China’s luxury liquor market contracts as economic slowdown and anti-corruption drive reshape demand

China’s luxury liquor market is facing a significant downturn as the country’s economic slowdown continues and government policies tighten spending in the public sector. The impact is being felt most acutely by Kweichow Moutai, the nation’s leading baijiu producer, which has long been a symbol of status and a staple in official banquets and gifting.

The Chinese economy has been losing momentum over the past year, with consumer confidence weakening and discretionary spending on high-end goods declining. While global drinks companies have hoped for a rebound once economic conditions improve, recent policy signals from Beijing suggest that the luxury spirits sector may not return to its previous levels of growth.

President Xi Jinping has renewed his anti-corruption campaign, reissuing the 2012 eight-point code of conduct for public officials. This code specifically discourages extravagant meals, expensive gifts, and high-end alcohol at official functions. The first rule states that working meals should feature simple, home-style dishes and avoid luxury items such as premium liquor and cigarettes.

Kweichow Moutai finds itself in a challenging position. Although it is publicly traded on the Shanghai stock exchange, the company remains majority state-owned. Its leadership is under pressure to align closely with government directives. In recent years, two former chairmen of Moutai, Yuan Renguo and Gao Weidong, received prison sentences for bribery related to lavish entertaining and gifting practices.

In response to these developments, current chairman Zhang Deqin has sought to shift the company’s image away from decadence. At Moutai’s recent annual meeting, attendees were served soft drinks instead of the brand’s famous Flying Fairy baijiu. Zhang referenced classic Chinese literature to emphasize that Moutai should promote culture, health, and harmony rather than excess.

The effects of these changes are not limited to domestic brands. Importers of high-end Western spirits such as Cognac and Scotch are also feeling the pinch as demand from China’s public sector wanes. According to a report released last month by Soochow Securities, Kweichow Moutai’s streak of double-digit revenue and profit growth is expected to end in 2025 due to the ongoing crackdown.

Market data shows that prices for premium baijiu have been falling steadily. Earlier this month, a bottle of 25-year-old Moutai was selling for less than 2,000 yuan (about $278), which is half its price on e-commerce platforms just two years ago.

Industry analysts say that even if China’s economy recovers in the coming years, the luxury liquor market may not return to its previous highs. The government’s focus on curbing corruption and promoting frugality in official circles appears set to reshape consumer behavior for the foreseeable future. As a result, both domestic producers like Kweichow Moutai and international spirits brands are adjusting their strategies in response to this new reality.