How fake organic food and consumer mistrust dealt another blow to China’s famous Red Army liquor

March 15, 2013
March 15, 2013

China’s favorite firewater, a sorghum-based liquor made by Kweichow Moutai, is feeling some heat. This week a Chinese newspaper, Time Weekly, accused it of making its sorghum-based liquor with grain laced with pesticides (in Chinese) rather than pure organic grains grown in the grassy wilds of the mountains of Guizhou, as the company likes to advertise. Kweichow posted on its microblog on March 14 in response that all its products are certified organic, noting that the local Renhuai government had reiterated that production met “approved standards” for organic certification (link in Chinese).

The problem is that both the paper and Kweichow could be right. According to the Time Weekly report, a grain supplier for Kweichow paid for farms to be certified by the government Organic Food Development and Certification center. But farmers interviewed said they were never supervised and regularly used pesticides, which are banned under China’s organic food standards. (Here’s a good overview of the story in English).

China’s organic food industry is growing as consumers become more concerned about food safety, but local media have reported on cases of producers using fake or expired licenses (pdf) and a lack of common labeling across the country confuses customers.

maotai

Moreover, the story is a reflection of growing suspicion of distillers in China’s $47 billion (paywall) baijiu—literally, “white liquor,” but more commonly known as “rice wine”—industry. China’s food safety regulator found plasticizers, chemicals used to soften plastic, in alcohol sold by a smaller distiller last year. Moutai, the country’s premium brand, faced similar accusations. And though those allegations were never proven, the company still suffered. The brand fell to 13th place, from 5th, (paywall) on a list of preferred gifts by China’s wealthy in January. And over Chinese New Year, when consumption is normally high, sales of Moutai and high-end liquor overall were remarkably slow. (A bottle of Moutai can cost as much as 1,800 yuan, or $290 a bottle.)

Kweichow’s share price, which has been falling since the summer, has dropped off more since December.

Moutai Feb

We’ve reported before that a government-led campaign against lavish spending and a potential crack down on corruption has already caused Moutai to begin falling out of favor. (Fine baijiu is often given as a “gift” to Chinese government officials, who account for about a third of high-end liquor consumption). This new product safety accusation against the company could make consumers even more paranoid. On Sina Weibo, a blogger commented on the story, writing, “You can understand why low-end companies might do this, but if the luxury brands are too then how widespread is this? And what for? To save a few dollars? They’re possessed.”

Chinese officials may want to save Moutai, a fabled national symbol whose origins trace back to Mao Zedong’s revolutionary Red Army (and according to Dan Rather, tastes not unlike liquid razors.) In December, Chinese officials issued a propaganda directive to Chinese media to stop negative reporting on the baijiu industry. It didn’t seem to work, and in any case when it comes to food safety in China there’s little that can undo the seeds of popular mistrust.

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