Diageo boosted by baijiu brands

11 December 2012

BEIJING: Diageo, the international drinks firm, is targeting the high-end Chinese spirit market following its successful acquisition of local producer Sichuan Swellfun.

"We believe high-end baijiu [Chinese spirits] broadens our product portfolio in China," said Joseph Tcheng, managing director Diageo Greater China, as he outlined the company's plans to China Daily.

Diageo, which completed the Sichuan Swellfun takeover earlier in 2012, expects its high-end liquor sales in the People's Republic to increase at a rate of 50% a year over the next three to five years. The main uplift will come from targeting the country's growing - and increasingly affluent - middle classes.


Broadening the amount of serving occasions for baijiu will also form part of Diageo's strategy.

"Imported spirits are usually enjoyed in night clubs and bars, while baijiu is served with food," Tcheng added. "One of our business focuses is to start introducing our spirits to the dining table market."

Diageo is also repositioning its brands to benefit from higher sales during important festivals in China such as the New Year.

The company's own research shows that around half of the country's $67bn alcoholic beverage market is taken by the local grain spirit. Imported spirits account for less than 2%.

Johnnie Walker, a Diageo-owned global scotch brand, is already a market leader in the Chinese imported spirits segment, building its business via an "always-on" digital engagement and branded physical spaces in China's urban centres.


Diageo's latest Johnnie Walker House, a real-life "embassy for whisky culture", opened in Beijing last week.

More generally, domestic Chinese targets for takeover by Diageo are likely to include established brands with long histories, good distribution networks and talented management, Tcheng added. 


Data sourced from China Daily; additional content by Warc staff