Diageo Plc has realized that China is a tough market to penetrate with whiskey. Cognac and French brandy Armagnac account for 66 percent of the value of all imported spirits. Diageo has converted a villa in Shanghai as the Johnnie Walker House and attracting the wealthy Chinese drinkers with $2,000 bottles of its limited-release 1910 edition whiskey, bespoke packaging and personalized bottle design. They have to fight Cognac which has been established as the luxury category for over 70 years in the country. The analysts believe that Diageo can hope to succeed with the younger generation of Chinese who might start behaving like western consumers and develop tastes like them.
Diageo owns a third of LVMH’s alcohol unit in China, but the agreement limits their ability to expand further into cognac in the region independently. That’s why they have decided to focus on whiskey to capture a significant share of the emerging Chinese demand for luxury liquor. Gilbert Ghostine, President for the region, is confident that the Johnnie Walker brand will provide the company the status and the appropriate face in China. They have invested $3.2 million in the Johnnie Walker House. Select customers to the hose will be invited upstairs for further services, lessons, and tastings.
Diageo has offered to take over Sichuan Chengdu Quanxing Group, which makes the local Shui Jing Fang baiju spirit but the clearances from the government are yet to come through. Diageo is betting bis on the growing Chinese market. They will have to first tackle Pernod who are leaders in the Chinese whiskey market with their Chivas Regal enjoying a 37.5 % share of the market. They have to fight on the pricing front as an increase in price resulted in consumers shifting to other brands. Ghostine is optimistic about achieving double digit growth this year as they have several promotional initiatives lined up.