Liquor Maker JiuGuiJiu Apologizes for Chemicals in Drinks

Chinese liquor-maker JiuGuiJiu Co. (000799) apologized to consumers and investors yesterday after Hunan’s provincial quality supervisor found excessive levels of plasticizer in its drinks.

The Jishou, Hunan-based spirit maker said in a statement to the Shenzhen stock exchange that it is co-operating with requests from the quality watchdog to run strict checks on its distribution and packaging processes to rectify the issue.

Shares of liquor makers slumped in Shanghai and Shenzhen yesterday after the Xinhua News Agency reported that drinks made by JiuGuiJiu had more than three times the permitted level of dibutyl phthalate, a chemical used to flavor drinks and in plastic containers, in some samples.

“The company continues to strengthen its quality supervision infrastructure in order to produce safe and high quality products for buyers,” JiuGuiJiu said in the statement. “At the same time, we extend our sincere apologies to consumers and investors over this recent issue.”

JiuGuiJiu said in last night’s filing that its products met the relevant national standards in China and did not pose a health risk to the consumer.

Liquor Shares

Inspections showed as much as 1.04 milligrams per kilogram of dibutyl phthalate, or DBP, in some JiuGuiJiu samples, Xinhua said, citing the General Administration of Quality Supervision, Inspection and Quarantine. The health ministry had set a limit of 0.3 milligram per kilogram, Xinhua said.

The report adds to a series of food and beverage scandals in China spanning melamine-tainted milk to reprocessed cooking oil.

Concerns over food and beverage quality have spurred the government to pledge greater consumer protection. Milk tainted with melamine, a toxic chemical used to make plastic and tan leather, was blamed for the deaths of at least six babies in 2008, with tens of thousands of children hospitalized.

Wuliangye Yibin Co. (000858), the country’s biggest liquor maker, fell 4.7 percent to 27.46 yuan, the lowest in more than two years, in Shenzhen yesterday. Jiangsu Yanghe Brewery Joint-Stock Company Co. (002304), China’s third-biggest distiller, dropped 3.4 percent to 96 yuan.

Consumer Confidence

Shares of JiuGuiJiu, maker of the Xiangquan and Jiugui spirit brands, will resume trading today, after a four-day trading halt, according to the statement.

“It’s a blow to consumer confidence,” said Liu Hui, a Shanghai-based analyst at CSC Securities HK Ltd in an interview yesterday. “The whole sector will be under pressure in the short term.”

Kweichow Moutai Co., the world’s second-largest distiller by market value, dropped 0.6 percent to 217.29 yuan in Shanghai trading. Sichuan Swellfun Co. (600779), part-owned by Diageo Plc (DGE), lost 4.1 percent in Shanghai.

Tests show that almost all Chinese liquor products contain plasticizers, at an average 0.537 milligrams per kilogram, Xinhua said, citing the China Alcoholic Drinks Association. The alcohol industry is discussing limits for plasticizers in liquor, according to the agency.

The Administration of Quality and Technology Supervision of Hunan Province said on its website yesterday that it asked the company to investigate the findings.

“Ingestion of dibutyl phthalate may cause gastrointestinal irritation, nausea, vomiting and diarrhea,” according to the website of the Scottish Environment Protection Agency.

To contact Bloomberg News staff for this story: Liza Lin in Shanghai at llin15@bloomberg.net; Vinicy Chan in Hong Kong at vchan91@bloomberg.net

To contact the editor responsible for this story: Stephanie Wong at swong139@bloomberg.net

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