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Diageo targets UK ‘meal occasions’ with super premium Chinese baijiu brand

By Ben Bouckley , 05-Jul-2012
Last updated on 05-Jul-2012 at 18:20 GMT

Diageo targets UK ‘meal occasions’ with super premium Chinese baijiu brand

Diageo has told BeverageDaily.com that the initial European launch focus for its Chinese ‘baijiu’ brand Shui Jing Fang will be UK ‘meal occasions’, although success will see it pursue sales in other channels that retain the drink's premium positioning.

Beyond China the drink was now available in around 40 duty free shops worldwide and also Southeast Asia, Korea, Australia and the US, with international sales accounting for 10% of revenues, Diageo spokeswoman Cecilia Coonan told this publication.

The product will be sold for ₤96.19 or €120 (500ml) and will be available to order via Oriental food wholesaler SeeWoo.

Diageo's initial sales focus will be on Chinese consumers in Britain, due to rising international demand from Chinese travelers, as well as Western businessmen keen to do business in China.

Acquired taste?

Towards the end of June 2012, drinks giant Diageo told the Financial Times (FT) that it would target Chinese expatriates and tourists buying gifts with the British launch of the product, which Diageo formally announced yesterday.

Euromonitor International senior company analyst, Jeremy Cunnington, told BeverageDaily.com: "I am not sure how much international growth potential the company sees for the brand internationally at least in the short term.

"It seems as though Diageo is looking to use its global distribution network to maximise revenues by selling to wealthy Chinese expats. It may also hope to broaden the appeal to Europeans, but that will take a long time if at all due to the product being an acquired taste."

Traditional Chinese restaurants

Reacting to the FT story, Coonan said: "I think that's accurate, but it's only part of where we will be expecting to make sales.

"Part of our programme of roll-outs in the UK is to target the meal occasion first of all.

"We'll be rolling out baijiu into traditional Chinese restaurants - of which there are 4,000 in the UK. We want to complete people's Chinese experience with a super-premium baijiu.”

She added: "Once people are used to drinking it with meals, we will then look to roll it out to wider sales channels. But at the moment it's aimed chiefly at the meal occasion."

Asked if Diageo might modify the brand’s super-premium positioning at a later date to introduce a more mainstream product, Coonan said: "Our European roll-out forms part of making Shui Jing Fang an internationally recognised brand."

“I can't speak for my CEO, but at the moment our focus is only on this premium brand and there are no plans to widen it out to other brands."

However, Diageo saw enough potential in the $41bn baijiu market to take a 53% controlling stake China's third-largest super premium baijiu brand, Shui Jung Fang, in June 2010.

Great white (spirits) hope...

Diageo did so by quietly acquiring an additional 4% stake in Sichuan Chengdu Quanxing Group Company, then a 39.7% stakeholder in Shui Jung Fang.

Coonan said: "We wanted to participate at scale in Chinese white spirits, and increasing our participation in Shui Jung Fang is a way of doing that."

"We have identified Chinese white spirits as a really fast-growing category that we want to be involved in,” she added.

“That's why we chose Shui Jung Fang, and we believe it's the best brand to have out there. It's one of the oldest distilleries in the world at over 600 years. The provenance and heritage of the brand sits well with our portfolio, think of Johnnie Walker, Jose Cuervo and Smirnoff."

Cunnington said that China and Taiwan were now the largest markets for baijiu.

Euromonitor International statistics show that 'other spirits' production volumes in China (dominated by baijiu) totaled 4.48bn litres in 2012, and are forecast to hit 5.45bn in 2016.

The equivalent volume figures for Taiwan are 32.76m in 2012 with a 36.22m forecast for 2016.

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