebration. It might be that they lose some big banquets, but if they can integrate themselves into some smaller celebrations, anniversaries, occasions such as that, they could be shown to improve in the medium term,” says Henry Farr, valuation director at Brand Finance, which provides an annual report on the top 50 most valuable spirits brands in the world. Moutai remained the world’s most valuable spirits brand in 2025, with a brand value of US$58.4 billion.
Sandhaus says the category has been held back by the absence of “strong industry-wide associations” that could boost the sector outside of China.
He cites the need for a trade group, similar to Japan’s Sake and Shochu Makers Association, as well as tourism boards, like in Mexico, which have been “very good at promoting Tequila, mezcal” and regional categories like raicilla. “There’s investment and cooperation across the industry, whereas baijiu has always been hyper-competitive between the major brands. To date, no one has been successful in forming those cross-category partnerships that will allow for outreach to new markets in a way that doesn’t benefit just one brand.”
Similarly, Chen of CNS Imports notes that the baijiu sector has “suffered from a lack of government support internationally. Many other Asian liquor brands (Japanese and Korean) get marketing support from the government to promote their culture through their products. Having some significant funds/effort to support the industry internationally might give it a chance to be more globally adopted, and lift the category as a whole.”
Industry insights
What is the biggest barrier to exporting Asian spirits internationally?
Seiji Susuki – general manager, overseas department, Choya Umeshu Co
“The biggest barrier is low category awareness. Many consumers are unfamiliar with ‘ume’, and often misunderstand umeshu as ‘plum wine’, which does not accurately reflect its identity. In Japan, umeshu has traditionally been enjoyed as a ‘wellness liqueur’, associated with digestion and recovery after fatigue. At Choya, we communicate this cultural background alongside ume’s natural acidity and aroma. We also promote modern consumption through cocktails and operate dedicated Choya cocktail bars in Tokyo and Hong Kong, with Singapore opening on 1 May 2026. Bridging this knowledge gap is essential to expanding the category globally.”
Ryan McFarland – chief commercial and strategy officer, Drinksology Kirker Greer
“The most significant hurdle is balancing authentic provenance with global accessibility. For many years, the barrier was a lack of consumer education and the dominance of established Western categories like Scotch or London Dry gin. Consumers often viewed Asian spirits as niche or exotic rather than versatile staples for home bars or cocktails. Logistics and navigating varied global regulations also play a role, but the real challenge is storytelling. To take a brand like Hoshi or Ukiyo into new markets, we must translate Japanese craftsmanship into a language that resonates with an international palate without losing the product’s soul. It is about proving that a rice-based spirit or a gin infused with sakura and yuzu is not just a novelty, but a high-quality liquid that deserves a permanent spot on shelves.”
Rakshay Dhariwal – founder and managing director, Maya Pistola Agavepura
“Historically, the West has viewed Asian spirits as novelties rather than premium, terroir-driven mainstays. When entering established markets like the UK, the challenge is shifting this entrenched narrative. Distributors and consumers are discerning, often assuming legacy categories from the West are the sole benchmarks for quality. We must work twice as hard to educate the market that the Indian subcontinent possesses incredible biodiversity, unique microclimates, and deep-rooted craft distillation expertise capable of producing truly world-class spirits. Ultimately, breaking through that initial scepticism to get liquid to lips is the highest hurdle we face.”
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