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LIDU LIQUOR CO. LTD.: IMMERSIVE EXPERIENTIAL MARKETING

Haibo Hu, Meiju Fei, Haitao Lu, Huaiyuan Han, Tao Huang, Fan Yu, and William Wei wrote this case solely to provide material for
class discussion. The authors do not intend to illustrate either effective or ineffective handling of a managerial situation. The authors
may have disguised certain names and other identifying information to protect confidentiality.

This publication may not be transmitted, photocopied, digitized, or otherwise reproduced in any form or by any means without the
permission of the copyright holder. Reproduction of this material is not covered under authorization by any reproduction rights
organization. To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Business School, Western
University, London, Ontario, Canada, N6G 0N1; (t) 519.661.3208; (e) cases@ivey.ca; www.iveycases.com. Our goal is to publish
materials of the highest quality; submit any errata to publishcases@ivey.ca. i1v2e5y5pubs

Copyright © 2021, Ivey Business School Foundation Version: 2021-09-09

Midway through 2019, Tang Xiangyang, general manager, was aware that Lidu Liquor Co. Ltd. (Lidu) was
facing additional challenges. The liquor industry had entered a period of brand concentration and liquor
sales had become increasingly concentrated. In 2017, about 23 per cent of the market share was controlled
by five companies: Kweichow Moutai Co. Ltd. (Moutai), Wuliangye Yibin Co. Ltd. (Wuliangye), Jiangsu
Yanghe Distillery Co. Ltd., Luzhou Laojiao, and Anhui Gujing Distillery Co. Ltd.1 In 2018, Moutai’s and
Wuliangye’s net profits accounted for 68 per cent of the net profits of listed liquor companies.2

The development space for liquor companies was relatively small; however, emerging liquors, which were
famous for their brand culture, had risen. For example, the 2018 sales of Chongqing Jiangxiaobai Liquor
Co. Ltd. exceeded ¥2 billion,3 which was about seven times Lidu’s sales that year.4 Moreover, domestic and
foreign brands had already noticed Lidu’s success and had begun to imitate its immersive experiences.

Lidu’s unique advantages were weakening. For future growth, Tang had to determine how to optimize the
company’s experiential marketing plan. With rapid development of the Internet and live e-commerce, to stay one
step ahead of the competition, Tang needed to transfer immersive experiential marketing from off-line to online.

LIDU LIQUOR CO. LTD.

Lidu, a traditional Chinese liquor enterprise,5 was located in Lidu Town, Jiangxi Province, China. This part
of central China was known for its long history of liquor production, which stretched back more than 1,500
years.6 Legend had it that when passing Lidu Town, Wang Anshi, a famous politician and author of a series
of reforms called the “New Policies” (written in the eleventh century), would stop to taste the region’s
liquor because he was attracted by its distinctive aroma. Similarly, Yan Shu, prime minister of the Northern
Song dynasty, would stop and buy bottles of liquor every time he passed through Lidu Town.7

The Lidu distillery workshop from the Yuan dynasty period was the oldest distillery site in China and was still in
use. It contained rare historical relics and was thought to have the most complete history of distillery production.8

The modern company of Lidu, founded in 1955, had 260 employees and registered capital of ¥12.24 million.
In 2002, HongKong Hengyuan Tuozhan Investment Ltd. (Hengyuan Group) acquired Lidu. For the first

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few years after the acquisition, sales were strong because the new owners sold off Lidu’s inventories. As
inventories were depleted, new production was scheduled with cheaper raw materials sourced from Sichuan
Province. But as consumers noticed that Lidu’s flavour was becoming more diluted, sales dropped.

As a result, by 2006, Lidu was incurring losses. Consequently, VATS Group purchased the company from
Hengyuan Group in 2008. The group had been successful using traditional marketing to grow its Jinliufu
brand of liquor—a strong Chinese aromatic spirit of 45 proof. Therefore, it tried to employ the same
strategies with Lidu, which included advertising in traditional media, building out distribution channels,
and running promotions at retail stores. However, these traditional methods yielded poor results, and Lidu’s
sales growth stalled between 2008 and 2013.

WU XIANGDONG AND TANG XIANGYANG

Wu Xiangdong founded the Jinliufu brand in 1997. In three years, Wu’s efforts generated brand sales of ¥1
billion. In 2006, based on the success of Jinliufu, VATS Group was established with Wu as its chair. VATS
Group then acquired Lidu in 2008, and in 2016, the group changed its name to Jindong Group. As of 2019,
Jindong had 15,000 employees and over ¥30 billion in total assets.

