As Economy Sours in China, Sales of Spirits Soar

It’s been a good year for purveyors of fine spirits in China, and the producers hope that the trend continues amid the slowing economic conditions in the country. Spirits such as whiskey and cognac have seen their popularity grow at a higher rate than expected over the last year.

The latest indication of the changing drinking habits in China comes from the world’s largest beverage company and owner of brands Johnnie Walker and Smirnoff, Diageo, which released earnings for the second half of 2018 on January 31st. The company said that it saw strong demand in China in the period, with sales growing a hefty 20 percent year-on-year. In particular, sales of scotch and Chinese baijiu (the company holds a significant stake in Sichuan Shuijingfang Company) were stronger than expected.

Diageo CEO Ivan Menezes said in an interview with CNBC that the increase in sales in China was attributed to consumers looking to “discover new special whiskies” and a desire to drink better. “I feel good about the consumer momentum in China,” Menezes noted in a Bloomberg interview.

The announcement comes on the heels of other spirits producers making similar claims about the Chinese market as investors fret over reports of declining sales from other international brands. On January 22nd, French spirits group Rémy Cointreau, the maker of Louis XIII cognac that sells for over $2,000 a bottle, reported stellar sales growth in China over the last quarter. The company’s CFO Luca Marotta said that cognac sales in China were growing 20 percent on average.

johnnie walker blue

Chinese New Year promotion for Johnnie Walker Blue Label on Instagram

While those statements are upbeat about the future of the market, spirits brands are now looking to the Lunar New Year for a sales boost to start the year, and they’re pushing out campaigns to draw in more consumers.

Diageo and its brands are continuing to target Chinese consumers aggressively. The beverage company’s Johnnie Walker Blue Label (the brand’s top-shelf whiskey that sells for about $200) recently released a Chinese New Year campaign on Instagram. It has also promoted the spirit on Weibo, where it has more than 675,000 followers but low engagement.

Some analysts may not be as optimistic as the brands on continued growth in spirits sales in China, but, for the time being, and considering the demand for liquor during the Lunar New Year, high-end brands will raise a glass and say, “Ganbei!” to a positive start to the year.

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Earnings Brief, Food, Wine, & Spirits