Foreigners can't play liquor? After 13 years of changing six CEOs, Diageo is still difficult to push Shuijingfang to the high-end table
Diageo, which has become a global liquor giant by "buying, buying, buying", has spent 17 years, but still can't get a Chinese liquor company. In the past thirteen years, six "heads" have been replaced, and the two major directions set at the beginning, one stagnate, and the other is difficult to say successful.
Author|Magnesium Jing Group Editor|Ou Aiping
Diageo, the global liquor giant, has been "dragged back" by liquor again.
According to the financial report, Diageo's net sales in the Chinese market in fiscal 2023 fell by 4% year-on-year, becoming the only declining market in the Asia-Pacific region. Sales of Scotch whisky increased by 13% year-on-year, but were offset by a decline in Shuijingfang's performance.
After 17 years of layout, Diageo still can't handle the Chinese liquor industry. Of the two major strategic directions set at the beginning, one has long been stagnant, and the other is still dead.
Thirteen years have changed six general managers, Shuijingfang has not yet sat on the high-end game table, what is the problem?
After 17 years of layout, he still can't play with liquor
For Diageo, this is not the first time that Shuijingfang has "dragged its feet".
Diageo's sales in China also fell 7% in the 2020 financial year, when sales of its Scotch whisky, liqueurs and beers were growing, offset by lower sales of liquor.
Diageo has been under Shuijingfang for more than a decade, but he still hasn't played with this liquor company. Since 2006, Diageo has increased its stake in Shuijingfang several times, and became the actual controller of the company in 2011. According to the 21st Century Business Herald, Diageo once regarded Shuijingfang as an important driver of growth in China.
▲Diageo has increased its holdings in Shuijingfang six times, and magnesium has been mapped by the group
After Diageo took a controlling stake in Shuijingfang, it determined two major development directions: internationalization and high-end. However, for the time being, the company's internationalization has come to a standstill, and the effect of premiumization is not obvious.
In 2010 and 2011, the growth rate of Shuijingfang's export business was indeed quite strong, and its export business increased by 389.45% and 51.78% year-on-year respectively. Unfortunately, the good times did not last long, and since 2012, Shuijingfang's export business has continued to decline.
▲The export business of Shuijingfang, which was mapped by the magnesium group
By 2022, the company's export revenue will be 57.16 million yuan, accounting for only 1.23% of its total revenue, which is not as good as in 2012. In other words, in ten years, its internationalization road has not advanced but retreated. In contrast, Moutai's overseas revenue in 2022 has reached 4.24 billion yuan.
Diageo's marketing network covering more than 180 countries around the world does not seem to have made Shuijingfang's internationalization easier.
In terms of high-end, Shuijingfang's situation is also a little embarrassing. Its high-end image has not succeeded in capturing the minds of consumers. Shuijingfang's financial report shows that mid-to-high-end products account for more than 90% of the revenue, but the best-selling products are actually sub-high-end products at the price of 300-600, and products with prices of more than 1,000 yuan have not caused a strong market reaction.
Shuijingfang's division of high-end products is also different from the mainstream, a bit messy, from 488 yuan to more than 10,000 yuan are divided into high-end liquor by Shuijingfang, Jingtai, Zhenjiu No. 8 series is the main force of Shuijingfang's revenue, these two products are actually sub-high-end liquor.
Shuijingfang is stubbornly high-end, more because of Diageo's strategic choice. As the world's largest foreign liquor company, Diageo has a liquor business in more than 180 countries and regions around the world, including Johnnie Walker, Jumbo (J&B) and other whisky series, the main products are luxury wines.
However, Shuijingfang did not help Diageo quickly expand into the local market as well as the liquor brands it acquired in other countries and regions. Diageo has revealed to "Xiaoshidai" that since entering China more than 20 years ago, the proportion of the Chinese market in Diageo's global net sales has increased from 2% to 5%.
If Diageo's revenue for the 2023 fiscal year (July 1, 2022 to June 30, 2023) (158 billion yuan) is estimated, its revenue in the Chinese market (including liquor, foreign liquor, etc.) is about 7.9 billion yuan, and Shuijingfang, which has a revenue of 4.6 billion, has already accounted for most of the share.
For Diageo, which has always been known for its efficiency, this pace of development may be a bit slow.
In thirteen years, he has changed his commander six times, but he still has not touched the pulse of liquor
Why can't Diageo play with liquor? The problem may lie in the employment of people.
After Diageo became the actual controller of Shuijingfang, he also began to send senior executives to it, and a total of 6 "heads" were changed to Shuijingfang, of which 3 were foreigners, and the other 3 were Chinese, but they were all perennial in multinational companies and had a rich international vision.
▲Diageo holds the successive general managers of Shuijingfang, and the magnesium is mapped by the group
In March 2010, Diageo appointed the company's former president of Greater China, Michael Cummings, as the general manager of Shuijingfang. After taking office, Cummins listed internationalization as an important strategy of the company, and said that within five years, the proportion of Shuijingfang's sales in the international market accounted for 40% of the total sales.
However, more than 10 years later, Shuijingfang's sales in the international market account for less than 2%.
During his tenure, China's liquor industry was still in a golden period of development, and many liquor companies achieved rapid growth during this period. For example, Shede wine and drunkard wine, the revenue has increased by 2-3 times. In contrast, Shuijingfang has been going downhill in the past three years.