Born in 1966, Tang graduated from Shaoyang College in 1989 with a major in winemaking. Tang
successively obtained the Chinese qualifications of senior liquor sommelier and senior winemaker. Friends
called him “Commander Tang.”

In 1989, Tang joined Hunan Shaoyang Distillery, where he worked as the director of its winery for six years
and then as a sales manager for eight years. In 2003, VATS Group acquired the Shaoyang Distillery, and
Tang worked as the pioneer of the group’s Guangzhou business under Wu’s supervision.

When Tang took over as general manager of Lidu in March 2014, the company had suffered losses for five
consecutive years with five different chairs attempting to lead the company out of its stagnation. However,
unlike the previous five general managers, Tang had a wealth of experience in the wine industry. His past
experience included time with a local winery and serving as the general manager of several local liquor
companies in VATS Group.

Shortly after his arrival, Tang reviewed Lidu’s sales and marketing plans. He noted that Lidu had focused
all its efforts on conventional marketing tools and channels, spending a lot of money on advertising,
maintaining dealer relations, and promoting sales. Lidu’s key selling messages—its historical heritage and
its unique flavours—were not adequately conveyed. As a result, it was difficult for the brand to stand out
in the minds of its potential customers.

Although the traditional Lidu distillery workshop had been excavated, the site had not yet been effectively
protected, nor had the modern company used the traditional workshop to produce or brand its liquor. In
addition, because the original liquor-producing formula had been lost, the modern Lidu had lost the “old
Lidu taste” once praised by consumers and was no longer attractive. Also, even though Lidu had 16 brands
at the time, Tang found that 76 per cent of Lidu’s sales were generated from its entry-level liquor brand,
which sold for ¥8 per bottle.

Tasked to revive Lidu, Tang decided to abandon traditional marketing, replacing it with in-person
experiential marketing as the key marketing pillar—a sharp departure from the company’s prior approach

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to industry standards. Core to the new marketing plan was a series of Internet communication campaigns
designed to reinforce the key marketing messages.

Tang also charged his new product development team with creating Lidu Sorghum 1955—a premium brand
with a distinctive flavour profile that resembled Lidu’s products in the 1950s. Lidu sorghum liquor referred
to all sorghum products brewed by Lidu, which had a brewing history of more than 200 years. Lidu
Sorghum 1955, however, was to be a new product, different from Lidu's other sorghum products in terms
of raw materials, technology, packaging, and pricing. Tang insisted that the grains used in the Lidu Sorghum
1955 brand were prepared for distilling in the company’s Yuan dynasty-era (thirteenth century) cellar. In
accordance with the established strategy of focusing on high-end products, once the product had established
its credibility as a premium brand, Tang set about promoting it directly to customers, relying on immersive
experiential marketing techniques.

Launched in 2015, Lidu Sorghum 1955 carried a premium price of ¥380 per bottle.9 To maintain the brand’s
premium positioning, Tang raised prices steadily, reaching ¥770 per bottle by May 2019,10 which ensured
that the brand remained the highest-priced brand of a type of Chinese liquor known as guangpingjiu. Sold
without packaging—the bottle was directly visible— guangpingjiu liquor was once synonymous with low-
end liquor. As Tang said, “We drew a lot of attention and praise for our bold efforts.”

Tang’s experience with traditional marketing and standard sales promotions led him to consider the need
for more effective marketing tools. In 2007, when he was in charge of sales for a liquor brand, he had
challenged the company’s 800-person sales team to boost their sales. Whereas other liquor brands were
employing a “buy 10, get one free” strategy, Tang went one step further with his “buy five, get one free”
tactic for end customers. He backed this promotion with ¥20 million in advertising. Tang’s brand recorded
¥10 million in losses in the first year of the business, largely due to the cost of promotions. By the fifth
year, total losses had grown to ¥100 million and Tang had learned his lesson, concluding that the ¥100
million spent was a “tuition fee.”

