Monday, January 24

Diageo to make whiskey in China to attract premium drinkers

Diageo Plc is investing $ 75 million in building its first whiskey distillery in China, with the goal of turning more local drinkers into whiskey lovers in a spirits market long dominated by baijiu makers like Kweichow Moutai Co.

The British alcohol giant will begin construction of a 66,000-meter facility in Yunnan province next year, with a goal of completion by 2023, it said in a statement Tuesday. The distillery will produce Diageo’s first Chinese-sourced single malt whiskey targeting the country’s so-called “premium” drinkers, according to the statement.

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Premium alcohol, including Moutai’s prized baijiu and Budweiser Brewing’s premium and super-premium beers, have significantly outpaced China’s overall liquor sales in recent years, even as the pandemic kept consumers away from restaurants and bars. .

“China continues to be an attractive market for us with increasing drinking opportunities, rapid growth of the middle class and growing appreciation of whiskey,” Sam Fischer, president of Diageo Asia Pacific and Global Travel, told Bloomberg in a interview.

International retailers are improving their offerings to meet the demands of a growing Chinese middle class eager for more expensive goods, from luxury handbags and cosmetics to high-end beer and imported steak. Global companies operating in China increasingly look to future growth in the world’s largest consumer market as the pandemic, now driven by the delta variant, drags down confidence in other areas of the world.

Fischer said some details of Diageo’s new whiskey, including pricing and launch information, had not been decided, as the liquor will need to mature for at least three years after the completion of the Yunnan distillery, according to Diageo. Still, it will be priced “far higher” than a whiskey produced jointly by Diageo and Chinese baijiu distiller Jiangsu Yanghe Brewery Joint-Stock Co in 2019, which sells for about $ 50 for a half-liter bottle.

Diageo’s ambitions in China are based on strong whiskey sales growth on the mainland over the past five years. The country’s $ 1.7 billion whiskey market, although much smaller than the $ 150 billion local spirits category comprised primarily of baijiu, posted high single-digit annual growth from 2016 to 2019, with only a slight decline. last year in the midst of the pandemic, according to Euromonitor International.

In 2019, rival Pernod Ricard SA also announced plans to introduce a new line of malt whiskey made in China by 2023 at the earliest and to build its first single malt whiskey distillery in the country, in Sichuan province.

China Challenge

Diageo, the owner of Johnnie Walker and Singleton, faces a key challenge in China: making whiskey a desirable option for group gatherings and holidays where baijiu has long played a key role.

“Specifically, there are cultural occasions in China like the Chinese New Year and the Mid-Autumn Festival,” Fischer said. “Now our goal will be to make whiskey more relevant for those occasions as well.”

The distillery will be carbon neutral and recycle the water it uses, the company said, and will have a visitor center for whiskey fans.

Earlier this year, Diageo opened a new logistics center in Shenzhen and announced the construction of a Shanghai-based research and development center that it said would strengthen the ability to develop premium products that meet Chinese tastes.

“Our performance has been excellent because of that belief for the past three to four years in China,” Fischer said. “We will continue to invest to develop our brands so that we can take advantage of that long-term growth potential.”

© 2021 Bloomberg

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