Diageo Eyes China Businessmen as Xi’s Austerity Drive Bites

on February 18 2014 | in Daily Headlines Trending | by | with No Comments

Diageo, the world’s biggest distiller, is targeting wealthy Chinese businessmen to boost sales at its local white-liquor unit as an austerity drive by President Xi Jinping dries up government orders.

Sichuan Swellfun Co., the Diageo unit making the white spirit called baijiu, will focus on selling more to walk-in customers and online buyers, James Rice, Swellfun’s managing director, said in an interview. He said the distiller also plans to expand its product line to attract retail consumers.

Xi’s crackdown on extravagant spending by government officials has hurt sales by domestic and foreign liquor makers including Kweichow Moutai Co. and Paris-based Pernod Ricard SA. (RI) Six of the 14 white-liquor makers listed in China are set to report losses or lower profit for 2013, according to company forecasts compiled by Bloomberg News. Swellfun may report a loss of at least 124 million yuan ($20 million) in 2013, the company said in a Jan. 20 statement.

“Before Xi Jinping, anybody could sell baijiu because the consumption demand was huge,” Rice said in a phone interview from Chengdu on Feb. 14. “Now, you have to be at the right price, you have to sell the right way and you have to go find your consumer.”

Diageo, the maker of Smirnoff vodka and Johnnie Walker Scotch whisky, plans to sell a 68,000-yuan limited-edition white liquor and offer more products priced above 2,000 yuan this year as it caters to affluent customers, Rice said.

Swellfun is advertising on Weibo, China’s version of Twitter, and other social media as it targets successful male entrepreneurs between the ages of 35 to 55.

“Mercedes, Louis Vuitton (MC) and Land Rover, they still sell,” Rice said. “There is still a consumer there for high quality products in China, and we want to be right there.”

To target more mass-market buyers, the company also introduced cheaper products such as a 98 yuan white spirit under a different brand, he said.

Read more at Bloomberg

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