China’s crackdown on the “erotic sector” as part of an official anti-extravagance drive is posing a serious threat to the cognac industry, as Beijing closes karaoke and hostess bars where European drinks companies make a large chunk of their mainland profits.
Drinks analysts say the Chinese government’s crackdown on prostitution, betting and drugs – launched in February in the southern city of Dongguan – has already had a major impact on sales of high-end imported spirits.
China Market Research Group in Shanghai estimates that as much as 30 per cent of cognac sales overall in China are made to karaoke clubs, bath houses, hostess bars and other erotic sector venues. The researchers say those sales may have taken a hit of up to 50 per cent since the launch of the latest anti-prostitution campaign.