Daily Archives: October 22, 2009

LVMH Acquires Chinese Traditional Spirits Distillery: Could Westerners Be Sipping Baijiu In Coming Years?

Market Analysts See Foreign Investments In Chinese Traditional Liquor As Smart Move To Cash In On Emerging High-End Domestic Consumer

LVMH's baijiu joint venture with Wenjun Distillery could be a huge money-maker in China; But will it appeal outside the country?

LVMH's baijiu joint venture with Wenjun Distillery could be a huge money-maker in China; But will it appeal outside the country?

Although most westerners may be unfamiliar with baijiu, the traditional spirit of China, drinkers within the country have been sipping the powerful, often tear-inducing alcohol for centuries. Less famous abroad than Japanese sake or Korean soju, two of its descendants, baijiu is most certainly big business in China, with the most expensive bottles often selling for more than $10,000 USD. This high-end spectrum, populated by rare bottles produced by only a handful of companies, has apparently garnered the attention of more than one foreign company looking to get a piece of the premium baijiu market, as Diageo bought a 43% share in baijiu producer Sichuan Chengdu Quanxing Group last year and, recently, LVMH Moet Hennessy acquired a 55% stake in one of China’s top producers, Wenjun Distillery.

This acquisition should fit seamlessly with Louis Vuitton Moet Hennissey’s broader China strategy. As we wrote earlier this week, LVMH is making a massive push into the Chinese market, buoyed by figures that indicate China has leapfrogged past traditional luxury markets like the United States this year and should surpass the Japanese market within five years. Acquiring a premium baijiu with real brand pedigree — the first Asian brand to be owned by the LVMH group — is being greeted as a gutsy move, as the high-end baijiu market is both exclusive and highly competitive. As Karen Cho writes, the acquisition of Wenjun has huge potential as incomes grow throughout China, but — as uncharted territory – presents LVMH with a host of new challenges:

“This is the first experience for the whole LVMH group owning an Asian brand,” says Allan Hong, development manager at Sichuan Wenjun Spirits Sales Company. “Because of the great potential in China, the whole group decided to run the Wenjun brand as a super-premium brand in China,” he adds.

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Conspicuous Consumption “Here To Stay” In China: How Will Retailers Take Advantage?

Luxury Market In China A Mixed Bag For Foreign Brands, Who Fight To Get Customers To Buy Inside China Rather Than Traveling Overseas

Although Beijing and Shanghai are China's "crown jewels," second-tier cities like Chongqing may ultimately prove the engines for the creation of a more comprehensive Chinese consumer culture

Although Beijing and Shanghai are China's "crown jewels," second-tier cities like Chongqing may ultimately prove the engines for the creation of a more comprehensive Chinese consumer culture

We’ve discussed recent reports on the rebound of the Chinese luxury market (which didn’t drop that much to begin with, despite global economic woes), and this year’s findings in McKinsey & Company’s Insights China report that China is rocketing towards the top of the list of the world’s biggest luxury markets. Although China remains one of the only bright spots in the world of luxury retailing at the moment, foreign luxury brands — despite rapid growth in the mainland market — often have difficulties convincing many of the country’s highest-potential customers (the wealthy and super-rich urbanites in top-tier cities) to buy their products within the mainland, strangely enough, because of the large luxury tax China levies on high-priced imported goods.

Possibly to combat this problem, as we’ve seen this year, many companies are looking towards second- and third-tier cities as a source of future growth, and perhaps leaving the top-tier cities alone and letting their Beijing or Shanghai boutiques function only as “showrooms” for ultra-rich customers who’ll simply buy the products on their next overseas or Hong Kong/Macau trip. In these smaller urban areas, middle- and upper-middle class customers, who still want to differentiate themselves through conspicuous consumption but are most certainly not part of the economic elite, could be the key for luxury brands who want their China locations to actually sell things rather than simply show them off like a real-life catalog. Middle- and upper-middle class urban professionals in cities like Xi’an, Qingdao, Nanjing and Chongqing — who make a decent living but can’t afford to fly to Hong Kong or Macau (let alone Paris or Tokyo) for luxury shopping sprees — are likely going to buoy luxury brands’ losses in top coastal cities.

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British Theater To Stage “Romeo And Juliet” In Seven Chinese Cities

TNT Theater’s Tour Will Visit Tianjin, Shenzhen, Guangzhou, Beijing, Ningbo, Hangzhou And Xi’an

TNT's past staging of "Oliver Twist" was a big hit in Beijing

TNT's past staging of "Oliver Twist" was a big hit in Beijing

It seems that cultural exchanges between China and the rest of the world are becoming increasingly commonplace, with large-scale events like Carnegie Hall’s “Ancient Paths, Modern Voices” festivals in New York and Orange County, the “Experience China in Israel” event in Tel Aviv giving foreign audiences a chance to see a cultural cross-section. Over the past few years in China, foreign cultural organizations and groups have made regular trips to the country to give Chinese audiences a chance to do the same. The most recent of these cultural exchanges, a staging of Shakespeare’s “Romeo and Juliet” performed by Britain’s TNT Theater, began its seven-city tour of China this week, and is set to perform the play throughout the country until November 29. From Xinhua:

Cui Yang, general manager of the Beijing-based Milky Way Arts and Communications Co., Ltd, the play’s importer, said the new version featured a cappella (singing without instrumental accompaniment) and live score which was specially commissioned for the play. 

 According to Cui, all the sound effects in the drama were created by human voices instead of being pre-recorded.

The TNT Theater, founded in 1980, has been distinguished for its simple stage decoration, strong British style and cross-gender performances. It has previously won the acclaim of Chinese audience with dramas such as Charles Dickens’ “Oliver Twist” and Shakespeare’s “Hamlet”.

In the run-up to next year’s Shanghai’s World Expo, and certainly in its aftermath, we should see a great deal more cultural exchange going on both inside and outside China, as more foreign audiences look to learn about China’s ancient and modern cultures, and Chinese audiences look to learn more about important global and historical trends.