Global spirits giant Diageo is evaluating the possible sale of its controlling stake in Chinese baijiu producer Sichuan Swellfun Co (Shui Jing Fang), according to Bloomberg, as the group reviews assets amid a global slowdown and mounting pressure on its China business.
According to the report, the maker of Johnnie Walker has launched a systematic review of its operations in China, including the possibility of an asset sale. The company has appointed financial advisers and begun preliminary discussions with domestic strategic investors and private equity firms to assess potential transaction interest.
People familiar with the matter said Diageo is working with Goldman Sachs and UBS to evaluate the assets under review, including its more than 63% stake in Shui Jing Fang. The advisers have made initial approaches to local strategic buyers and private equity groups to gauge acquisition appetite, the sources added.
Shui Jing Fang is Diageo’s most significant asset in China. Bloomberg reported that the baijiu producer currently has a market capitalisation of about US$2.7 billion, meaning a sale, if completed, could deliver a meaningful return for Diageo.
The news lifted Diageo shares by more than 2% in early trading on Jan. 13. Shui Jing Fang’s shares also rose sharply, climbing as much as 5.7% in Wednesday morning trading — their biggest intraday gain since Dec. 25. Despite the rebound, the stock remains down 13% over the past 12 months.
Shui Jing Fang profit plunges in first three quarters
Based in Chengdu, in southwest China, Shui Jing Fang is a well-known baijiu producer whose distilling history can be traced back to the Ming and Qing dynasties. Leveraging local water resources and traditional solid-state fermentation techniques, the company has built a portfolio centred on strong-aroma baijiu. In 2000, the discovery and archaeological confirmation of Shui Jing Fang’s ancient cellar pools and distillery workshop ruins were widely regarded as rare physical evidence of the development of China’s baijiu industry.
At the shareholder level, Shui Jing Fang has long been controlled by Diageo, which has been deeply involved in the company’s governance. Between 2006 and 2013, Diageo increased its stake in the controlling shareholder on four occasions, ultimately securing control. The brand is positioned primarily in the sub-premium and premium baijiu segments.
However, as alcohol consumption in China becomes more restrained and downtrading pressures intensify, the broader industry has come under strain. Shui Jing Fang has not been immune. In the first three quarters of 2025, the A-share listed company reported revenue of RMB 2.35 billion (about US$335 million), down 38.01% year on year. Net profit attributable to shareholders fell 71.02% to RMB 326 million (about US$47 million).
In June 2025, market rumours circulated that Shui Jing Fang had carried out layoffs across multiple departments, including claims that the team behind its high-end brand “First Workshop” (Di Yi Fang) had been fully disbanded. The related posts were later removed from Chinese online platforms, and the company did not issue a public response.
Sale speculation resurfaces
Speculation about a potential sale of Shui Jing Fang has surfaced repeatedly in recent years. On May 20, 2025, Diageo released a strategic update in London under its “Accelerate Programme”, outlining plans to drive cost savings and reduce leverage over the coming years. The company said it would pursue “timely and selective asset disposals”, a statement that — while not explicitly referencing China — fuelled market speculation.
Later in December, reports emerged suggesting Shui Jing Fang could be acquired by another Chinese baijiu producer, Jiannanchun. Shui Jing Fang moved to deny the claims, issuing a clarification on Dec. 26 stating the reports were “untrue”.
Throughout 2025, Diageo has announced and advanced a series of asset disposals as part of a broader portfolio rationalisation. These include the sale of its controlling stake in Guinness Ghana Breweries, the divestment of its Italian business, the sale of Venezuelan rum brand Pampero, and, towards year-end, the sale of a majority stake in East African Breweries for about US$2.3 billion to Japan’s Asahi Group. The group has also suspended production at several distilleries across Europe and the United States.
Against this backdrop of global retrenchment, renewed discussion around a potential sale of Shui Jing Fang has come as little surprise to the market.
Bloomberg cited people familiar with the matter as saying that talks remain at an early stage and that Diageo has yet to make a final decision. Any transaction may ultimately not proceed. Spokespeople for Diageo, Goldman Sachs and UBS declined to comment. Shui Jing Fang said it had not received any information regarding a potential equity sale.
