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How Diageo is taking baijiu mainstream

How Diageo is taking baijiu mainstream



Chinese baijiu brands dominated the 2017 Brand Finance Spirits Report this year, scoring four of the top 10 spots.

Baijiu now accounts for 37.5% of total global spirits values, up from 23% in 2016. 

While the literal translation of “baijiu” is “white wine,” the clear liquid resembles vodka, but with a far more powerful punch - some brands have with an alcohol content of upwards of 120-proof. 

Heading the list of top brands is Moutai, which saw a 60% increase in sales in the past year to $US11.5million. 

But Diageo is keen to give Moutai a run for its money by repositioning the liquor to expand from its niche market of Chinese males aged between 30 and 50, who generally drink it while conducting business.

Diageo is the only multi-national spirits producer with baijiu in its portfolio (though Brown-Forman has a "co-operation agreement" with Wuliangye, the world's second-biggest baijiu brand), after it acquired Shui Jing Fang (SJF) in 2011.  

Diageo saw its organic net sales grow by 4% to reach £12.1 billion (US$15.8bn) in its 2016/17 financial year, with Shui Jing Fang experiencing the company's greatest organic growth at 65%.

Diageo CEO Menezes told just-drinks: "We're confident we have an exciting growth engine in the baijiu category which really no other multi-national company has - this is a real advantage for us in China."

It's a dramatic turnaround for the brand, which was hit hard soon after its acquisition by Chinese president Xi Jinping cracking down on extravagance among government officials, who were among the spirit's biggest buyers.

The effect on bajiu shares was almost immediate. Stock prices tumbled and bottle prices halved. In 2014,  Diageo was forced to write down the value of Shuijingfang by US$446million as annual sales fell by 78%.

Fortunately, baijui's fortunes have dramatically revived. 

While SJF only had a 0.2% share by volume of the super-premium local spirits category in China last year, it is one of China's fastest-growing baijiu brands.

I'm very pleased with the performance of Shui Jing Fang," Diageo CEO Ivan Menezes told just-drinks. "It's getting the fundamentals right."

And now, the next step for Diageo is to take the spirit mainstream. 

Shui Jing Fang's Yuan Dynasty limited edition bottles

Sam Fischer, Diageo’s president of greater China and Asia told Forbes the company wants to give the ancient brand a more modern feel both in its packaging and its market approach: “That gives us an opportunity to skew slightly younger and recruit different types of consumers.”

SJF has also lowered the alcohol content and added in herbal aromatics to appeal to the Western palate and Diageo is encouraging bartenders explore its nuances and experiment with it as a cocktail base.

Menezes told just-drinks that the strategy is working and the brand is "resonating with a younger consumer".

Moutai is also keen to make baijui mainstream. Evershine Trading Australia – the exclusive distributor of Moutai in Australia, is holding the finals of its ‘Enter the Dragon’ competition in Melbourne this month, with bartenders creating recipes that use at least 30ml of Moutai.


 


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