THE INTERNAL AND EXTERNAL ENVIRONMENT OF LIDU IN 2014

The Liquor Industry

Liquor was a popular and traditional beverage in China. In 1984, liquor production accounted for 45 per
cent of alcoholic drink production in the country by volume. 11 However, in 2001, after the market reforms
of the 1990s and the opening of China’s economy, the proportion of liquor production as a percentage of
the production of all alcoholic drinks had decreased by 14 per cent.12 Yet, on an aggregate basis, the liquor
market by value had grown from ¥50 billion in 2002 to ¥500 billion in 2011, with consumption driven by
government and the business consumer.13

Two important events in 2012 led to the end of this “golden era” decade in China’s liquor industry. First,
in an effort to rein in expenses, government officials were told by the China State Council to control their
spending on the “three public expenses”—namely, vehicles, entertainment, and overseas trips. Officials not
heeding these new rules would be removed from their posts.14 Second, the results of a government-initiated
quality test found unacceptably high traces of dibutyl phthalate (DBP), a plasticizer, in liquor samples.15
The test was conducted by Shanghai Tianxiang Quality Technology Service Limited Company, and 50
samples were tested. The highest detected value of DBP was 1.04 milligrams per kilogram, exceeding the
allowable standard by 2.6 times.16

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The two events led to a drop in liquor demand, especially for high-end brands. Two premium liquor
brands—Moutai and Wuliangye—initiated price cuts in an effort to prevent a plunge in sales. 17 While
manufacturers were eager to find ways to prove to consumers that they produced quality products, the
negative publicity had left consumers skeptical of such new claims. It was during this time that more
experiential marketing began taking place with taste tests at local distilleries.

The government-imposed limit on entertainment expenditures resulted in a reduction in liquor sales to

government officials. From 2012 to 2015, liquor sales to government as a percentage of total sales fell from
40 per cent to less than 5 per cent. However, the percentage of sales to business consumers rose from 42
per cent to 50 per cent, and the proportion of sales for personal use rose from 18 per cent to 45 per cent.18

Consumers

Following years of social progress and the rapid development of China’s economy, a young, wealthy, and
urbanized population began to turn their focus on their spiritual life and on defining what it meant to be
part of China’s “new middle class.” This new middle class had four characteristics: (1) they were young,
mainly of the post-1980s and 1990s generation; (2) they were well-educated; (3) they lived mostly in Tier
1 and Tier 2 cities in China, with annual incomes above ¥100,000; and (4) they sought a quality-oriented
lifestyle. In 2014, years of economic growth meant that there were over 200 million people in this new
middle class who paid attention to health trends and quality products.19

COMPETITIVE ANALYSIS

Competitors

National Brand-Name Competitors

In the Chinese liquor industry, brands such as Wuliangye, Jiannanchun, Luzhou Laojiao, Fenjiu, Xifengjiu,
and Dongjiu had long been regarded as national brand-name products.20 In contrast, Lidu was viewed as a
local brand in Jiangxi Province. As a result of their premium pricing and positioning, national brands
generated the majority of their sales in Tier 1 cities such as Beijing, Shanghai, and Guangzhou and in
provincial capitals. When sales started to decline as a result of the clampdown on expenses and the DBP
plasticizer scandal, these brands started to expand their sales efforts outside Tier 1 cities. These moves
brought the national brands in direct competition with local and regional brands.21

Site Liquor

Site Liquor was considered the premier liquor brand in Jiangxi Province (where Lidu was located). Site
Liquor was selected as Jiangxi Province’s flagship product, a designation conferred on the brand thought
to be most representative of the area. The brand enjoyed widespread popularity in the region. Similar to
Lidu, Site Liquor used rice as the main ingredient and was known for its unique flavour. In 2014, Site
Liquor had sales of ¥4.2 billion.22

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Jiangxiaobai Liquor

Many liquor companies shunned Internet marketing, believing liquor sales to be more readily influenced
by retail promotions. Jiangxiaobai, a new liquor brand, took a different approach by relying on Internet
promotions, and it built a strong brand in the process.23

Jiangxiaobai relied on a combination of visuals, consumer engagement through microblogs, releasing

videos, and publishing online comic strips. As its key online character, the company used a cartoon image
of a small, handsome man with a generic-looking face, wearing black lens-free glasses on the bridge of his
nose, an English-style black-and-white checkered scarf, and a casual suit. It was generally believed that
rapid social changes had resulted in youth not grasping the finer details of traditional “liquor culture.”
Jiangxiaobai seemed to turn that observation on its head, suggesting that traditional liquor culture did not
understand today’s youth. For example, Jiangxiaobai paid close attention to consumer taste preferences,
tweaking its product to taste more “smooth, light, [and] pure.”24

REVIEWING MARKET TRENDS

Wu believed that, in the future, connecting with consumers would require a more personal touch. Wu asked
Tang to pay attention to two issues: (1) understanding where the liquor industry was headed, as well as the
future development direction of liquor; and (2) creating marketing ideas with distinctive local brands.

