UK based spirits group Diageo reported this week the value of its stake in Shui Jing Fang, which opened its first distillery in 1408, dived after sales tumbled 78% in the year to 30 June amid heavy price competition from rival brands and action by the Chinese government to curb use of luxury goods by officials. Scotch also took a hit, with Johnnie Walker Black Label’s sales down 28% in the country.
The crackdown has affected a number of western luxury brand’s hopes in the fast-growing economy, with cognac maker Rémy Cointreau and British clothing brand Burberry among those affected. Growth in China’s luxury market slowed to about 2% in 2013 from 7% in 2012, according to consultancy Bain.
Diageo paid £250m for a controlling 40% stake in Shui Jing Fang in 2012 when sales of luxury goods were burgeoning in China. But a change of government later that year led to a crackdown on corruption, announced by China’s president, Xi Jinping, in 2013.
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