Diageo Bets on China’s Homegrown Baijiu


No matter where you are in the world, drinks conglomerate Diageo hopes that when you take your next celebratory shot, you’ll skip the tequila or scotch and order the baijiu instead.

Diageo, which owns Smirnoff vodka and Johnnie Walker whiskey, thinks that its newest brand, Shui Jing Fang baijiu, can conquer the globe just like some of its other famous brands have in the past. “White liquor” in Chinese, baijiu is a strong, clear-colored spirit distilled from grains including sorghum and rice.

“This is a brand with a lot of potential,” said Gilbert Ghostine, the Singapore-based chief executive for the Asia-Pacific region at Diageo.

The company took control of the traditional baijiu brand – upping its stake to 53% from 49% — last year and has since launched it in select markets around the world. Currently selling in seven countries and 40 airports, Shiu Jing Fang is the first baijiu brand in Diageo’s portfolio.

“We’re starting to take it internationally,” said Mr. Ghostine. Sales outside of China increased 68% in the past year, he added, though he admitted that the figure started from a low base.

Whether the world’s non-Chinese drinkers will take to baijiu is another question. To many who are not familiar with the drink, baijiu is an acquired taste: it has strong aromas, a powerful flavor and a signature burn thanks to its more than 50% alcohol content.

While the company hasn’t created a program of cocktails to introduce the liquor to the uninitiated, it has started introducing it in the way that Chinese people are most likely to drink it: over a multi-course Chinese banquet meal. He said the company has so far focused its international promotions on airport duty-free stores and high-end Chinese restaurants.

Meanwhile, in China, Diageo will have to convince drinkers that Shui Jing Fang is the tipple of choice. According to a 2011 survey of China’s luxury consumers conducted by Hurun Report, Moutai ranked No. 1 as the preferred baijiu brand, with Wuliangye coming in second. Shui Jing Fang didn’t appear among the top five.

So, if not baijiu, what does Diageo sell a lot of in China?

Whiskey, thanks to its Johnnie Walker label, according to Mr. Ghostine. He said that he hopes to expand market share – Johnnie Walker products already make up 36% of all whiskey sold in China – especially in what he calls the “super luxury” categories.

Last year in Shanghai, the company opened its first Johnnie Walker House, a members-only clubhouse mansion, as part of its bid to promote whiskey — and the brand — as an aspirational drink among young, wealthy Chinese. Its marketing efforts seem to be paying off: Last quarter, Johnnie Walker Blue Label, which sells for 1,400 yuan (US$222) per bottle, grew 52%, making it the sixth consecutive quarter of growth that exceeded 40%.

“There’s more interest in whiskey in China than in the U.S. right now, and the consumers are both female and male,” he said.

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