According to Tang, brands would become more important in China’s liquor industry. For consumers,
especially the younger generation, “drink less and drink better” had become the norm for liquor
consumption. Younger consumers paid special attention to the historical and cultural history of the brand
and cared about brand “experience” and being engaged.

While Tang was researching Lidu’s market and consumers, a remark from one of his old friends in
Nanchang (the provincial capital of Jiangxi Province) stood out. Recalling Lidu’s heritage, the friend stated,
“Lidu is an old brand. It was the first liquor brand in Jiangxi Province. I only started drinking Site Liquor
when I found that Lidu’s distinctive flavour had disappeared.”25

Tang reasoned, also, that many Chinese continued to harbour a special fondness for the 1980s because they
viewed this period as a simpler time. According to Tang, “Nostalgia is a kind of emotion and resonance
from the bottom of your heart, and traditionally branded wine—with historical gravitas—will undoubtedly
resonate with consumers.”

The strategy of revising Lidu’s brand to be more in touch with its roots was echoed by Wu, who listened in
on the strategic meetings. By returning Lidu to its roots, Tang hoped that the company could close the gap
between its brand and its consumers’ preferences. “I think there is a gap between companies and their
consumers,” said Tang. “In an era where advertising is not likely to be easily believed, we are aiming to
position Lidu as a brand that remembers its traditional positioning. This is reinforced by the redesign to
feature an older-style bottle, older-style trademarks and lids, and a more traditional taste.”

Combining the traditional with an embrace of experiential marketing and online promotion was the key to
success for Tang:

We are in the Internet age. We will invite customers to Lidu to participate in our immersive
experience. When they visit our Yuan dynasty liquor production site, they will understand the heritage

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we have and the care with which we produce liquor. When these customers post their own videos and
photos of our site and our products, what they post is genuine and it is credible. It builds our brand.

REVIVING LIDU

After systematic market research, Tang decided that Lidu, with its relatively small size and annual output
value of about ¥40 million,26 would best compete based on a differentiation strategy:

What we have to make clear is that there is no easy thing to do in the liquor market in the future.
The days of relying on advertising promotions and pushing retailers to stock up on product are
over. If you do not choose the most difficult road, you will not succeed.

Lidu’s differentiation strategy would consist of the following: (1) a differentiated philosophy (“small but
beautiful”); (2) differentiated products reflecting Lidu’s unique cultural connotations; (3) differentiated
marketing methods, including an immersive experiential marketing model; and (4) differentiated
information dissemination, with reliance on the Internet.

Reproducing the Original Lidu Liquor Flavour

After taking office in March 2014, Tang decided to launch a new range of products. To this end, he spent
¥2 million on purchasing a batch of the old Lidu for the research and development team. They reviewed
old recipes and rediscovered traditional brewing methods. In July 2015, the Lidu Sorghum 1955 was
successfully “cloned,” resuscitating the original Lidu flavour.

The market positioning of Lidu Sorghum1955 was that of a high-quality and high-value liquor, but without
any fancy outer packaging. Tang described the flavour as “tasting four flavours in one sip.” What Tang
meant by this was that customers could smell the aroma of the liquor when they picked up the cup and taste
the flavour of the rice as the liquor touched their lips. The beverage left a delicate flavour in the mouth,
with a Moutai aftertaste.

Renovating the Site of the Lidu Distillery Workshop

In June 2002, when Lidu expanded a production workshop in the old factory area, workers accidentally dug
out ancient liquor-making cellars. Later, after further excavation and reorganization by professionals, a
complete liquor-making site was uncovered, including ceramic pots, liquor cellars, and wells that dated
back to the Yuan dynasty, as well as stoves, drying halls, distillation facilities, gutters, and wall foundations
from the Ming dynasty. The Lidu distillery workshop site was named one of the top 10 archaeological
discoveries in 2002. Yet despite the provenance and the marketing opportunity it presented, before Tang’s
arrival, the Lidu distillery workshop had sat dormant.

