UK/CHINA: Diageo targets vodka growth in China, despite baijiu buy

By | 5 December 2012

Smirnoff can grow in China despite baijius stranglehold on the spirits market, according to Diageo

Smirnoff can grow in China despite baijiu's stranglehold on the spirits market, according to Diageo

Diageo has said it believes its vodka stable is well placed to grow in China, despite its recent entry into the country's domestic white spirits category.

The company has targeted healthy growth for the Smirnoff, Ketel One and Ciroc brands going forward, and maintained that China will contribute to that growth. The spirits producer took a controlling stake in Sichuan Chengdu Quanxing Group, which owns 39.7% of baijiu brand ShuiJingFang, in 2010. Baijiu accounts for 99% of all spirits sales in China.

Speaking at a briefing in London earlier today (5 December), however, Diageo's global white spirits portfolio director, Peter Fairbrother, said he still believes that vodka has strong potential in China.

“It's early days (for vodka in China),” he said. “It's not that consumers haven't taken to it, they've not had many vodka options. They've got a huge baijiu category, and Cognac and Scotch have gone in and invested. What we're starting to see in the last two or three years is vodka starting to get in there.”

Total annual vodka sales in China total around 300,000 nine-litre cases, according to Fairbrother.

“We're not throwing the kitchen sink at it,” he added. “We're testing our way in. We're running a test with Smirnoff in Wuhan and we're getting some positive signs. If you went to the best bars in Shanghai and Beijing, you'll find Ketel One in them, and Ciroc is in some nightclubs. We'll keep building it, but easy as she goes.”

When asked what the ShuiJingFang buy meant for the future of Diageo's vodka brands in China, Fairbrother said: “We're not going to piggy-back vodka on baijiu, we're just trying to make it available to a newer generation.

“China's big enough that there's scope for everyone - when you sell hundreds of millions of cases of baijiu and you're just starting with vodka, there's space.”

Expert analysis

Vodka in China to 2016: Databook

"Vodka in China to 2016: Databook" contains detailed historic and forecast Vodka consumption analysis, segmented at a category level. It provides year on year growth figures for the different types of Vodka available in China, as well as volume data based on price segments and alcoholic strength.

Sectors: Emerging markets – BRIC, Spirits

Companies: Diageo, Smirnoff

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