Diageo takes a giant bet on China’s £17bn spirit: UK drinks giant wants to raise stake in 600-year-old distillery
Diageo has outlined plans to tighten its grip on a Chinese drinks maker whose distillery dates back more than 600 years.
The British drinks giant, whose brands include Guinness and Smirnoff, wants to raise its stake in Sichuan Shui Jing Fang (SJF) from 39.7 per cent to 60 per cent.
The move looks likely to cost Diageo around £700million.
SJF is based in the Chinese city of Chengdu and produces baijiu at a distillery set up in 1408.
It is thought to be the oldest and the most complete baijiu distillery in China.
Baijiu, a clear liquor traditionally served neat in small cups at room temperature, is one of the most popular spirits in China.
Around £17billion of baijiu is sold every year making it an attractive market for Western drinks companies such as Diageo to exploit.
China represents a relatively small part of Diageo’s business.
Its exposure to the world’s most populous country is mostly through its Scotch brands, as well as its SJF investment.