Chongqing baijiu maker finds the right recipe for success
By Li Mengyuan, Song Yaotian

Editor's note: This report focuses on Chongqing as part of our special series, "Rising Star Cities," about Chinese cities whose annual GDP exceeds 1 trillion yuan ($155.4 billion, or more than the GDP of Qatar). At the end of 2020, there were 23 such cities. Click here for more stories on Chongqing. You can also explore our earlier coverage of Ningbo and Changsha.

Baijiu, the fiery Chinese white spirit, has a rich history dating back to thousands of years ago. But in recent times, modern baijiu brands such as Jiangxiaobai have managed to hold their head high despite intense competition in the industry. The company attributes its success to keeping up with the rapidly changing consumer preferences and having an optimal cost structure.

Jiangxiaobai has kept its manufacturing and retail costs to relatively low level. But how have its founder and his company managed to achieve that? CGTN talked to Tao Shiquan, founder and CEO of Jiangxiaobai, to understand more about the sector and the company's success.

As for liquor costs, the food and brewing cost basically the same. But some listed companies have very high gross profit margins, which may be as high as 80 or even 90 percent, Tao said,

Jiangxiaobai's gross profit margins are definitely not that high, as they have chosen a different path, which is to satisfy the consumer needs for high quality products, according to Tao, making the company's production cost similar to those of large enterprises. Meanwhile, the company is trying to control its marketing expenses so that it can pass on the price benefits to the consumers while maintaining their gross profit margin within 10 percent, he added. 

Tao said currently their annual sales are more than two billion yuan ($310 million). For market expenses, if you only calculate the brand communication expenses and advertising expenses, theirs is less than 10 percent.

When it comes to why the brand can be immensely popular with the younger generation. The CEO said they use trendy packaging to reach out to a wider cross-section of consumers. 

"Consumers have specific requirements for each brand, including its artwork, fashion, and trendiness. The younger consumers of today are a different breed," Tao said.

"The things they use, the good products and brands they can access globally, are all different from what it used to be before. Businesses must strive to maintain their creative and innovative edge to reach out to such consumers. It is always a challenge to keep up with the changing customer demand. A new brand should not only be classic, but also focused on constant innovation at the same time," he added.

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