Diageo Wants China to Order a Scotch

Diageo (DEO) this month opened a tasting center in Shanghai's fashionable French Concession district to drum up new business in China for its Johnnie Walker brand of whisky. It's not your typical Scottish pub. Visitors to the Johnnie Walker House, a villa converted at a cost of almost £2 million ($3.2 million), are served on the first floor, where lights made from whisky bottles and walls made of peat and barley remind drinkers of the whisky's roots. Select customers—those who are influential or have deep pockets—gain invitations to the second and third floors for lessons about distilling, information about personalized bottle designs and bespoke packaging, and private tastings of pricey bottles like the $2,000 limited-release 1910 Edition whisky. This temple to all things Johnnie Walker is "just the first of many initiatives we have in the pipeline" to drive growth in China, explains Gilbert Ghostine, president of Diageo's Asia-Pacific unit.

The world's largest distiller wants to increase the appreciation of whisky in a market where cognac and the French brandy Armagnac account for 66 percent of the value of all imported spirits, according to the . Whisky has a 29 percent share, says . "Cognac's been established as the luxury category for 70 or 80 years," says Trevor Stirling, an analyst at Sanford C. Bernstein (AB) in London. "What Diageo has to hope is that a younger generation of Chinese will start to behave like Western consumers and say, 'We want a drink for our generation.' But it's likely to be a slow burn."