THERE was much self-congratulation among Diageo’s bosses in July last year when the British firm, the world’s biggest maker of spirits, completed its acquisition of Shui Jing Fang, a maker of baijiu, a liquor generally made of rice. But only 12 months later Diageo had to write down the value of its purchase, after its sales had fallen 78% in response to the Chinese government’s ban on the giving of “gifts” to officials.Diageo’s Chinese misadventure is a cautionary tale of the pitfalls of Western spirit-makers’ push into emerging markets. Such places are so attractive because the potential for growth is far higher in countries where the consumption of spirits, especially foreign ones, is still modest, and the number of people able to afford the luxury is soaring. But the risk of government meddling in businesses is higher too.The spirit-makers’ latest headache in emerging economies is Russia, amid its dispute with the West over Ukraine. So far Russia has excluded spirits from a ban it has imposed on some Western imports in response to sanctions—but that could easily change. Jack Daniel’s Tennessee Honey, a...
from The Economist: Business http://ift.tt/1FvK0rj
No comments:
Post a Comment