June 2, 2013 at 10:29 AM ET
Move over tequila, here comes Chinese firewater. Baijiu, a flammable, pungent white liquor averaging a 110-proof wallop, is the world's most consumed spirit, but for the first time distillers are looking to develop export markets.
But Baijiu's punch makes it a tough sell in Western bar culture where people tend to drink on an empty stomach. So does its fuel-like odor and its aftertaste. But the history of regional drinks, such as Japanese sake, or Mexican tequila, shows that nearly any taste can be acquired.
According to data from International Wine & Spirit Research, Chinese people drank over 11 billion liters of baijiu in 2012; the spirit, distilled from sorghum, wheat or rice, accounted for more than one-third of all liquor consumed in the world.
But as a new generation of Chinese drinkers discovers the imported spirits that were unavailable to their parents, baijiu risks losing that market share unless it creates new markets overseas.
"Baijiu hasn't been marketed to the West yet but I think it can be," said James Rice, managing director of Sichuan Swellfun Co Ltd, a baijiu maker in Chengdu, western China, in which London-based beverage multinational Diageo has taken a sizeable stake.
"People are interested in China and here's a piece of Chinese culture that can go right to your dinner table."
The opportunity has also attracted small entrepreneurs like David Zhou, who founded Washington-based Everest Distillery to import a Chinese baijiu and rebrand it for sale locally.
"We really want to go for mainstream U.S. consumers and we do believe they can accept it."
But Rice, and other distillers, have to deal with a major challenge: baijiu tends to make a terrible first impression.
"I thought it tasted like paint-thinner and felt like a liquid lobotomy," said Michael Pareles, manager at the U.S. Meat Export Federation in Beijing. "However, like many other things in China, I eventually grew to like it."
Torsten Stocker, head of Greater China consumer practice at Monitor Group in Hong Kong, was skeptical about prospects for overseas expansion.
But he suggested the liquor could be better distributed to the swelling overseas Chinese community, which now depends on duty-free stores in airports to stay stocked.
However, selling the rest of the world on baijiu will be challenging. "Tequila has a very unusual flavor compared to more popular spirits," said Derek Sandhaus, industry consultant and author of a forthcoming book on baijiu appreciation.
"But through clever marketing, good cocktails, and good management, it's earned a place on the bar shelf. I see no reason why the world's most popular spirit can't do the same."
But an adjustment is still probably necessary.
Matt Trusch, a former China resident, founded a distillery called Byejoe USA that imports baijiu base from China, then re-filters it to make it more drinkable.
"We've made it much more palatable to American tastes."
Vinn Distilleries in Portland, Oregon, founded by a family of ethnic Chinese immigrants from Vietnam, is reproducing a generation-old baijiu recipe, and Vinn president Michelle Ly has marketed it - in very small volumes - to non-Chinese consumers.
Curiously enough, she said a group of investors had approached her with an idea to export her U.S.-made baijiu back to China, advertising it as a product of high quality control - an issue domestic baijiu brands have struggled with.
Baijiu expert Sandhaus thinks the best avenue for developing drinkers overseas is to follow the model of Japanese sake and market baijiu as the alcohol to drink with Chinese food. But he added that there is no need for distillers to rush.
"It will still be a very long time before baijiu stops being a very lucrative business in China."
Copyright 2013 Thomson Reuters.