Tang petitioned VATS Group to release ¥7.8 million to develop and protect the archaeological finds. He
also secured ¥8.96 million in funds from a national cultural protection foundation to renovate the site. The
funds went to refurbishing the ancient site and preparing it for visitors. After refurbishment, a set of
reproduced equipment for the three-step production of liquor brewing—cooking raw materials,
fermentation, and distillation—was presented to the world. At the same time, Lidu also obtained
government permission to use the actual ancient cellars from the Yuan dynasty to continue making liquor.

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Personalizing Liquor for Customers

Many consumers wanted a liquor that was tailored to their tastes. To meet customers’ special needs, Lidu
began to provide private customized services for its products in December 2014. The company provided
“pure customization,” which meant that aside from including the words “Jiangxi Lidu Distillery” on its
bottles as a mark of the liquor’s quality, everything else could be customized according to customers’
whims. For example, customers could alter the appearance of the bottle as well as the taste profile of the
liquor. It took less than two weeks to deliver a customized order.

At Lidu, personal customization became an important part of experiential marketing. After experiencing Lidu’s
unique liquor culture, many customers were happy to immediately place an order for customized Lidu liquor.

Launching the “Sealing of the Altar” Event

An altar was a storage vessel or jar with a large bottle mouth and a small belly, made of a material that did
not easily deteriorate. It was mostly used to hold liquids such as wine, vinegar, or soy sauce. The act of
“sealing the altar” referred to putting a fixed amount of the newly brewed liquor (20 or 50 kilograms) in
the ceramic altar and storing it in the cellar or in mud. The plan was to use the sealed liquor in important
ceremonies in the future, such as children entering university or getting married, the use of the sealed liquor
implying good blessings and expectations.

The sealing of the altar was an important custom that had been passed down for thousands of years. In
ancient times, altar-sealing festivals were held every year in winter. However, as the pace of life continued
to accelerate, the traditional culture of altar sealing had gradually been forgotten.

On August 24, 2014, Lidu opened the ancient Lidu Yuan dynasty cellar and held a private altar-sealing
press conference in Lidu Town, officially launching the business of sealing the altar of its pure pulp liquor—
freshly brewed, original liquor from fermentation with rice koji, and not yet mixed with other liquors or
added flavours.

Lidu sealed altar liquor was priced according to grade, ranging from ¥20,000 to ¥80,000 per 100 kilograms,
with sales starting at 25 kilograms. Collectors subscribed to the liquor, which was stored in Lidu’s century-
old liquor store for free for three years. After three years, a 3 per cent annual storage fee was charged. If
the collector sold the liquor for personal reasons, Lidu had the first right to purchase the liquor being sold.

Creating Online Buzz

After Lidu abandoned traditional media advertising, social media became the company’s main channel for
product information. As Tang said, “Now everyone uses WeChat, everyone is their own media. Through
the spontaneous communication of WeChat friends, Lidu Liquor fans who have had a good immersive
experience will bring many people to the experience.”

To this end, Lidu needed to constantly create relevant topics to attract the attention of fans and consumer
groups. First, Lidu opened an official new media platform. In 2015, the Lidu WeChat official account began
to publish daily original news content supported by the company’s interactions with consumers. In 2016
and 2017, WeChat frequency and event-planning activities increased by almost 50 per cent.27

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Subsequently, Lidu organized a series of promotional activities to strengthen liquor lovers’ interaction,
expand other participants’ knowledge of liquor, and strengthen the influence of the immersive experience.
On February 27, 2017, Lidu held a 10,000-person self-mixing liquor experience event and planned to apply
for the Guinness World Record for this event. It also held the Lidu Golden Sorghum Photo Contest in April.
On June 3rd, the 16th China Liquor Industry Forum Community Exchange Summit and Awards Gala was
held at the Lidu distillery. Then, to further gather target customers, Lidu held the first Lidu Fan Festival in
Nanchang, Jiangxi, and established the Lidu Super Fans Club on February 2 of the following year.

