A Rush for Red Label Rice Wine

As Taiwan strives to join the World Trade Organization (WTO), the days are numbered for the island's tobacco and wine monopoly system. A rise in rice wine prices can be anticipated once the monopoly system goes, and it is in preparation for this that the Taiwan Tobacco and Wine Monopoly Bureau (TTWMB) has introduced a new blend of "aromatic" rice wine, costing around twice as much as regular Red Label Rice Wine. The Red Label variety remains as popular as ever, however, and consumers have been buying up and hoarding the product in response to the familiar round of rumors about higher prices and the end of production.

Membership in the WTO, which Taiwan has been trying to join for many years now, will have an immediate effect on tax levels, and the official tobacco and wine monopoly that has been in force since the ROC government moved to Taiwan will have to be abolished, in favor of a new tobacco and wine taxation law.

Current draft legislation on the taxation of tobacco and spirits (including rice wine) mandates a levy of NT$185 per liter on spirits. Additional business taxes and duties will also be levied on tobacco and wine in the future, meaning that the price of a bottle of rice wine, stable at NT$20 for more than a decade, is sure to rise.

This tax on spirits will be implemented over a five-year period, with taxes of NT$60 per liter in the first year rising to NT$185 in the fifth. While these taxes are implemented, the price of a single bottle of rice wine is expected to rise from NT$50-60 to NT$120 at the end of five years.

In readiness for this leap in prices, the TTWMB announced on May 2 that it would stop making Red Label Rice Wine, which has been on the market since 1950, and instead devote production to Aromatic Rice Wine, a cooking wine containing seasoning. But with the Tobacco and Wine Taxation Bill long in the offing, people had already begun buying up and hoarding rice wine.

From an average monthly market of around 1.5 million cases (a dozen bottles per case), Red Label Rice Wine sales have surged to 2.34 million cases per month since March, yet it is still hard to find a single bottle on the shelves, which indicates that some people are stockpiling and even profiteering in the product.

The TTWMB's attempt to foil speculators by stopping production drew a storm of protest from consumers, in response to which the Bureau had to announce a full restoration of Red Label Rice Wine supply. But this flip-flop in turn triggered a backlash from business and criticism from legislators, and Premier Vincent Siew promptly ordered a review the decision-making process by those concerned.

Rice wine has always been a necessity for the Chinese, used in daily cooking and considered indispensable as a dietary supplement for mothers in the first month after giving birth. In order to meet consumer demand, the TTWMB increased output beginning in March, while also introducing a system of distribution quotas on March 30.

With the implementation of distribution quotas, people streamed to stock up at the TTWMB's 127 outlets and distribution centers. Most were only allowed two bottles at a single purchase, although women giving birth that month were allowed up to 20 bottles each. However, with each outlet allowed an allocation sufficient for only 100 customers per day, many were sold out within fifteen minutes of opening.

The government has already uncovered large-scale stockpiling by a number of distributors and retailers, and is watching for evidence of commercial collusion or unfair competition. The Ministry of Finance is preparing to fine businesses caught driving up the price of rice wine, up to NT$2000 per bottle, as well as taxing the price differential, and will offer rewards for reports about violations.

Amid this shortage of and craze for rice wine, the TTWMB is trying to persuade consumers to convert to higher-alcohol-content Aromatic Rice Wine, and is in the process of developing a rice wine with over 40% alcohol content, roughly double that of Red Label Rice Wine. But many people remain faithfully attached to the Red Label variety that they know so well.

Rice wine is in fact more than just a favorite cooking wine: it is also a popular tipple among lower-income drinkers. For the government, the main consideration in the confusion over current policy is how to cater to the needs of the general public while setting the scene for forthcoming changes in taxation. It is a problem that the government must rapidly solve before Taiwan accedes to the WTO.

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Rice wine is an indispensable cooking ingredient for the Taiwanese. This happy couple have just purchased their permitted quota of two bottles each-no mean feat during the current shortage. (photo by Pu Hua-chih)