Chinese spirit company signs agreement with Diageo

British alcoholic beverages company Diageo on Friday signed a strategic agreement with Chinese spirit maker Jiangsu Yanghe Distillery Co.

The agreement will see the two companies form a joint venture and begin a strengthened partnership.

Diageo and Yanghe will integrate resources and industry expertise in liquor-making techniques, products, distribution channels, and brand management and market management, according to the agreement.

Further details of the joint venture, such as investment and the exact stakes of each company, have not been disclosed.

A Chinese-style whisky named Zhong-Shi-Ji, co-created by Yanghe and Diageo, was also unveiled Friday.

CH Chu, Diageo Greater China managing director, said that Zhong-Shi-Ji represents an effort to meet Chinese consumers' increasing demand for more quality products.

"China has long been one of the most important emerging markets in terms of whisky consumption for Diageo."

"With the accelerated urbanization and expansion of the middle class in the country, Chinese consumers have demonstrated a more sophisticated taste for product quality as well as diversity," he said.

Statistics from the Scotch Whisky Association (SWA) show the export value of whisky to China has recorded double-digit growth since the early 2000s.

The export value to China surged by 34.8 percent year-on-year in the first half of 2018, according to SWA.

Diageo in late February extended a partial tender offer to Sichuan liquor maker Shuijingfang (SJF) to increase its aggregate equity stake in the company from 60 to the maximum 70 percent.

The offer price was 45 yuan ($6.7) per share, with the tender offer’s maximum value projected at 2.1 billion yuan.

A later announcement from SJF however said Diageo only managed to acquire 31 percent of the shares it sought.