PREMIUM LIQUOR SALES IN CHINA HIT SOBERING WALL

Date: March 5, 2014             From: CNBC              By: Ansuya Harjani

As high-end baijiu sales hit a sobering wall in China amid the crackdown on gift-giving and lavish spending by officials, consumption of premium liquor in India is roaring ahead, said Gilbert Ghostine, president, Asia Pacific at Diageo - the world's biggest distiller.

"If you look at our business in China, these anti-extravagance measures definitely did impact our baiju business," Ghostine told CNBC Asia's "Sqauwk Box" on Thursday.

"We recognize the baijiu business will still be disrupted in 2014, (but) in 2015 [sales in] the category will be up again in high single-digits. This is a category that's well entrenched with Chinese consumers, it is part of the culture," he added.

Baijiu, the world's most consumed form of liquor thanks to its popularity in China, is a pungent white spirit averaging 110-proof.

Diageo reported a 23 percent on-year drop in its sales to China in the six months through the end of December 2013, after sales of its baijiu brand plummeted 66 percent.

"One of the reasons why our baijiu business was impacted more than others is because we only competed on the super-premium end. Now we have introduced variance at the premium end of the business, and these brands are doing well," Ghostine said.

The British maker of iconic brands such as Johnnie Walker whisky and Smirnoff vodka generates about 42 percent of its sales from emerging markets.

As Diageo suffers from a pullback in consumption in the mainland, Ghostine said the company is doing "very well" in India, where sales rose 35 percent in the six month period.

" [In India], the Johnny Walker business is up 80 percent, and even our vodka business is up in double-digits," he said.

-By CNBC's Ansuya Harjani.