Image: © Landor Associates. Used With Permission. All Rights Reserved.
This week I was interviewed by Benjamin Li, from Media Asia magazine. He was writing about Diageo’s increased stake in Shui Jing Fang and was looking for some branding insights into the story.
Fortunately, I had worked on the baijiu category and our Landor New York Office had designed the Shanghai White brand. This was Diageo’s first foray into producing a white vodka from Asia, which was produced by Shui Jing Fang in China.
More interestingly, I have drunk more than my fair share of baijiu, at numerous client dinners. More often than not, clients will try and get the Laowai (foreigner) drunk, by endless toasting in a harmless and fun way.
At one memorable event, I was having dinner with prospective clients in Guiyang, in South West China. We had been drinking baijiu and toasting each other, throughout the twelve-course Chinese banquet. However, towards the end of the evening, the Chairman ordered a dozen beautiful hostesses from the restaurant. He insisted I drink a glass of baijiu, bottoms up, with each and every one. Well, I don’t remember too much after that, but we did win the project.
So drinking baijiu is often part of the culture of doing business and working in China.
You can read Benjamin’s full story below or download in PDF as it appears in the Media Asia magazine.
Diageo Expands In China With Baijiu Brand Stake
News that UK alcoholic drinks giant Diageo plans to buy a controlling stake in the parent of baijiu (white liquor) maker Shui Jing Fang for a total of US$935.5 million could provide the world’s largest alcoholic beverage producer with major new influence over a leading Chinese consumer brand.
Diageo will gain greater sway over China’s large market for baijiu, a white spirit that the firm said accounts for about half the nation’s alcoholic-beverage consumption by volume. Shui Jing Fang is the fourth-largest producer of premium baijiu in China, with reported net sales of about $171 million in 2008.
The China deal fits with Diageo’s global effort to target rising middle class consumers in emerging markets, encouraging them to trade up to premium spirits. With the economic downturn leading consumers to buy less premium liquor in the US and Europe, the company has been looking to markets such as China, Russia and Latin America to boost its business.
“The alcohol market in the West is stagnant, whereas it is still growing in Asia. It is sensible for Diageo to build its presence here,”said Ray Ally, executive director of brand consultancy Landor Associates, which works closely with Diageo.
“Chinese drinking culture centres on baijiu. It is consumed during business occasions. Local brands are preferred as it is seen as promoting Chinese brands in a corporate situation, which is more politically correct than giving, for example, cognac or Scotch as a gift.”
Euromonitor said that the acquisition would give Diageo control of the premium baijiu brand Quanxing. In 2009 the brand held about one per cent of the 239 million litre premium Chinese baijiu category.
“It’s a smart move to build on the trademark of Shui Jing Fang in China,” added Ally. “Having a firm like Diageo to help them with marketing, branding, packaging and to bring world-class expertise to the brand, is a win-win situation for both companies.”
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Would Chinese consumers change their mind about a brand of baijiu that they knew was now owned by a British company? I would think that with the importance of baijiu in Chinese tradition they would rather buy something truly Chinese. On the other hand the baijiu isn’t really changing so if its the quality they want then it won’t matter who they are buying it from.