(Yicai Global) Nov. 9 -- Excessive plasticizing additives found in a spirit produced by Shaanxi Xifeng Liquor Group, once one of China's most famous alcohol makers, looks set to harm the firm's business and its plans to go public, according to an industry insider.

Xifeng Guodian Fengxiang 50-Year Vintage 2012 (Collector's Edition), referred to as the Xifeng Vintage, failed to meet standards for two plasticizing-related chemical additives, Shanghai International Wine Exchange disclosed in a test report published on its website on Nov. 6.

Diisobutyl phthalate and dibutyl phthalate, commonly known as plasticizers, in the firm's Xifeng Vintage was recorded at 1.44 milligram per kilogram and 1.02mg/kg respectively, exceeding the limits of 0.5mg/kg and 0.3 mg/kg by about three times, the test report said.

The results are based on three 500-milliliter bottles of Xifeng Vintage of 60 percent alcohol by volume and made in May 2012, according to the information. Some are still in the market and Shaanxi Xifeng Liquor Group will begin to recall them after approval from the Shaanxi Food and Drug Administration, the firm said in a statement.

Dealers and customers can exchange recalled items for the 1915 Xifeng, which is 55 percent alcohol by volume, or the firm will buy them back at the manufacturer's price, it said.

Plasticizers are a polymer material additive widely used in industry and are added to plastic, concrete, drywall materials, cement and gypsum. Excessive plasticizers in food can cause serious damage to the liver, kidneys and the reproductive system, public information shows.

IPO in Jeopardy

The discovery will have a huge impact on Xifeng Liquor Group, seriously affecting its nationwide operations and IPO plan, food industry analyst Zhu Danpeng told state-backed news outlet China Online.

The IPO plan was initiated in April 2016 when a prospectus was submitted to the China Securities Regulatory Commission to raise CNY1.5 billion (USD219.9 million). It was updated in May last year. But the prospectus was later removed from the CSRC's website. It was not until May 2 that it was scheduled for IPO pre-disclosure, which means that it has been on the A-share IPO waiting list for 25 months.

Founded in 1999, Xifeng Liquor used to be one of China's four most famous liquor brands along with Kweichow Moutai, Shanxi Xinghuacun Fen Wine and Luzhou Laojiao. But it has been left far behind in terms of business performance and scale. Xifeng Liquor is mainly sold in Shaanxi province, and 70 percent of its main business income is earned there. Undue concentration of sales areas in the liquor industry has hobbled the future development of the liquor brand.

The company's operating income was CNY2.8 billion, CNY2.9 billion and CNY3.2 billion each year from 2015 to last year, and net profit excluding nonrecurring items was CNY174 million (USD25.5 million), CNY281 million and CNY355 million, data show.

Xifeng Liquor has a long way to go public, and its long-term dependence on other suppliers for basic liquor is one obstacle and risk. It bought 21,238 tons, 18,180 tons and 19,439 tons of basic liquor between 2015 and last year, and the proportion of that to finished products was 68 percent, 67.4 percent and 70.3 percent respectively.

Any quality issues or price fluctuations in basic liquor would be devastating, insiders said. Buying too much from other suppliers has a great impact on the firm's own brand and liquor body, Zhu added.