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Distilling the recent success of a 290-year-old cognac brand: An interview with Rémy Martin CEO Patrick Piana

Posted by on Nov 27, 2013

20131121PatrickPiana0549.jpgPatrick Piana became CEO of iconic cognac brand Rémy Martin at Rémy Cointreau Société, when the company was at its lowest point since the bursting of the tech bubble seven years earlier. The global economy was in a tailspin, consumer confidence was at an all-time low and the purchase of high-end spirits was a luxury many chose to do without. Since then, the Rémy Martin brand has diversified geographically, capturing significant market share in Asia, the U.S. and Canada, and has more than doubled its  revenue. Mr. Piana recently spoke with FP’s Dan Ovsey about its strategy during the downturn, it, its approach to U.S. marketing, the impact of recent anti-corruption measures in China and how the 290-year-old brand approaches innovation. Following is an edited transcript of their conversation.

Q: Right now, Asia represents about 50% of your market, North America represents 30% and Europe only 20%. To what extent did the global economic downturn affect this composition?

A: If I take the U.S. or I take Canada, we clearly decided that we would be investing in the downturn, and thank God we did that, because when I look at our performance in North America, in Canada we’re growing right now at 5%. In the U.S. we’ve been growing high single digits or low double digits over the last few years, which shows if you make the right decision in the downturn on a strong brand, you can do that.

“It’s about thinking about what is going to be the next wave of growth — whether it’s going to be in 10, 15 or 20 years”

Then we looked at other parts of the world. China has been a fantastic growth market for us, as well as southeast Asia, as well as some markets that used to be growth markets and then suffered in the downturn and are now coming back. These markets helped us go through the downturn. In fiscal year 2008/2009 our revenues had declined to €311-million revenue, we finished last year’s fiscal at €719-million, so we more than doubled our revenue in four years.

We opened up markets like South Africa. We started to be more efficient in Russia. We seeded some new plans for Louis XIII and our XO in India. It’s about thinking about what is going to be the next wave of growth — whether it’s going to be in 10, 15 or 20 years.

Q: Now that you’ve achieved the traction you want in the U.S., how do you intend to maintain the momentum over the long term?

A: I think what we’ll continue to do is try and be the premium offering of the market. We will have to raise our prices. We will have to continue to introduce new variances that will continue to upgrade our mix — so it’s value in terms of pricing and it’s value in terms of mix. Also, we need to continue to recruit new consumers to our brand.

The opportunities are there, but we believe those opportunities are built through driving our roots and history, driving our product superiority, telling our story, but also adding thrill through celebrity partnerships, and we do a lot of PR to compete. But it’s not about doubling investment. It’s about being consistent about what we do.

Q: You’re an old European brand that has seen tremendous market diversification. Do you feel that will affect how your brand evolves?

A: I think what we have to keep in mind is that if I take western Europe, this is a market of 500 million people out of 7 billion people. So, it is absolutely normal that the weight of Europe continues to decline compared to the rest of the world. I’m expecting Africa to take a greater share of our business in the future. There are 1 billion people in Africa, there are going to be 2 billion with increased purchasing power. I believe they will join the group of Remy consumers more and more in the future. This is not an issue.

Q: There have been some recent anti-corruption measures implemented in China with regard to the giving of high-end spirits as gifts to government officials. That has adversely affected both you and your competitors. How are you adapting your business model in that market to these changes?

A: I think one of the key elements to keep in mind is that in China, and in many Asian countries, gift giving is part of the culture. In China, you invite someone to dinner, the person will come with a gift. The gift could be spirits or any other type of gift that is of value. The more important you are, the more thanks I want to give to you, the greater the gift is going to be. It has nothing to do with getting favours from you. It’s a mark of respect.

What the government is doing right now is absolutely understandable based on their economic drivers. The impact on gift giving is a reality and we’ll have to live with it. But I think the major effort we have to continue with is really attracting new and younger consumers entering into the world of spirits. That part of the business continues to be moving in a very good direction, which gives me a lot of confidence in the long term because this is fundamental to our business.

Q: There are a number of luxury brands that have chosen to diversify their product offering to target more of a mass market, middle-class demographic, particularly in emerging economies. You seem to be going in the other direction — raising your prices and making your products even more premium. Why is that?

A: What is important to us is that Remy Martin will always be Remy Martin, meaning we are a beautiful cognac house. We focus on the best fins champagne (a blend of Petite Champagne and Grande Champagne. That is in our DNA. But by nature, we know there is a limitation to how much we can produce. We know that some of our products are already on allocation (like Louis XIII because we know that it takes 100 years to get Louis XIII ready). So, if you think of volume and accessibility, we will not be the player who says tomorrow I shift my business. We will remain in the spirits world a niche player, but an extremely strong value generator in that place. We will stick to superior quality and stick to innovation on the high-end part of the business.

louis-xiii

Q: You have mentioned that innovating is a core part of your business, but your product is rooted in very old traditions. Where does the value of innovation lie for you?

A: It’s twofold. We have fantastic product reserves — from four years old to 100 years old. We have cellar masters who are like painters, and for them it’s like having a palette of colours they can use to mix and play. Based on what we want to do, we can basically ask them to create products out of these fantastic reserves we have from generations — specific products. For example, right now in Canada we have our VSOP and we have XO and we have Louis XIII. If one is $3,000, another is $260. There’s huge room. Our reserves enable us to place products in between. So, innovation is the creation of the epitome of fins champagne and cognac. It’s a blend of 300, 400 eau-de-vies, up to 50 years old (fins champagne, not grande champagne). Why do you do that? Because you can generate value, because it is a giftable and a great product to taste. So, it’s not about making things cheaper or reinventing things, it’s about going into our treasures and saying “how can we combine this great treasure with great packaging and design, create a new offering to consumers?”

Q: Your product takes a long time to develop. How do you ensure your production volume will fit with market-demand years from now?

A: If you make short-term decisions based on outside events, you can damage your long-term possibilities. So, it’s very important to read signs and to always take long-term perspectives. It doesn’t mean you don’t do anything to hit your numbers, but you can’t make short-term decisions at the expense of the long-term strategy, otherwise it’s very difficult to come back. And we’ve seen brands that have made that mistake and it’s taken them a long time to come back.

 

viaFinancial Post

 

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