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Diageo looks to tighten grip on baijiu business

After a sterling half-year performance, Diageo has made a bid to once again increase its shareholding in the maker of baijiu brand Shui Jing Fang.

Organic sales of Diageo’s Chinese white spirits portfolio, led by Shui Jing Fang, increased by 22% in H1

Last year, Diageo increased its stake in Chinese spirits producer Sichuan Shuijingfang Company from 39.71% to 60%.

Now, through its Grand Metropolitan International Holdings subsidiary, the UK firm has approached the board of the Chinese group with a proposal to increase its ownership to 70%, at RMB45.00 (US$6.74) per share.

Sichuan Shuijingfang Company is a Shanghai Stock Exchange-listed white spirits maker. Its principal brand is super-premium baijiu Shui Jing Fang.

After moving under Diageo’s control in 2011, Shui Jing Fang experienced a tumultuous time in light of the Chinese government’s anti-corruption drive, which obliterated China’s high-end spirits market.

Diageo initiated a write of the value of Shui Jing Fang in 2014, but the brand has since returned to buoyancy. In the first half of Diageo’s 2019 fiscal year, organic sales for the group’s Chinese white spirits portfolio, led by Shui Jing Fang, increased by 22%.

Baijiu continues to dominate the ranks of the world’s most valuable spirits. In Brand Finance’s most recent Spirits 50 report, the world’s top 10 most valuable spirits brands included five Chinese white spirits.

Moutai baijiu retained its position as the world’s most valuable spirit brand, with an estimated value of US$21.2 billion.

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