Maotai Town Distillery Halts 70% of Production Capacity, Guizhou Liquor Industry Faces Changes.

China’s baijiu market is experiencing a downturn, with 70% of small and medium-sized baijiu companies in the Maotai region having already halted production. The price of baijiu raw liquor has also dropped to less than 30 yuan per jin (500 grams). Analysts indicate that a major change is underway in the baijiu production region of Guizhou.

According to reports from Fengmian News on March 3rd, along the route from Zunyi to Maotai Town, the once densely packed advertising billboards have become sparse, with one billboard seen every five or ten kilometers. Maotai Town itself has also become noticeably quieter, without the bustling crowds and the liquor stores on the streets are mostly deserted, with few customers in sight.

The head of a well-known local alcohol company mentioned that since the beginning of this year, 70% of the production capacity in the Maotai region has stopped, over 30% of investment managers have switched careers, with many turning to becoming online ride-hailing drivers. Many small and medium-sized liquor factories with relatively weaker financial strength will not produce unless they have advance orders from larger factories. Once production starts, it cannot be easily stopped within a year due to the substantial investment, which many small and medium-sized liquor factories cannot afford, leading them to be forced to cease operations.

Accompanying this situation is a significant drop in the prices of aromatic baijiu in Maotai Town. An owner of a baijiu company in Maotai Town mentioned that the transaction price of Kunsha baijiu has fallen to below 30 yuan per jin, whereas a few years ago, Kunsha aromatic liquor from Zunyi and Renhuai cities could not be purchased for less than 200 yuan per jin.

A seasoned industry expert pointed out that with the prices of Maotai aromatic baijiu having “cracked,” the small and medium-sized liquor factories in Maotai Town can never return to their former status, and many of them may face permanent closure.

Moreover, pressure has been exerted on small and medium-sized liquor factories by new large enterprises using advanced technologies. In a newly built liquor factory, a new fermentation pit can handle 1000 tons at a time, which is 100 times the capacity of traditional pits. With the continuous rotation throughout the year, they can produce 10 rounds of liquor, resulting in over 20,000 tons of aromatic baijiu per year.

Facing these technological advantages, the survival space for some small and medium-sized liquor factories is rapidly diminishing. The baijiu industry is poised for a significant transformation, with the existing traditional structure being disrupted.

Since last year, China’s baijiu market has been consistently sluggish, with even the anticipated peak sales periods of the “Mid-Autumn Festival” and “Chinese New Year holidays” falling below expectations for liquor businesses. After the Chinese New Year, a phenomenon of retail prices being lower than factory prices (price inversion) emerged in the Chinese baijiu market, prompting several liquor companies to implement suspension of supplies as a form of “shock therapy” to stabilize market prices.

According to reports from “Financial News,” from January to February 2025, over 10 leading liquor companies in China issued a total of 16 notices of supply suspension, including high-end lines such as the eighth generation Wuliangye (Pu Wu), Dream Blue M6+, and Xi Jiu Jiucang 1988; mid-to-high-end brands like Yanghe Tianzhi Blue/Sea Blue, Jinse Yuan Guoyuan Sika/li; basic hundred-yuan products like Luzhou Laojiao Laotou Qu, Lidu Gaoliang 1955. The companies issuing supply suspension notices cover all price ranges from hundred-yuan bottles to thousand-yuan high-end products.

The severe internal competition within the baijiu market and the suspension of supplies by liquor companies are the result of several factors: first, overcapacity, with Maotai and Wuliangye’s base alcohol capacity increasing by 9% and 6% respectively in 2024, far exceeding the market demand growth rate; second, shrinking consumption, even mass-market liquor priced under 50 yuan per bottle saw a year-on-year drop of 18%; third, price system collapse, with the proliferation of label wines impacting terminal price levels, with more than 30% of “branded wine products” on a certain Chinese e-commerce platform selling for less than a third of authentic products; fourth, high inventories, as per the data from the National Bureau of Statistics of the People’s Republic of China, the output of the baijiu industry’s large-scale enterprises fell by 12% in 2024, while social inventory surged to 120 million kiloliters (approximately 24 billion bottles), sufficient for Chinese consumers to “drink for one and a half years.”

Some netizens believe that the current situation in the baijiu market reflects the economic reality of China from one perspective. Netizen “Hu Yang” stated: “The wealth gap is getting more severe, with the rich having more money but limited demand, and many of the middle class, who are the main consumers, are falling into poverty. The victims are not just the baijiu industry but the entire real economy.”