To promote experience activities on the Internet effectively, Tang had more than 10,000 WeChat friends,
each salesperson had a minimum of 4,000 friends, and each Lidu production worker had a minimum of
2,000 friends. At Lidu’s request, every Lidu employee was required to send a message about the company
or its product to their circle of friends each day.28

Lidu’s immersive experiences achieved remarkable results, attracting liquor industry experts, government
leaders, and professional media to the distillery to experience and report on Lidu’s products. On April 23 and
24, 2018, the group leaders of the company’s seven major network communities 29 —including New
Marketing, New Retail, New Distribution, New Beer, the Chinese Wine Industry Forum, the Fan Research
Institute, and the Xuzhou New Youth Planning Club—organized a 100-person tour of the Lidu distillery and
the covered communities. In September 2018, the party and government leaders of Renhuai City, China’s
liquor capital and where the famous Moutai liquor originated, investigated Lidu’s “immersive experience.” A
documentary about Lidu liquor was broadcast by China Central Television on April 11, 2019.

LIDU’S IMMERSIVE EXPERIENCES

Tang commented on Lidu’s immersive experiences:

I simply explain it through examples. For example, when you play cards or play computer games, you
might not even want to pick up the phone if it rings. You are very reluctant to let others bother you: you
are completely immersed. When we designed the immersive experience of Lidu Liquor, we also
considered this. We wanted to make consumers feel that even if they were in Lidu for just an hour or
two, they probably did not want to answer the phone or be disturbed. They wanted to be completely
immersed. So the immersive experience is meant to help attract consumers to the company.

The "Seven One" Model

To attract customers, Lidu designed and gradually improved on its “Seven One” model, which featured
products and events that revolved around the making and tasting of liquor.

Liquors were made with grains such as rice, sorghum, and wheat left dregs, known as lees. One product
was a popsicle made from the sake lees—a product created by the original Lidu distillery. The company
made this natural, old-fashioned popsicle from sake lees and goji berries, strictly following traditional
techniques. The popsicles could be experienced at all locations, no matter the season. Lidu’s popsicles were
sweet and pleasant, with a flavour similar to Lidu’s liquor.

The lees were also used to prepare eggs. Lidu made these eggs by covering them in hot lees and steaming
the eggs for a few minutes during Lidu liquor production. Every participant could experience an egg at the
Lidu distillery.

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One of the events of the experience model involved a liquor ceremony. Through vivid performances, the
etiquette and customs of ancient liquor and the basic process of appreciating liquor were reproduced,
showcasing China’s 1,000-year-old liquor banquet culture.

Another event involved making custom-made liquor. Participants watched a bartender engage in an old
custom of mixing liquors in a custom recipe: 300 millilitres (ml) of 35.5-proof liquor, 200 ml of 60.2-proof
liquor, 1 ml of 45.5-proof seasoning liquor, and one drop of 45.2-proof seasoning wine were combined to
compose 500 ml of 45-proof custom-made liquor. With staff guidance, participants at the event prepared
their own liquor, which was then packaged in a company bottle with a custom-made liquor label and made
available for participants to purchase.

In a competition known as the Liquor King, staff would pour participants a glass each of six different
drinks—mild flavour, rice flavour, strong flavour, special flavour, Moutai, and Lidu Sorghum 1955. An
expert advised the participants how to distinguish between the characteristics of each liquor using smell
and taste. The order of the glasses of liquor was then shuffled and the participants attempted to identify the
different drinks in a blind test. Whoever received the highest score was crowned the “Liquor King.” In
addition, as an experience event, the competition was layered with levels, with every small game aimed at
choosing the “King of the Month” and, eventually, the “King of the Year.”

Lidu also held Chinese liquor tasting classes. Participants took a training course on the taste, comparison,
and judgment of liquor. A brief explanation of the history of Chinese liquor was given, various tasting
techniques and methods were taught, and participants were introduced to the characteristics of 12 types of
liquor flavours.

The seventh item was a liquor banquet in which participants were served a menu of dishes that were inspired
by and cooked with Lidu liquor as an ingredient.

With continuous iteration, Lidu’s experience model expanded to include more than seven customer
experiences; however, the concept of Seven One was retained. For example, Lidu chose to incorporate the
history of Chinese liquor culture into the experience content. Participants watched a special film about the
excavation of the ancient liquor site, listened to a presentation on the liquor-making process at Lidu,
watched a demonstration of the traditional artisanship of spirits, and visited the science hall and the ancient
cellar with its 100-year-old liquor storehouse. Through cultural immersion, participants gained an overall
understanding of the history of Chinese liquor culture.

