• by Nina Lentini  @Nina_Lentini, December 13, 2006

Diageo, the world's largest liquor maker, is buying a 43 percent stake in Sichuan Chengdu Quanxing, parent company of a Chinese distiller that began producing the white spirit "baijiu" at the end of the Mongol reign.

Quanxing has a large distribution network in China by which Diageo could expand sales of its imported brands--Johnnie Walker, Smirnoff, Baileys and J&B. One Shanghai-based analyst predicted that high-end liquor will show "very strong growth in the next five years" due to increasing disposable income among the Chinese.

Diageo joins InBev and Anheuser-Busch in making acquisitions in the world's most populous nation. China is set to surpass Japan as the world's second-largest spirits maker by value, with sales estimated to reach $11.4 billion this year, according to Diageo.

Swellfun markets its liquor to China's wealthier consumers. A bottle of Swellfun is sold for about $77, compared with the average price of 18 cents for beer, 64 cents for spirits, and $3.19 for wine. It competes with Kweichow Moutai Co.--maker of the spirit that was used to toast former U.S. President Richard Nixon--which plans to boost capacity by 2,000 tons a year by 2008.

Diageo, which gets a third of its profit from its international unit, plans to commit more resources to developing regions including Asia, where the company increased liquor sales by 15 percent in its latest fiscal year.

Can't recall the Mongol reign? It was 600 years ago, during the Yuan Dynasty.