Baijiu: Dark Matter

Baijiu is the world’s biggest spirit with the world’s biggest consumer base. It is already international but can it broaden its appeal to western palates? Hamish Smith reports

"IT'S THE DARK MATTER of the spirits world – it pervades everything but we don’t see it,” says spirits historian David Wondrich. He is talking about baijiu, the high-strength white spirit from China that in 2012 sold a mind-dissolving 1.16bn 9-litre cases (IWSR). 

To offer some category context, baijiu is more voluminous than vodka, whisky (with or without an e), rum, gin, tequila, brandy and cognac – even bound up together with a bow on top. It is indeed the ubiquitous dark matter of the spirits universe, but if one company can shine a light it is Diageo.   

In late July the group increased its share in Szechuan baijiu Shuijingfang (try saying Shway Jing Fung) from 21.05% to 39.71%, giving it the controlling stake in one of China’s emerging super-premium segments. Diageo may be the most global of groups but 90% of Shuijingfang sales are domestic. 

The upside of a brand with an inward focus, though, is its distribution network – something of a strategy-fetish for Diageo (Mey Icky, Ypióca, United Spirits etc). Rightly so too. In the modern world double-digit growth is an emerging market phrase. In these countries the group is able to open new doors and mouths for its band of western, premium spirits. And doors and mouths don’t come any more numerous than in China. But first things first. Baijiu is not looking like taking a back-seat – it is growing at 2.1% (2011-2012, IWSR) and has an appealing CAGR of 18.8% (2007-2012, IWSR).

The spirit comes in many sizes and guises, but Diageo is concerned with what its Shanghai-based Chinese White Spirits general manager, Dan Hamilton, terms the “700rnb and above” [£70 plus] segment, aka China’s super-premium.  “Our core variant, Wellbay is around the 950rnb mark,” says Hamilton. “The Classic retails at about a 40% premium and Forest Green, which plays at the top end of super-deluxe, trades at a 90% premium to Wellbay. 

“There are a number of national brands in the super-premium segment. One is Moutai, another is Wuliangye. The distinction is that we purely play in super-premium whereas they have quite a broad family right down to the much lower price points. We are seeking to focus on the higher margins and high value end of the category.” 

Moutai, which is based in Guizhou Province in the south of China, comes in the form of the economy Moutai Yingbin, mid-market Moutai Prince, premium Flying Fairy Moutai, super-premium Gift-box Moutai and luxury Vintage Moutai. 

“Moutai is renowned as the spirit of China – basically everybody in China knows about it. From civilians to the social elite, all of them love our products,” says Jeff Wang, of the company’s marketing department. 

Normally such trumpeting wouldn’t pass through the pages of this magazine, but in the case of Moutai – particularly its popular Flying Fairy variant – it’s a case of blow away. According to Brand Finance, which devised Drinks International’s Brands by Value list, Moutai is the world’s second most valuable brand, behind Johnnie Walker but ahead of Hennessy, Bacardi, Smirnoff and Chivas Regal, with the aforementioned Wuliangye in seventh.