The Three-Level Experience Structure

The immersive experience that built on the Lidu distillery workshop from the Yuan dynasty period was
also called the “distillery experience” or the “total rudder” experience. Participants could experience all of
the immersive experience activities offered, including visiting the cellars from the Yuan, Ming, and Qing
dynasties, as well as attending brewing workshops. For participants, these were the most direct and
complete content experiences, limited only by the size of the plant and the geographical distance.

Immersive experiences in selected cities were called the “liquor house” or the “sub-rudder” experiences.
To expand its influence and reach more participants, Lidu chose to establish a Lidu liquor house in some
city locations away from the Lidu distillery. With the exception of visiting the Lidu distillery workshop
from the Yuan dynasty period, liquor house participants could experience most of the immersive experience
activities, including popsicles and peanuts made from lees and goji berries, a liquor banquet, the Liquor

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King competition, and making a bottle of custom-made liquor. Thus far, Lidu had opened liquor houses in
Beijing, Shanghai, Guangzhou, Hangzhou, and Xi’an.

Immersive experiences in villages and towns were known as the “sorghum co-operative” or “small rudder”
experiences. Lidu chose alcoholic drink and tobacco stores with a business area of at least 50 square metres
as partners for establishing consumer experiences, including a Lidu distiller’s popsicle refrigerator and a
Liquor King competition platform. Customers at these venues could experience only limited immersive
experience activities, including tasting popsicles and peanuts made using lees and participating in a simple
Liquor King competition. In fact, this experience was based on sales channels, and its main purpose was to
attract more new customers and promote the brand.

Lidu’s revenues rapidly rose over three years, from ¥80 million in 2016 to ¥120 million in 2017, with
revenues for 2018 estimated at nearly ¥300 million.

The company officially launched Lidu Sorghum1955 in 2016 at the price of ¥380 per bottle. By May 2019,
after 10 consecutive price increases, its unit price reached ¥770 per bottle. It had become the highest-priced
guangpingjiu in the Chinese liquor market.

In 2018, more than 50,000 people participated in the immersive experiences offered at the Lidu liquor
distillery, and their direct purchases reached 25 per cent of Lidu’s total sales volume in the same year. That
same year, more than 40 Lidu liquor houses welcomed more than 40,000 people. The resultant high-end
group purchases of a single bottle at ¥200 or more accounted for 75 per cent of Lidu’s total sales.

THE FUTURE OF LIDU'S IMMERSIVE EXPERIENTIAL MARKETING

According to Tang, from 2014 to 2019, “Lidu had been doing one thing: the creation of product value
through the immersive experience.” Lidu’s immersive experiential marketing model was maturing. It
started with the refurbishment and promotion of ancient liquor sites and had moved to the creation of
enriched customer experiences. In addition, Lidu had established retail outlets online to reach more
consumers, such as selling Lidu’s products on Lidu small program mall and JD.com to expand the impact
of experience activities.

By mid-2019, Tang realized that Lidu’s unique marketing methods had become well-known in the market
and were being copied. While Lidu had a first-mover advantage, Tang knew that the company could not be
complacent. Competition was becoming more intensive, with well-known national brands and online
brands entering Lidu’s local and regional markets. Tang wondered how Lidu could continue to achieve
breakthroughs in building the unique and immersive experience marketing it had created.

With the increasing maturity of new retail practices, Tang also noticed that emerging online marketing
models such as Internet advertising marketing, community marketing, and live broadcast marketing played
an increasingly important role in the development of enterprises. Tang wondered whether the company
should explore an online immersive marketing model.

The case authors wish to thank Jiangxi University of Finance and Economics, the School of Business
administration, and Dean Professor Haibo Hu for their support in developing this case.

This document is authorized for use only by UTOMO SARJONO PUTRO in 2022.
 For the exclusive use of U. PUTRO, 2022.

