Drinking to the spirit of globalization

French businessman Cyril Camus said his favorite baijiu (white spirit) brand is Moutai. He first traveled to China more than 20 years ago when he was still a student and tried his first sip of baijiu. Of course, it was not Moutai because he could not afford China's national heritage liquor then.

"I am interested in tasting different categories of liquor, different brands," said Cyril Camus, one of the fifth-generation of the Camus family who have owned a Cognac house producing the French spirit since 1863.

"I was fortunate enough to live in China in the mid-1990s for a number of years. Going out to dinner with my friends as well as some business partners, I started being offered Moutai and that's when I first developed a taste for it. That's also when I started to develop an interest in the brand's history and its qualities," he said.

Camus is now the president of the family business - Camus Cognac - and he played a decisive and personal role in promoting Moutai to the international market.

Camus Cognac and China Kweichow Moutai Distillery Co set up a partnership in 2005 to market Moutai globally. "From zero to one of the top 15 luxury brands of spirits around the world, we have started achieving some results on Moutai's internationalization but we know it is a long-term job to make it widely recognized by Westerners," said Camus. He said he cannot reveal sales figures of Moutai outside China but sales growth was very fast over the last few years and will surely be promising.

However, to make Moutai, a typical and iconic Chinese baijiu recognized by Westerners is not easy. Both Moutai and Camus Cognac agreed when the partnership was established that if they wanted to promote the traditional Chinese liquor to the overseas market, they must have the right product to sell.

Global marketing

At that time there was a lot of confusion in the West about Moutai and baijiu, according to Ji Keliang, honorary chairman and chief technical adviser of Kweichow Moutai.

From a Western perspective, the idea of baijiu could be very negative because Westerners coming into China did not usually drink Moutai or other high-end white liquors so they were often very disappointed or surprised with the taste of lower quality products.

With the help of Camus Cognac, Moutai wanted to disassociate itself from all those potentially negative perceptions. One way was to very clearly express that it had a specific blend, for the export market only, and therefore that could not be confused with any other products a Westerner might have tried in China. The result was Small Batch Blend Moutai, specially for the overseas market.

They also found the way Moutai was sold in China did not fit in with Western codes of luxury and professionalism so they made some changes. The Small Batch Blend Moutai stuck to Moutai's familiar bottle shape and style but used slightly different color codes and emphasized a different message on the label. It remained instantly recognizable as a Moutai bottle but one that indicated to a Westerner that he knew what he was buying. More details of ingredients and technological information in English were added.

Although the product was ready, how to market it was still a problem.

The first challenge was making Moutai available on the shelves of the international market. The best choice was duty-free stores, a hub of international premium brands, according to Camus. Camus Cognac sells products around the world - in most international airports and onboard a large number of international airlines, with a network of more than 200 duty-free partners covering more than 4,000 duty-free shops worldwide.

"The duty-free exposure offered an incomparable platform for Moutai - thousands of high-end and high-spending travelers who are exposed to such a small and saturated shopping space come up close with Moutai's presence, which is likely to allow the brand to have maximum impact on the international market," said Ji, adding that the duty-free market, in airports in particular, was a window into the world of luxury.

The second step is educating consumers, especially Westerners, in such an environment. "We have our own staff in the shops talking about the history of Moutai, detailing how it is produced and explaining why it is a national heritage of China and the soul of this liquor," said Camus.

"The sales were not very high at the beginning. I remember a time when I was receiving the monthly reports and we were counting the number of bottles, not cases. It was hard because non-Chinese consumers still had not heard very much of the brand, because the promoters were not used to it and all that took time."

They then decided to go down the traditional advertising route. The Cognac house placed advertisements in magazines and on some TV channels.

Moutai began to experience an uplift in global recognition through a sponsorship in celebration of the historic pilgrimage made by Chinese monk Xuanzang in the 7th century. Moutai's international offering became the official gift for a program broadcast by China Central Television in which several experts retraced Xuanzang's walk from the historic city of Xi'an, in Shaanxi province, to India. It helped explain the brand and made it better known within the duty-free trade and its operators.

Brand image

These efforts to promote Moutai worked during 2009 and 2010. A few stores started to do well and others began to hear about them, raising confidence in the liquor. Starting from Asia, Moutai went to Europe and the United States, where duty-free trade and operators were willing to sell the product.

"We believe it's an exciting challenge. We can make a brand so famous and iconic in its home and then get recognition in the rest of the world," said Camus.

Ji of Kweichow Moutai admitted that sales of Moutai outside China are still limited. He attributed it to differences in drinking habits and the fact that there is a greater choice of alcoholic strengths and flavors in other countries.

Yang Jun, corporate manager of a State-owned enterprise, told China Daily that he once bought two bottles of Small Batch Blend Moutai in a duty-free shop at Beijing Capital International Airport. It cost $135 for a 350 milliliter bottle. "They are for my friends in Germany. For myself, I will not buy the liquor in duty-free shops," said Yang, explaining that the taste of Small Batch Blend Moutai is lighter than that sold in the domestic market and not very typical. "Maybe Moutai adjusts the formula to cater to Westerners' tastes?" he suggested.

According to an assistant in the shop, some visitors bought Small Batch Blend Moutai but few of them were foreigners. "More Chinese travelers bought Maotai for an investment. In recent years, the retail price of the liquor has increased 400 to 600 percent. They believe the price will continue to rise," she said.

Kweichow Moutai plans to increase its output to about 100,000 tons this year from 60,000 tons in 2011, Ji said. The company generated sales revenues of 18.4 billion yuan ($2.92 billion) in 2011, a year-on-year increase of 58.19 percent. Meanwhile, its net profit jumped 73.49 percent to 8.76 billion yuan. Analysts attributed the higher growth of net profit mainly to continuous price rises.

Although in the international market the manufacturer and sellers are making efforts to highlight Moutai's status as a premium brand, the company is striving to emphasize Moutai is not a luxury good and to disassociate the liquor's relationship with corruption and banquets and receptions held at public expense.

Liu Yuan, secretary-general of the China National Association for Liquor and Spirits Circulation, said that Moutai is an icon of China's white spirit industry selected by high-end customers. "What we should criticize is corruption and public budget consumption, not Moutai."

Competition

A group of other Chinese liquor producers are also trying to enter the international market and some foreign agencies are doing their best to promote them overseas.

International drink trader Diageo Highland Holding BV is to launch a mandatory tender offer to all shareholders of Sichuan Swellfun Co, excluding its parent company Sichuan Quanxing Group, at 21.45 yuan a share.

Diageo Highland is currently a foreign shareholder of Quanxing, with a 53 percent stake, and the controlling shareholder of Swellfun by indirectly owning nearly 40 percent of the brand.

If all other shareholders of Swellfun accept the offer, Diageo Highland will buy out the remaining 60 percent stake for a maximum amount of 6.3 billion yuan, giving the company full ownership of the brand.

"The offer shows foreign companies' interest in Chinese liquor and it will help Swellfun to enter the international market," said Liu.

Founded in 2000, Swellfun is one of the premium liquor brands in China. It competes with Kweichow Moutai and Wuliangye of Wuliangye Yibin Co. Diageo Highland is a subsidiary of the London-based spirit giant Diageo, producer of Johnnie Walker whisky and Smirnoff vodka.

Camus said he thinks that although the acquisition will bring competition to his business, it is a good thing. "More competitors will help more Westerners to get an appreciation of baijiu - the specific category of liquors from China," he said.