Additive scandal poisons liquor stocks

Stocks in Chinese liquor companies heavily impacted Monday by an alleged additive scandal saw a slight rebound Tuesday, though Jiugui Liquor, a high-end liquor producer, did not resume trading after a media report revealed that the company's products may contain excessive plasticizer.

Plasticizer is a chemical which experts say may cause harm to human immune and reproductive systems.

A report on 21cbh.com, a news portal under Guangzhou-based newspaper 21 Century Business Herald, said Monday a test report found that one kilogram of Jiugui liquor contains 1.08 milligrams of DBP, a type of plasticizer, an amount which is 260 percent higher than the national industry standard.

The report has been widely circulated on major domestic news portals.

Stocks of liquor companies on Monday witnessed a major slump, with several of them reaching their daily limit of 10 percent. However, some of the liquor stocks began to rebound on Tuesday. Stocks of high-end liquor producer Kweichow Moutai gained 0.89 percent Tuesday.

The China Alcoholic Drinks Association claimed late Monday that though most domestic liquor products contain plasticizers, the amount they contain is certainly below food industry standards.

The industry association said that the plasticizer found in liquor is mainly caused by the use of plastic in the liquor production process, while the fermenting process of the liquor itself does not generate plasticizer.

Fan Zhen, a senior official at Jiugui Liquor, has raised doubts over the methods used by the company which conducted the test and said he is also uncertain whether the liquor that was tested was produced by Jiugui, according to a report from stcn.com, a news portal under the Securities Times.

The company has already sent some samples of its products to authorized test agencies, said the report.

The report on 21cbh.com said that the test was conducted by third-party quality tester Intertek.

Henry Lin, a spokesperson for the Shanghai office of Intertek, told the Global Times Tuesday that he is not authorized to reveal clients' information, but admitted they had tested some liquor samples.

"The entire testing process of Intertek is in accordance with Chinese standards," said Lin.

Liu Hui, a senior analyst at Capital Securities, told the Global Times that the industry is recovering from the incident, and the situation is far less serious than the melamine scandal in the dairy industry in 2008.

Plasticizers are mainly used in plastics, but have also been used in beverages to condense them for a better taste.

"It is not very likely that liquor producers add plasticizers on purpose to improve the taste, since the amount is too small to change the flavor," Liu said.

Liu noted that currently there is still no concrete standard in terms of plasticizer for the liquor industry. But the country has clear standards on quantities of plasticizer for the food industry.

The quality watchdog in Hunan Province, where Jiugui Liquor is located, said in a statement released Tuesday evening that the investigation so far shows no evidence proving Jiugui has intentionally put plasticizer in its products.

"We'll continue our investigation and any illegal activity will be punished according to the law," Hunan's Administration of Quality and Technology Supervision said on its website.

Other liquor companies have been attempting to distance themselves from the scandal. Wuliangye, one of China's top liquor brands, told the media Tuesday that although the scandal has been impacting the liquor industry, Wuliangye hasn't been affected much because the company is not using any material or equipment that contains plasticizer.

The China Alcoholic Drinks Association has called for domestic liquor producers to reduce the use of plastic during production to avoid putting excessive amounts of plasticizer in liquor in the future.