Reinvention needed for liquor makers

Visitors taste baijiu at the 2013 Western China International Fair. A burst price bubble and changing tastes caught liquor makers by surprise. Xinhua

The products of Wuliangye Yibin Co Ltd, the maker of what's easily China's most prestigious and recognizable brand of baijiu (white spirits), recently announced a substantial price cut. It reduced the wholesale price of one of its most select brands, 52-proof Crystal Wuliangye, by almost 17 percent.

This isn't the first time in recent years that deep discounting of the Wuliangye baijiu brands and those of competitors such as Kweichow Moutai Co Ltd is taking place. Even in 2012, many of the more luxurious baijiu brands cut prices.

A rather inflated price bubble and a shift in customers' tastes from hard liquor to red wine are the most frequently cited reasons behind the price-cutting.

But is this the right approach, given the luxury association and the place in Chinese entertainment culture enjoyed for so long by the generic baijiu product brand?

Wuliangye and Moutai in particular have crafted carefully a very strong set of emotional associations over many, many years.

Undoubtedly, the rapid emergence of the red wine market in China has presented Wuliangye and other distillers with a formidable opponent.

In particular, famous wines from France carry an extremely similar and competitive brand image.

Such a competitive threat from world-famous red wine brands is being exacerbated by the "all eggs in one basket" brand strategy long pursued by Wuliangye-and sadly characteristic of many of China's more famous corporate brands.

Wuliangye's most prestigious brands all target middle-aged, urban Chinese professionals. All rely on a "celebratory experience", such as a big wedding, to maintain their high-end status and luxury image, as well as their not inconsiderable price premium.

Sustainable competitive brand advantage is rarely built on one corporate brand occupying one market position in just one geographic market.

It's urgent, therefore, for Wuliangye to begin to develop a portfolio of baijiu-based product brands.

Development of such a portfolio will ward off the need for drastic price-cutting for its current luxury brand and put an end to an inevitable and possibly fatal decline in brand value.

Wuliangye could follow the examples of several other alcohol brands that found themselves in a similar predicament and were forced to shift consumer tastes and freshen up their brand images.

They need look no further than the incredibly imaginative repositioning in recent years in the United Kingdom's cider industry.

It was not that long ago that cider also had a negative image. It was often perceived as "the poor man's Champagne" and "a drink for older people".

But in recent years, the UK alcoholic beverages market has included numerous branded cider products targeted at the heavier-consuming younger generations. These products also have a "cool" and "fashionable" image.

Wuliangye could leverage its mighty brand equity in much the same way, and it could consider a branded baijiu-based product, possibly with a soft drink mixer, targeted at younger, heavier-drinking consumers.

The spirits industry in the UK generally is also fighting an image problem, and it has also shown innovative repositioning and rebranding. For example, there's Bacardi Ltd, maker of a white rum, rebranding itself with Bacardi Breezers.

Wuliangye should follow Bacardi's lead with a baijiu-based equivalent, also presented with a colorful, fun brand appearance, valued by younger generations.

Development of a portfolio of branded, baijiu-based bottled products will not only reinvent the baijiu product and Wuliangye's corporate brand. It will also introduce a brand-and market-oriented culture to the company.

And, price-cutting of the traditional, luxury product targeted at older consumers won't be needed.

Ambition, innovation and a strategic brand management plan that plots the building of a portfolio of baijiu-based branded products adapted for different market segments is the way forward for Wuliangye.