▲2010-2012 Shuijingfang performance performance, magnesium group mapping
Ke Siming, who did not grasp the golden age of the liquor industry, chose to leave in 2012. In March 2013, Diageo sent James Michael Rice, an American, to take charge of Shuijingfang. He has more than 20 years of experience in the FMCG industry in China and is known as a "China expert".
Under the influence of policies such as "restricting the consumption of the three publics" and "restricting liquor", high-end liquor has entered a period of deep adjustment, and Wuliangye and Luzhou Laojiao have reduced their prices. However, rice adheres to high-end positioning and resolutely does not reduce prices.
Moreover, he also advocated replacing the original general generation model with a direct sales model, and tried to apply the flat sales model of FMCG to Shuijingfang.
As a result, in 2013 and 2014, Shuijingfang's revenue grew negatively for two consecutive years, and it also fell into a loss, and once came to the verge of delisting. In the first quarter of 2015, with the recovery of the liquor industry, Shuijingfang turned losses into profits. This year, the rice also left Shuijingfang for personal reasons.
In the eyes of the outside world, during the two "foreigner" general managers at the helm of Shuijingfang, they did not conform to the industry trend when formulating the company's strategy, which made Shuijingfang miss a good opportunity for development.
Later, Diageo may also realize that foreign professional managers can't play the liquor business. Therefore, after Rice left office, Diageo began to let Chinese with foreign investment work background take charge of Shuijingfang, and Fan Xiangfu, Wei Yongbiao, and Zhu Zhenhao successively took the position of general manager.
During the period when these three people served as general managers, Shuijingfang's performance was not bad, with revenue increasing from 855 million yuan in 2015 to 4.673 billion yuan in 2022, and net profit increasing from 87.97 million yuan to 1.216 billion yuan in the same period.
However, it should be noted that during this period, the liquor industry fully recovered, and Shuijingfang's performance growth was largely due to the growth of the industry, while the ability of the management is still up for debate.
Because whenever the general environment of the liquor industry is not good, the performance of Shuijingfang is always worse than that of most liquor companies. For example, when the epidemic hit in 2020, most liquor companies withstood the pressure and maintained growth, while Shuijingfang's performance declined.
Since the beginning of 2023, high inventory, inverted prices, and reduced consumption expectations have become the main theme of the liquor industry. In this sluggish industry environment, Shuijingfang's performance has declined significantly. In the first three quarters of this year, Shuijingfang's revenue and net profit growth were negative, ranking at the bottom of the 20 listed wine companies.
It can be seen that as long as the general environment of the liquor industry is slightly bad, the performance of Shuijingfang will not be good, which can't help but put a question mark on the combat effectiveness of its management.
Diageo, which has been in the Chinese liquor market for more than ten years, still does not seem to have touched the pulse of liquor even if it has changed three Chinese "heads" to Shuijingfang.
is still stubbornly high-end, it's time for the "foreign boss" to change his thinking?
After 8 years, Diageo handed over the control of Shuijingfang to foreign professional managers.
Since March 1 this year, Briton Mark Anthony Edwards (Edwards) has acted as the general manager of Shuijingfang and has become the third "foreign executive" of Shuijingfang.
According to Baidu Encyclopedia, Ainhua used to be the brand manager of Unilever's category group in the UK and Europe, the director of marketing and innovation in Diageo Korea, and the brand director of Diageo Asia Pacific. His resume does not look much different from that of the previous two foreign general managers.
As the so-called "three fires for new officials to take office", Ai Inhua mainly did the following things after taking office: launching the ultra-high-end product "Shuijingfang First Fang", continuing to build IP around sports marketing and cultural marketing, focusing on banquet market segments, and building Shuijingfang cultural aesthetics and experience halls in more than 30 cities across the country.
Pushing new products seems to be one thing that every head of Shuijingfang must do. For example, Ke Siming launched "Tianhao Chen", Rice launched "Zhenzhuo No. 8", Fan Xiangfu launched "Jingcui", Wei Yongbiao launched "Jingtai 12", and Zhu Zhenhao renovated the old versions of "Collection", "Jingtai" and "Tianchen".
In fact, Ainhua's "predecessors" have basically tried these methods, and it is difficult for him to play tricks again.
His layout also reflects the limitations of foreign capital in managing Chinese liquor companies. As Xiao Zhuqing, a wine analyst, said, the operation and management of foreign companies pay more attention to standardization and budgeting, and pursue institutionalized management and process management. However, China's liquor industry is highly competitive, pays attention to local conditions, adapts measures to time conditions, and needs to respond quickly, and the standardized and process-oriented management style of foreign capital is very incompatible with China's liquor industry.
Ainhua is also facing more fierce competition and a more difficult industry environment.
The high-end liquor market in Shuijingfang can be described as "more monks and less porridge". According to the data of the China Research Institute of Puhua Industry Research Institute, the three major brands of Moutai, Wuliangye and Luzhou Laojiao together took 95.4% of the share of the high-end market. The remaining 6% market share is eaten by many brands such as Langjiu, Yanghe, Xijiu, Fenjiu, and Shuijingfang. You can imagine how fierce the competition is.
Compared with these competitors mentioned above, Shuijingfang does not seem to have an advantage in terms of brand influence and scale.
In addition, the liquor industry has entered an adjustment cycle, and since 2022, liquor consumption has been cold, channel inventories have been rising, and prices have been inverted, and this situation has continued until 2023.
The previous two foreign general managers obviously did not adapt to the cyclical changes in China's liquor industry, and it is still unknown whether Ai Inhua, who has a similar career experience to them, can hand over a different answer.