In the lead-up to two events in Beijing and Shanghai celebrating the 50th anniversary of UK-China ambassadorial relations, FOCUS speaks to British companies that have experienced success in the Chinese market over the last half a century
In this fourth instalment, Corporate Relations Director of Diageo Greater China Lin Fou-Menuhin tells FOCUS how the company has been promoting positive drinking, championing inclusion and diversity, and pioneering grain-to-glass sustainability.
Tell us how and when Diageo entered the China market …
We established our China business in 2002 and over the years we have developed an outstanding portfolio of international and local premium beverage alcohol brands in China, ranging from Scotch whisky and gin to vodka, liqueur, rum, beer and Chinese baijiu. However, our iconic Scotch brand Johnnie Walker actually first appeared in China as far back as 1910.
Today, China is one of Diageo’s top three global strategic markets. We will continue to stay at the forefront of Chinese consumer insights and trends, innovating and developing quality products that cater to Chinese consumers’ tastes.
What major successes have you scored during this time, and how has the company grown?
Over the last few years, Greater China has increased from 2% to 5% of our global net sales. In the first half of the 2023 fiscal year, Greater China net sales grew 2%, driven by Scotch with strong performance in the super-premium-plus segment.
We are rapidly expanding our strategic footprint in China and have made a series of investments to better serve the growing market:
- In May 2021 we established a regional logistics hub in Shenzhen to service China and the Asia-Pacific region.
- In September 2021, we announced plans for a new R&D Centre in Shanghai to strengthen our ability to innovate and develop premium products for the China market.
- In November 2021, we broke ground on the Diageo Eryuan Malt Whisky Distillery in Yunnan Province and construction is well underway. The distillery will be carbon neutral in operations and will produce the highest quality China-origin whisky.
Our 10-year sustainability action plan, “Society 2030: Spirit of Progress”, which focuses on promoting positive drinking, championing inclusion and diversity, and pioneering grain-to-glass sustainability, underpins our sustainable business strategy.
Last year, we also launched a positive drinking month promotion campaign that successfully attracted 585,423 users to visit Diageo’s DRINKiQ website (Diageo’s flagship responsible drinking programme). In addition, over 47,630 people completed the Wrong Side of the Road test, raising consumers’ awareness of the dangers of drunk driving.
We are also developing China-based regional centres of excellence (CoE) in key functions to ensure that we have the talent and organisational muscle to drive business growth in China and Asia Pacific.
What are your thoughts and reflections on the Chinese market today?
The overall alcoholic beverage market continues to grow across all categories in China. While international spirits is the fastest-growing category, it still only represents around 3% of the total market, presenting a clear opportunity for Diageo.
At the same time, baijiu plays an important role in China’s unique alcohol culture. Diageo is currently the only international beverage alcohol company to participate in the dynamic baijiu sector, and we are very proud of our involvement with the iconic Shuijingfang brand. As a result, our diverse product portfolio can cater to different consumer demands, occasions and tastes – from Scotch whisky to baijiu and from premium beer to white spirits such as gin and tequila.
Our Chinese consumers are becoming more adventurous and willing to experiment with new products and brands. They are increasingly choosing brands that offer superior quality, authenticity and taste as they pursue a better quality of life. They are also increasingly sophisticated and interested in the culture and heritage of our products.
We have witnessed the rapid growth of e-commerce and digitalisation in China, which is enabling us to deepen our market penetration and make our products more accessible for Chinese spirits connoisseurs.
How has CBBC supported you during this time?
CBBC plays an important role in promoting trade and partnership between the UK and China, helping shape bilateral relations and promoting the interests of businesses, which has facilitated our strategic investment and growth in China. For example, in 2021, Diageo CEO Ivan Menezes, as a representative of senior British business leaders, attended a virtual meeting with Premier LI Keqiang organised by CBBC and the China Council for the Promotion of International Trade (CCPIT), and showcased Diageo’s determination to participate in the development of a healthy bilateral relationship.
CBBC is an important partner for Diageo China. It provides us with cutting-edge local market intelligence, supporting our ability to rapidly identify new and emerging trends and innovate at pace.
What are your ambitions and plans for the future in China?
We remain very optimistic about the China market and confident about double-digit accretive growth in China for international spirits and baijiu.
We will continue to increase our strategic footprint through a series of “in China for China” initiatives. For example, the development of our Eryuan Whisky Distillery is now well underway, which will bring China into the centre of the global whisky conversation.
Meanwhile, we will continue to expand our local innovation and production capabilities and develop innovative products that satisfy Chinese consumers’ diversified demands.
We are also committed to ensuring that our sustainability and ESG strategy aligns with China’s own high-quality development goals, be they industrial, social or environmental, and we look forward to continuing to work with local partners, industry peers and organisations such as the China Alcoholic Drinks Association (CADA) to support China in its goals to improve quality of life, facilitate sustainable development and optimise the business environment.
What do you think China will look like in another 50 years?
We are still only at the beginning of a very exciting journey in China, and over the next 50 years, we expect that the country will contribute tremendously to the growth of the alcoholic beverage industry worldwide.
We expect that China will continue to open up and pursue high-quality development, and that consumers will continue to seek higher levels of quality consumption, further boosting an already vibrant consumer market and continuing the trend of premiumisation.
China has set ambitious targets through its “dual carbon goals”, and in the run-up to 2060 in particular, we can expect China to make significant achievements in the green transformation of its industries, in addition to continuing to be a leader in innovation, science and technology.
As we celebrate 50 years of diplomatic relations between the UK and China, we look forward to continued cooperation, particularly in the areas of trade, exchanges and the environment.