Sagging Spirits

Apr 21 2014, 03:48 IST
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SummaryFalling sales, thanks to an “anti-extravagance” China, is a sobering reality for makers of premium liquor

Remy Cointreau, maker of ultra-premium cognac Louis XIII, and Diageo, maker of rival Hennessey, have both reported slipping sales figures, following which their share prices have also fallen.

Interestingly, both seem to have been hit by China’s anti-extravagance policy—a bid to curb corruption and a culture of gift-giving among public officials, often involving high-end liquor. Cointreau has admitted as much, pinning its 13.5% decline in sales on the Chinese clampdown, saying it had a “negative impact on the consumption of premium spirits”. Diageo’s figures hint at the same—sales in the Asia Pacific crashed 19% in the three months to March 31, 2014, while it grew in North America,

Russia and Latin America.

Left high and dry by the Chinese, liquor giants are hoping that India helps drown out their sorrows. Diageo, for one, is letting a lot ride on the Indian market—on Tuesday, it put up a $1.9 billion bid to double its stake in the Indian liquor giant, United Spirits—as it sees a sizable chunk of tipplers in the country’s growing middle-class. Besides, according to a CNBC report quoting market research firm Mintel, the liquor makers are readying to raise a toast to India’s next government which they hope will bring down tariffs on imports, giving a leg up to their premium drinks’ markets. And who knows, given India’s seemingly entrenched “gift-giving” culture, the country could just be the market to succeed China.

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