History of Baijiu

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The history of Chinese white spirit
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Chinese white spirit is known as “Baijiu” in China. The name is always mistakenly translated as “Chinnes Wine” or “White Wine”. It is actually an 80 to 120 proof, or 40-60% alcohol spirit (China daily, 2010) Chinese people always have Baijiu at home or restaurants during the meals for family get-togethers, festivals celebration or just for relaxation and fun. -------------------------------------------------

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Chinese spirit has been made for over 4000 years; t has been the most popular alcohol beverage ever since the times of ancient China. Ancient China’s economy heavily depended on agriculture, such as sorghum, wheat and rice which are the main ingredients of white spirits (Feng, 2012). -------------------------------------------------

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According to the historical records, the Chinese spirit making technique was invented in the Xia Dynasty (c.2100 BC-c.1600BC) (China daily, 2010). There is a story about this invention, "Du Kang stored some cooked Chinese sorghum seeds inside a hollow tree stump on a winter day. In the spring of the following year, a fragrant aroma wafted from the tree stump into the nostrils of Du Kang. Afterwards, Du Kang found that it was the fermented sorghum seeds which gave off the alluring fragrance." (China daily, 2010). -------------------------------------------------

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The rise of agriculture production strongly promoted white spirit development in the Han dynasty and ancient Chinese started to celebrate big occasions with it (Feng, 2012). Since then, white spirit is closely associated with all manners of festive celebrations (Feng, 2012 ), including weddings, new business startups as well as moving into a new house. In a social context, white spirits also plays an important role. Business meetings often include white spirits, and tend to smoothen the process of reaching a consensus.

Chinese white spirit market: Introduction:

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Comparing with Australian wine market, the Chinese spirit market is much bigger, due to the consumption power of the largest population in the world. Because of the fast growing economy, the time between 2004 and 2010 was a “golden age” for the Chinese spirit industry. The industry has registered an 18% CAGR in production volumes and a 31% CAGR in value. In details, low-end spirit (less than 2AU$/bottle) volumes have decreased during the past 5 years, which was replaced by the mid-end products (about 2AU$-15AU$/bottle). (Chan, 2011) -------------------------------------------------

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It is expected that the production will keep increasing. In the first 3 months of 2012: the production was about 2.85 billion litres, compared to production in the same the period of 2011, the growth rate is 23%.The total revenue in 2010 was 24.21 billion Chinese Yuan (about 4 billion AU$), which led to a profit of 3.18billion Chinese Yuan (about 0.50 billion AU$).(Dong,2012) -------------------------------------------------

Figure 3: Chinese white spirit market volume
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Source: CEIC, Credit Suisse analysis (Chan, 2011)

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Porter’s five forces (China):
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Bargaining...
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