Penfolds goes from Grange to rocket fuel

AFR
Angus Grigg
July 3, 2018

If you thought brandy or champagne were a stretch for the Penfolds brand, try the Chinese white spirit baijiu.

The firewater, a staple at Chinese banquets along with cigarettes and shouting, will come with a Penfolds label from September.

Parent company Treasury Wine Estates confirmed this to The Australian Financial Review on Tuesday while insisting such a stretching of the brand would not harm the iconic wine label.

Only time will tell if that’s true, but it does show that Treasury really only has one globally recognised brand and under chief executive Michael Clarke the company is planning to stretch this for all it’s worth.

It’s the Coca-Cola-isation of Penfolds, which is hardly surprising given both Clarke and chief operating officer Robert Foye spent much of their early careers thinking of ways to stretch the Coke brand further.

Thankfully for banquet goers in China, the Penfolds version of the country’s national drink will be “wine enlivened baijiu”.

This means not only will it be red – the luckiest of colours in China – but will only have a 21.5 per cent proof rather than the full 50 per cent, which has brought many a diner unstuck.

We’re told the new tipple will sell for $155 a bottle and be known as Penfolds Lot 518.

Treasury is not saying who they are partnering with to produce their watered-down rocket fuel, but the strong tip in the industry is China’s state-owned baijiu maker, Luzoulaojiao.

Mask the taste

The speculation is that a partnership with the Sichuan-based company on baijiu would also involve it distributing Treasury’s wines.

“The Chinese are always dreaming up new ways to get the world to drink baijiu and they can’t understand why it has not taken off like vodka,” said one person in the industry.

“Unfortunately what they don’t realise is that no wine or mixer is strong enough to mask the taste of baijiu.”

That review suggests the Penfolds baijiu may not have much appeal outside China, but that may not matter.

The baijiu market within China is already the world’s largest alcohol category by value and accounts for around half of all the country’s booze sales.

This year the luxury baijiu segment alone is forecast to be worth more than $US150 billion ($204 billion), while the most famous company in the space, Kweichow Maotai, is the world’s largest liquor producer with a market value nearing $US130 billion. 

This is the market Treasury wants a piece of, but Mark Tanner, a Shanghai-based brand expert, said it’s highly competitive and traditionally Chinese consumers are reluctant to embraced brands designed only for the mainland market.

“Blackmores tried to do it with infant formula and failed,” said Mr Tanner, who is chief executive of consulting firm China Skinny.

“That said, if they can carve out a little niche for themselves it could be very lucrative, but they will need to support it with some serious marketing dollars.”