Former footballer David Beckham is the face of Haig Club
Former footballer David Beckham is the face of Haig Club © PA

Images of David Beckham clutching a tumbler of Haig Club, a new scotch, will be seen in China next month when Diageo, the world’s largest distiller, launches the new spirit next month.

The former star footballer is the frontman for the single grain scotch, released in Edinburgh this month, and Diageo hopes the new whisky will help reverse its fortunes in China.

For a start, the new scotch tastes less sour than other whiskies, which Diageo hopes will appeal to what it describes as the sweeter Asian palate.

Diageo is the world’s largest producer of scotch, which, with cognac, is the main international spirit consumed in the country.

The London-based group, which also makes Smirnoff vodka and Guinness beer, was a late entrant into China where it is playing catch-up to France’s Pernod Ricard. The latter makes 12 per cent of sales and 15 per cent of profit in China – its most important market after the US.

China only accounted for 1.5 per cent – 0.7 per cent on the mainland – of Diageo’s total sales last year. But the country’s growing middle class and rising affluence mean that it will become an increasingly important market for international spirits.

Its late entry has not screened Diageo from the blow to sales of ultra-premium drinks struck by the Chinese government’s anti-extravagance campaign. It swallowed a 78 per cent drop in sales of its Shui Jing Fang, its baijiu premium spirit, in its financial year to June 30.

Diageo’s strategy in counteracting the decline in baijiu is to introduce lower-priced versions, aimed more at private dinners and large family occasions than previously lavish state and local government banquets.

At the end of last year it launched Shui Jing Fang Red Fortune, ahead of the Chinese new year at $63.50 for 500ml. This was a very different proposition from its offering for gift-giving in New Year 2012 – before the new Chinese government came to power – when Forest Green Shui Jing Fang was released in a Swarovski crystal bottle, with a price tag of $625.

Pernod too has had to backtrack on its policy of selling ever more expensive drinks by introducing lower priced ones in China – such as Martell Distinction, costing about $30 a bottle instead of Martell Cordon Bleu at $100.

For its part, Rémy Cointreau has also moved to limit the damage. One of its responses has been to push 1738, a mid-priced version of Rémy Martin. Selling at around $70 a bottle, 1738 is a so-called VSOP Plus – and a distant cry from its Louis XIII, which retails for around $2,500 a bottle.

Rémy has been the hardest hit of all the big international groups from the swings in China. In its fiscal year ending 2013, about 40 per cent of group revenue came from the Asia Pacific region – and the great majority of that from cognac sales in China.

A year later, and as a result of the crackdown, Asia-Pacific only accounted for 29 per cent of group sales.

More generally, Rémy has also been trying to scale down its dependence on cognac sales in China. Attempts at diversification include its determination to develop the US cognac market.

Yet there could be a flicker of light in the gloom. Pernod Ricard said previously that China Martell cognac sales by wholesalers in China had increased 5 per cent during its most recent quarter.

Trading may also be stabilising in China for Diageo, the largest Scotch producer. The sharp fall in first-quarter sales was still a big improvement on the 50 per cent drop in the financial year to June 30.

As Trevor Sterling of Bernstein Research says of the Chinese market, “the rate of decline has started to slow”.

Ian Shackleton analyst at Nomura says: “We may not be there yet, but we are getting closer to the inflection point”.

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