Brown-Forman, Wuliangye sign cooperation deal

A sales assistant showcases a bottle of Wuliangye white spirits at a supermarket in Ganyu county, Jiangsu province. [Provided to China Daily]

New products will counter impact of govt crackdown against corruption

Baijiu maker Wuliangye Yibin Co Ltd has teamed up with United States liquor giant Brown-Forman Corp to develop new products for emerging markets and counter sluggish baijiu sales business due to the ongoing crackdown on corruption and extravagance in China.

Brown-Forman, the Louisville-based wine and spirits producer that owns famous whiskey brand Jack Daniels, has already signed a cooperation agreement with Wuliangye in this regard, said sources.

The US company was ranked third in China's whiskey market in 2013, behind France's Pernod Ricard Groupe and the United Kingdom-based Diageo Plc. Pernod Ricard had 45 percent of the market share in China, followed by Diageo with 19.5 percent and Brown-Forman at 8.7 percent, according to statistics provided by Euromonitor International.

James Roy, associate principal at China Market Research Group, said Wuliangye and Kweichow Moutai Group Co Ltd, the two baijiu leaders in China, have suffered due to the anti-corruption drive as government, military and enterprises' spending on luxury banquets has dried up, thereby leading to flagging sales.

But foreign spirits such as whiskeys have not done that badly during the same period as there are more opportunities for people to drink foreign spirits for their own leisure and entertainment such as socializing.

"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 Roy.

Xiao Zhuqing, a liquor marketing specialist, said both companies are expected to develop emerging categories such as the cocktail brand Rio that targets young consumers.

"It is a growing trend that the age group of consumers using liquor products is becoming younger," said Xiao.

"Ready-to-drink cocktail has achieved quite positive reception among young consumer groups, inviting increasing attention from liquor producers to cash in the market."

Between 2009 and 2013, the cocktail market has maintained annual growth of 30 percent and is expected to reach 4 billion yuan ($647 million) this year, according to industry sources. The growth rate is much higher than liquor at 6 percent, beer at 9 percent and wine at 5 percent.

The lucrative cocktail market has also attracted several investors. Shanghai Bairun Flavor & Fragrance Co Ltd has acquired Shanghai Bakesi Wine Ltd, producer of cocktail brand Rio.

Shanghai Bakesi has achieved net profits of 4.9 million yuan, 20.2 million yuan and 110 million yuan in three years starting from 2012.

Liquor products are often sold through banquets, supermarkets or dealers while foreign spirits are mostly distributed in night clubs, said Xiao.