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?
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.
Posted in Business, China, Investment, Luxury
Tagged alcohol, baijiu, China, diageo, high-end, liquor, louis vuitton, Luxury, LVMH, moet hennissey, premium, spirits, wenjun, wenjun distillery
Premium Scotch Distillers Eye Huge Potential, Existing Growth In Chinese, Emerging Markets
Chivas has enjoyed great success in China since entering the market in 2001
China’s love affair with the national sport of Scotland, golf, has also spread to the national drink of Scotland — scotch whisky. The Chinese market has become a prime market for Scottish distilleries in the last 10 years, as brands like Chivas Regal (introduced to the Chinese market in 2001) and other Speyside whiskeys like BenRiach and Glendronach (which have entered the market more recently) have attracted the devotion of everyone from scotch connoisseurs to well-heeled bar patrons in China. Chivas in particular has seen business booming as a result of its China expansion, where within a year of entering the country China had become the biggest global market for Chivas. For many scotch brands, which have seen their popularity in western countries steadily diminish in the last few decades as scotch has lost its allure among younger drinkers who increasingly favor vodka, China has great potential since it is a “blank slate” with fewer preconceptions about brands, flavor, region or pedigree.
One interesting characteristic of scotch consumption in China is the sizeable gulf that separates the devotee from the social drinker. In bars across China, it is common to see premium scotches like Chivas offered in a promotional “package” for a relatively high price, typically bundled with a bucket of ice and several bottles of sweetened iced green tea. While serious scotch drinkers would recoil in anguish at the sight of partygoers haphazardly mixing high-quality scotch with sugary tea, this home-grown concoction is one of the main drivers of Chivas Regal’s growth in the Chinese market, and the agreeable taste of the resulting cocktail suits the local market extremely well. Far from resisting the trend of Chivas becoming a “mixer” of sorts in China, the company has actively encouraged and nurtured its image as a sophisticated yet youthful party liquor, one that bestows a certain amount of status for the individual ordering the Chivas package for his or her table. In tacitly encouraging this localized brand image throughout the country, Chivas Regal has — in only 8 years — become the envy of other foreign liquor brands, and is no doubt the case study pored over most when foreign companies look to carve out a niche in China.
Posted in Business, China, Culture, Luxury
Tagged alcohol, baijiu, benriach, China, chivas, chivas regal, drambuie, glendronach, green tea, liquor, scotch, scotch whisky, spirits, trends, vodka, whiskey, whisky
Demand For High-End Liquor Remains Strong In China, Following Massive Turnout At Wine Auctions Earlier This Year
Huge in China - Martell's $3,600 per bottle L'Or cognac
Bloomberg reports that cognac brand Martell has sold out of its $3,600-per-bottle L’Or cognac, mainly because of strong demand in the Chinese market, where cognac has increased in popularity rapidly over the past 15 years. As developed markets like the US become less dependable in the face of economic concerns and consumer cut-backs, distillers have had to look eastward, and the growing popularity of cognac, wine and other liqueurs has counteracted the falling demand in other global markets.
In East Asia, much of the success of cognac depends on the China market, where Chinese drinkers have responded well to branding and marketing efforts of brands like Martell and Hennessy, and brand tie-ins have boosted the visibility and consumer recognition of major brands. And although Martell still lags behind Hennessy in the Chinese market, major initiatives like television sponsorship and bar promotions have significantly boosted their market share in the last few years. As an earlier Bloomberg article points out, “[Martell’s parent company] Pernod has established a strong foothold in the Chinese market, overtaking Rémy Cointreau Group for second place, with 26% market share, compared with Rémy’s 20%, as of 2007, the latest data available from Euromonitor. Both companies still lag behind leader LVMH Moët Hennessy Louis Vuitton, which holds a 44% market share.”
Posted in Business, China, Luxury
Tagged alcohol, China, cognac, hennessy, l'or, liquor, louis vuitton, LVMH, martell, moet, pernod, remy cointreau