Keeping with its infamous taste, China’s baijiu (white spirit) market is proving to be an increasingly sweet proposition for foreign liquor brands. Two of the world’s largest - V&S Group and Moet Hennessey - have recently made aggressive moves into the sector, with one launching a new brand and the other relaunching an existing product. They join Diageo, which already has a minority stake in Swellfun.
For the domestic giants – including the ‘big three’ of Wuliangye, LuZhaoLaoJiao and Jiannanchun – the increasing involvement of international players offers some clear opportunities, given the baijiu category’s increasing disconnect with China’s young affluents.
Total volume consumption is dropping as beer and wine gain in popularity, which means that the baijiu industry has two realistic options: head even more upmarket in search of better margins, or attempt a considerably more contemporary image.
The influx of international marketing savvy should help, and helps explain why Moet Hennessey’s Wenjun brand has tasked foreign boutiques Bravo Asia and Design Bridge, and why V&S is bringing in a marketing director from Absolut for its TCX product.
“These are typical Chinese companies, so from a pure marketing perspective they don’t really understand the consumers well,” says Data Driven Marketing director Sam Mulligan, who advises the V&S Group.
“That’s the reason why the local companies are doing these JVs - there’s no reason other than the fact than they’ve recognised they can learn from marketing best practice.”
The category’s appeal is not too hard to understand. Baijiu accounts for a phenomenal 4.5 billion litres of consumption per year in China, earning it the sobriquet of the world’s biggest spirits category. For international liquor brands, significantly, it is largely drunk by the type of crowd who are not likely to be attracted away by their core offerings in vodka and whiskey.
“Everyone is looking at the long-term development of the business in China,” explains Mulligan.
“No one has the idea of converting them to other spirits. They are trying to build a business in their own right that will be profitable, and build a platform from which they can hopefully expand their international spirits business.”
Still, the international players will have to walk a very fine line, or risk alienating a consumer base that is - to put it lightly - steeped in tradition.
“You cannot change the way of marketing totally, but you have to be a little different, a little innovative,” says Johan Simonsson, who is heading the V&S/Jiannanchun JV.
“The market is not ready for a total change – there’s so much history which you have to follow.”
TCX, accordingly, will lean heavily on Jiannanchun’s heritage, even as it aims for a slightly more contemporary feel. Wenjun, meanwhile, is totally revamping its positioning to target a significantly more upmarket clientele.
If Moet Hennessey’s acquisition of the largely provincial player raised some eyebrows, the advantage may be Wenjun’s relative lack of historical baggage.
For the time being, all of the international offerings will remain dwarfed, in perception terms at least, by Moutai – the legendary brand whose Communist Party appeal gives it the highest margins in the market.
“At the moment baijiu has an older appeal,” says MEC national creative director Charley Kan. “But it has to change its tone. When they talk about premium, it’s always associated with superiority, which is a very shallow insight. They could learn from whiskey brands to use more emotional channels.”
