Company Special: UK tastes gaining ground in mainland palette [China Daily: Hong Kong Edition]
(China Daily: Hong Kong Edition Via Acquire Media NewsEdge) When Sam Fischer, managing director of Greater China for Diageo, the world's leading beverage alcohol company based in London, visits a place where his company's drinks are sold, his favorite thing to do is to sit down with consumers and observe their consumption patterns.
After arriving in Beijing one night in February, he toured a local Wal-Mart store and 15 outlets in town.
"I cannot spend enough time with Chinese consumers or Chinese customers learning about what they want," Fischer said.
At the outlets, he was excited to see lots of ladies drinking Baileys and some youth, of course above legal purchase age, drinking a diversified group of brands under Diageo.
"There was a lot more openness around the choices. They didn't feel burdened by tradition," he said.
"This is the new consumer that I was talking about -one that feels unconstrained, experimental, one that tries different things. So I learned that we need to do much more of that - much more of that experimental opportunity for them," he noted.
If it were much harder to make a change once those habits and behaviors are more deeply engrained, younger consumers have a more innovative approach and are still in an experimental stage, said Fischer.
"Obviously, they are the kinds of consumers we want to interact with to build new experiences and new drinks to build up some kind of loyalty," he added.
Being positioned in Asia for 15 years, the Australian has learned the importance of understanding local culture and people and the art of blending such understanding with their Western drinks.
His first impression of China is the enormous opportunity for the business.
"In some ways it's about navigating through all of those opportunities and deciding which one or which ones we will focus on to try and develop," said the managing director. "We always take a medium or longer term view in a market like China, and I just feel excited, really, about the future."
The top priority for Diageo - the company owning a collection of well-known brands like Johnnie Walker, Windsor, Baileys, Guinness and Smirnoff - in China is to grow the Scotch whisky category, which accounts for 40 percent of their business globally.
They started with trying to ensure that Chinese consumers understand Scotch whisky's history, heritage and provenance so they can appreciate what that history can provide for them.
"The No 1 vehicle for me is educating Chinese consumers on Scotch whisky and ultimately having our brands play a key role in the future growth of Scotch," he said.
The second channel is developing relationship with consumers through mentoring programs designed for smaller groups of consumers, to whom brands including Scotch whisky are introduced with rituals that help them understand how to appreciate the category.
"We find that when we do that, it's a real positive surprise from Chinese consumers once they understand and appreciate. Then they can start to consume themselves," said the executive.
Despite the immense opportunities, international spirits are still a very small part of the overall beverage alcohol market in China, including beer and Chinese spirits.
Fischer said the key to overcoming that is to grow the total international spirits pie, not just their brands within it. "If we can grow 2 percent to 4 percent or 6 percent, then that brings obvious benefit to all of us," he said.
To grow the international spirits to match with meals, Diageo has invested heavily in their Johnnie Walker Houses, which were introduced in 2011, and is a physical space dedicated to bringing the art of blending whisky to China.
On top of that, the houses also develop the awareness of Scotland and Scotch whisky regions together with an appreciation of the differences those regions bring to the characteristics of the Scotch.
Through the interaction with consumers, the houses have offered a platform for Diageo to understand what's important for Chinese consumers and therefore allowed for incorporating those insights into the company's offerings to them, said the managing director.
For example, after learning the importance of Chinese Zodiac, Diageo now have bespoke Jonnie Walker Blue Label with the Chinese Zodiac sand-blasted onto the bottle - actually etched in. "Marrying those Chinese insights with our Western Scotch whisky has made the whole proposition infinitely more relevant to Chinese consumers," said Fischer.
Innovation in blending Chinese insights with product portfolios has been adopted in many marketing strategies for Diageo. Sisterhood Day for Baileys is a way to really try to become the conduit for women to celebrate sisterhood as many Chinese daughters grew up without sisters.
"Even as a male, it gets me emotional to think that Baileys is playing a real role that resonates with women," he said.
Building an appreciation among Chinese consumers for international spirits such as Scotch is crucial to expanding Diageo's market share in the country.
Fischer has been looking at ways to pair Scotch with different Chinese dishes. "It's not just about Scotch with Chinese cuisine everywhere. It's about choosing the cuisine and marrying it up with different Scotch variants because Scotch tastes different - it's not all the same," he said.
"In fact, when I look at Taiwan, Hong Kong, the Philippines or Indonesia - where there are quite significant Chinese communities - it's already entrenched; it's a habit already, so we know it can work.
"We just have to uncover it and make sure that how we marry it resonates with the Chinese consumer."
The rising young generation of consumers has boosted e-commerce as a considered channel for Diageo to build their brand and promote sales.
Modern off-trade such as retailers, including Wal-Mart and Carrefour, has been growing, though at slower rate over the past three to four years, he said. High-energy outlets such as KTV or nightclubs have also grown quite aggressively, as a key channel for Diageo to penetrate.
In addition, gifting also serves as a big opportunity, said the executive. But in the short term, they've experienced some sluggish growth as a result of the government austerity campaign.
Yet in the long term, the act of gifting as a sign of respect is deeply rooted in China and engrained in the Chinese culture, tailoring the gifts is really powerful.
"We will continue to participate aggressively in gifting," he said. Diageo will target premium gifting by using Johnnie Walker Houses and other channels. Despite the slow growth of the gifting market, Johnnie Walker has continued to grow, said Fischer.
"We saw our Blue Label business up 72 percent in the first half, and our sector is the probably only one that saw that growth," he said.
Also, Diageo will continue to marry Baileys with gifting opportunities for females, by leveraging Sisterhood Day, Christmas, Mid-Autumn Festival, and Chinese New Year, to make Baileys an integral part of that gifting occasion and the female consumption occasion, he said.
Shui Jing Fang, their Chinese liquor brand as gifting options for Chinese consumers, Fischer considered it as a category that has been ingrained in Chinese consumption. "So a few years certainly hasn't dampened our appetite for Chinese white spirits and the meal occasion," he said.
"We will develop the brand. We want to modernize the brand and make it part of the new Chinese consumer. So it's not a part of the old China, but very much a part of new China and what we see is this new China consumer coming into play."
He said Guinness, Diageo's beer brand, and Smirnoff, its No 1 spirit globally, will also be on their agenda for the Chinese market.
Young people drink a toast with a glass of Baileys. Photos Provided to China Daily
(China Daily 03/10/2014 page14)
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