At a recent meeting during the TFWA World Exhibition in
Cannes, where the French liquor giant celebrated another successful year in the
travel retail channel, Constandis outlined the company’s strategy for the
dynamic Chinese market – one that is playing an increasingly critical role for
brand companies of all types.
Here’s our interview:
I began by asking about Pernod Ricard’s overall brand
strategy in the Asian travel retail market, where the company already has a
major presence with its leading brands Chivas Regal and Royal Salute Scotch
whiskies, Absolut vodka and Martell Cognac.
Constandis cites value creation and premiumisation as key
areas of focus, revealing that some 75% of the company’s returns come from the
over-$100-a-bottle segment, namely in the Scotch and Cognac categories. Pernod
Ricard has captured a 40-50% share in value terms of the spirits category in
the over-$100 segment.
The second “emerging” segment, he continued, is young
people, notably the growing number of young millionaires, and also women. Female consumers were also identified as a growth area for Pernod Ricard
overall by the company’s chief-in-waiting Alexandre Ricard, grandson of one of
the founders, at a dinner in Cannes for journalists which I attended.
For this younger market, Pernod Ricard is targeting its
entry-level products such as vodka and wine.
The Chinese travel market
The Chinese travel market in particular is of great
importance to the firm, said Constandis, excitedly quoting World Tourism
Organization figures for 2012, when China's expenditure on travel abroad
reached $102bn, making it the top tourism source market in the world in terms
of spending. “Just look at the traveller statistics: there are 1bn
international travellers, growing to 1.6bn in five years, and 2bn by 2020, with
$100bn in total expenditure.
“65% of Chinese expenditure goes on shopping when they
travel. Their average basket size is bigger and is outpacing the Americans and
Germans.”
Constandis also said the Chinese travel statistics would
only grow as visa regulations loosen around the world, which will boost the US
as a destination for this nationality.
Constandis believes a “huge opportunity” awaits and “we’re
currently only at the halfway mark” in terms of future Chinese travel numbers,
compared with a mature region like Europe. But he also cited the Japanese,
Koreans and southeast Asians as significant customer nationalities in airport
and downtown duty-free shops.
Chinese shopping behaviour
To appeal to the Chinese market in particular, Pernod Ricard
employs marketing tactics designed around their particular shopping behaviours,
using “simple messages”, often visually led with few words. Constandis said
using too many English words in communications can confuse Chinese shoppers and
engender scepticism. These simple messages are used in duty-free locations
popular with the Chinese such as Hawaii, Singapore, Bangkok and Taiwan. A lot
of marketing is done by the group downtown, too.
To glean insight into this nationality’s shopping patterns,
Pernod Ricard has people “planted in stores in airports in Asia, watching and
interviewing and observing cultural cues”. The firm also undertakes
segmentation studies.
In a nutshell, the Chinese are interested in “luxury,
premium items, Cognacs and heritage, and they know how they want to be served
in the store”, noted Constandis. “The Chinese seek value and comparative
prices. They are looking for value for money and will trade up, so we make sure
the product packaging evokes authenticity, heritage, and has a real story and
substance. But the packaging can’t replace quality. You can’t fool them.” He
added: “Red and yellow alone [used on packaging] won’t work.”
In terms of tastes and flavours, the Chinese seek products
that work well with food for a meal occasion, such as Martell Cognac. There is
also a growing interest in mixability, he said.
Turning to the thorny subject of promotions, Constandis
suddenly became quite animated. “The Chinese have a cultural cue around instant
gratification – they want to get something in return. They love the free bags
[offered as gwps]. But you can put it on the record that I hate these free
gifts, because it goes away from branding!”
Constandis added that gwps have to be “relevant, familiar
and reliable” and observed that discounts do work but are not mandatory.
Chinese government clampdown on banqueting
Constandis said the Chinese government clampdown on official
banqueting, implemented at the end of last year, had had an “immediate impact”
on consumer behaviour on the Chinese mainland but in travel retail, shopper
behaviour had not changed because the Chinese travellers’ purchasing
motivations were different. Some 50% of purchasing in travel retail is done for
gifts for family and friends and the other 50% for others and for
self-purchase, he said.
However, he noted that there had been a drop-off in sales of
ultra-prestige $500-plus spirits in travel retail, but declined to reveal the
percentage reduction.
Absolut brand store – a first in travel retail
In an initiative that Constandis terms “bold” and
“engaging”, the Absolut vodka brand recently began trading in its own section
of a premium lifestyle zone at Kuala Lumpur International Airport. It is the
only spirits brands present among an array of familiar fashion names such as
Chloe, DKNY and Hugo Boss.
The 400sq m Eraman-operated shop – a first in travel retail
- features a bar manned by a bartender offering different vodka flavours for
sampling. Digital plays a key role in-store, with a plasma screen showing 3D
bottle images. Mindful of its airport location, the company has installed an
arrivals/departures board that looks like a usual airport one but does not show
flights - it flashes up the time, place and date or when a person tries one of
the new Absolut cocktails and registers it on social media.
Constandis commented: "In certain cities/airports across the
world, digital is used to capture people’s preference on an array of cocktails,
and the selections flash up sequentially and stay lit up, like a real arrivals
board. Thus in Kuala Lumpur, you see names flash up from Istanbul and so on, so
the interaction begins!"
Constandis describes the monobrand shop as “50% brand marketing
and 50% ROI”. “This store puts our image at the forefront. People have two
hours to shop at the airport and it’s been a huge success so far – a bold
move.”
Pernod Ricard and Eraman are learning from the Absolut store
experience at KLIA, which has the fastest-growing passenger traffic in Asia,
running at +15 to +16% a year, according to Constandis.
At the same time as the shop opening, Absolut rolled out a
new, destination-specific flavour called Hibiskus, targeted at shoppers seeking
Malaysian souvenirs. “This is an important cornerstone in our marketing, giving
it more power. We’re looking to do more.”
Constandis also gave the Jameson City Editions Series as
another example of a “value-added” destination-themed innovation.
Importance of travel retail
Travel retail is the third-biggest engine in the Pernod
Ricard machine, with the US and China taking the number one and two spots,
respectively.
Building on the success of Chivas Regal, the most popular
Scotch in travel retail, Pernod Ricard introduced the channel-exclusive Chivas
Brothers Blend in 50 airports across the world from October 2012. Some 1m
litres have been sold in total – “and it didn’t cannibalise our classic
products”, according to Constandis, despite its price premium.
The coming year will see Pernod Ricard focus on “how we
redefine ourselves”, Constandis said. “We’re great with brands; we want to
strengthen our retail operations; we want to strengthen our marketing; we will
continue to gain consumer insights; and customer management will be key.
“We’re constantly redefining ourselves so Pernod Ricard
Travel Retail can stay the leader.”
Personal highlights
Finally, turning to his personal highlights since joining
the Asian travel retail team only a few months ago, Constandis said: “Firstly,
I’ve been impressed by my inspiring team. We’re challenging the old rules. I
feel a bit old. And secondly, I’ve enjoyed working with our customers and
seeing world-class retailers challenging the rules.”
I can also reveal that Constandis - a Canadian national of
Greek descent - has a passion for golf, travel and learning about different
cultures. Which is all good for a top Hong Kong-based executive, I think.