Page 11 W24771

ENDNOTES
1
Zhu Qian, “2018 Liquor Market Trends in China” [in Chinese], Qianzhan, accessed March 15, 2021,
https://www.qianzhan.com/analyst/detail/220/180628-55752c42.html.
2
“Net Profit of Listed Companies in the Liquor Industry in 2018” [in Chinese], ASKCI Consulting Co. Ltd., accessed March 15, 2021,
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3
¥ = CNY = Chinese yuan renminbi; US$1 = ¥6.8679 on January 1, 2019.
4
Yunjiutoutiao, “How Jiangxiaobai Made Young People Fall in Love with Liquor” [in Chinese], Sohu, accessed March 15, 2021,
https://www.sohu.com/a/307463607_250147.
5
Traditional Chinese liquor enterprises had a long history of liquor production and had been rated as a national or provincial time-honoured
enterprise. Traditional Chinese liquor needed to be made from grains, including sorghum, wheat, and rice. Production was characterized
by the simultaneous use of solid-state fermentation, natural openness, multi-microbial co-fermentation, saccharification, and fermentation.
The final product was a distilled spirit; however, unlike other distilled liquors in the world, Chinese liquor was distilled using zeng guo—a
cylinder with a slightly larger upper mouth. Distilled traditional Chinese liquor was stored in pottery jars instead of oak barrels.
6
Fan Changsheng and Yang Jun, “Excavation of the Site of Lidu Liquor Workshop in Jinxian County, Jiangxi Province” [in Chinese],
Archaeology, no. 7 (2003): 618–625, 683–684.
7
Lidu Town Chronicles’ Competition Committee, “Niang Jiu,” chap. 2 in Lidu Town Chronicles [in Chinese] (Nanchang: Lidu Town People's
Government, 2010), 206.
8
Yang Jun and Liu Shuhua, “Lidu Wuxingtang Liquor Workshop Site: Exploring the Mystery of the Origin of Chinese Liquor” [in Chinese],
Cultural Relics in Southern China, no. 4 (2003): 1–8; and Zhang Min and Li Meijuan, “The Oldest Large-Scale Liquor Workshop Site in
My Country Was Unearthed in Jiangxi” [in Chinese], Xinhuanet, November 21, 2002, http://tech.sina.com.cn/roll/2002-11-
21/2154151379.shtml.
9
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https://mp.weixin.qq.com/s/oiJ1NVE1elRFOjIIbTI28g.
10
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https://mp.weixin.qq.com/s/N7TGTVIKN6VSV7Er_-ur4Q.
11
Yuan Guoren, “Analysis of China's Liquor Industry Structure and Development Prospects” [in Chinese], Liquor-Making Science &
Technology, no.3 (2008): 113–117, 122.
12
Fu Nanping, “Liquor Industry: From Free Competition to Oligopoly” [in Chinese], Sohu, September 28, 2002,
https://business.sohu.com/20/84/article203428420.shtml.
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14
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03/26/content_2100539.htm.
15
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Xinhuanet, December 1, 2012, http://v.china.com.cn/news/2012-03/27/content_24992499.htm.
17
“New Standards for Liquor Plasticizers Will Be Introduced, and Content Indicators Will Be Relaxed” [in Chinese], Caixin, April 9, 2013,
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18
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19
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Winshang, August 10, 2017, http://news.winshang.com/html/062/2617.html.
20
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(2019)” [in Chinese], Chinese Food, May 10, 2019, www.cnfood.cn/toutiao138170.html.
21
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22
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23
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24
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25
Ouyang Taohua et al., Li Du Winery: Can Experience Value Awaken the Thousand-Year-Old Ancient Cellar? [in Chinese] (China
Management Case-Sharing Centre and Dalian University of Technology, August 4, 2015), product no. STR-0390, https://www.cmcc-
dut.cn/Cases/Detail/1961.
26
Sales data collated by the authors from company documents. At the same time, sales of Chinese listed liquor companies in 2014 were
as follows (in ¥ millions): Moutai, 31,573; Wuliangye, 21,011; Yanghe, 14,672; Beijing Shunxin Nongye Ltd., 9,480; Luzhou Laojiao, 5,353;
Gujinggong, 4,651; Fenjiu, 3,916; and Jinshiyuan, 2,400. Data collected from Jianiang Net, “Sales of 16 Listed Liquor Companies in 2014”
[in Chinese], Sohu, May 6, 2015, https://www.sohu.com/a/13928880_180467.
27
WeChat frequency represented the activity of Lidu's WeChat channels (WeChat official account and WeChat group), which was
measured by the number of people participating in WeChat group and WeChat official account activities and the number of WeChat official
account articles that were read.
28
Liu Shensong, “How Can Regional Wine Companies Win the Sub-High-End ‘Survival Battle’? These 6 Points Must Be Remembered”
[in Chinese], China Kuaixiao Forum, April 26, 2019, https://wzbj.beizongren.cn/thread-179059-1-1.html.
29
Network communities consisted of members who had common hobbies and needs and were connected to each other through various
network applications, such as WeChat group. Each community was autonomous.

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