Chinese baijiu maker Wuliangye Yibin Co has teamed up with U.S.-based wine and spirits producer and distributor Brown-Forman Corp, the owner of Jack Daniels whisky, to develop new products for emerging markets and to counter slow baijiu sales.
Brown-Forman, based in Louisville, Kentucky, has experience in the Chinese market as the third most popular company in China’s whisky market in 2013, behind France’s Pernod Ricard and the U.K.’s Diageo. According to China Daily, Brown-Forman has an 8.7 percent market share, whereas Pernod Ricard and Diageo control 45 percent and 19.5 percent of the market respectively.
Wuliangye, along with China’s other top baijiu maker Kweichow Moutai, has been hit hard by the government’s luxury crackdown, as baijiu was a staple of government events and gift-giving.
Because of the luxury crackdown, China’s spirits market is moving from the high-end luxury drinkers to mainstream drinkers.
Even though Pernod Ricard’s sales to China were down 18 percent in the first half of this year, the company remains optimistic, noting that China is becoming a “normal emerging market.” The company will change its strategy and push its less expensive brands in China where it expects high single-digit growth in China in the near future with an organic annual profit growth of one to three percent thereafter.
With China becoming a normal emerging market, the partnership between Wuliangye and Brown-Forman could not have come at a better time for the two companies.
“The bar culture has played a big role in boosting demand in Chinese cities. It was not always like this before. So it makes sense that Brown-Forman has partnered with Wuliangye, a company that needs more diversification, and still has strong presence in distribution channels,” said China Market Research Group’s James Roy.
Though the markets for beer, liquor, and wine are expected to grow at a rate of 6 percent, 9 percent, and 5 percent respectively, the cocktail market is booming in comparison. From 2009 to 2013, the cocktail market in China grew 30 percent annually and is expected to reach 4 billion yuan ($647 million) this year.
The huge growth in the cocktail sector can largely be attributed to the fact that the age of liquor drinkers is falling in China, according to liquor marketing specialist Xiao Zhuqing.
“Ready-to-drink cocktail has achieved quite positive reception among young consumer groups, inviting increasing attention from liquor producers to cash in the market,” he told China Daily.
Wuliangye and Brown-Forman will look to develop new products in the cocktail category, such as the newly created Rio, which is targeted at younger drinkers.
image source: jack daniels