SHENZHEN -- Pernod Ricard, the world’s second largest distiller after Diageo, is on a mission to reshape China’s drinking culture, investing heavily in marketing campaigns, including a partnership with Tencent Holdings, to draw millennials to its premium spirits.
While China’s alcohol market is still dominated by beer and the traditional Chinese spirit baijiu, the sales of imported spirits have grown quickly in the past year, with the younger generation open to western tastes.
Driven by the strong growth of its premium Chivas Regal whiskey and Martell cognac, the French retailer's sales in China, its second largest market after the U.S., rose 19% in the nine months ended in March. That figure compares with a 6% growth for the entire group and and 11% for Asia in the same period.
“We spend all our [customer] recruitment money in terms of market activities on the younger generation,” Alexandre Ricard, chairman and chief executive officer, told the Nikkei Asian Review in an interview in Shenzhen. The company aims to double its market share in China by 2025. Imported brands only account for 1% of China’s spirits market, of which Pernod Ricard controls 44%.
"China is more of an opportunity for us. We lost one-third of our business in China over the past five year, and now we are back to growth," he said. China accounts for about a third of Pernod Ricard's sales in Asia during the nine months ended in March.
Sales of many high-end liquor and wine brands slumped in China after President Xi Jinping launched his far-reaching anti-corruption campaign in 2013 that clamped down on extravagant gifts in the form of meals and luxury goods.
Ricard attributes the recent rebound to the rise of an affluent middle class in China, and lifestyle changes of the younger generation. The Paris-based company has teamed up with Tencent to collaborate beyond traditional advertising, such as content creation, the sponsorship of video and music programs, as well as customer analytics.
Through Tencent’s network that reaches 98% of China’s internet users, Pernod Ricard wants to penetrate the drinks market and start new consumption trends.
During a live stream of a concert featuring Chinese pop singer Hua Chenyu last year, who has 18 million followers on Weibo, China's equivalent of Twitter, thousands of bottles of Ballantine's Finest, an entry-level whiskey brand, were sold within two hours, said Jean-Etienne Gourgues, CEO at Pernod Ricard China. This was in large part thanks to promotions during the live stream.
The company has to circumvent strict advertising rules in China where alcohol advertisements are not allowed on Tencent’s gaming platforms. But Pernod Ricard was able to sponsor the U.S. National Basketball Association games on Tencent’s mobile platforms.
The vast amount of personal data collected by Tencent can also give the spirit-maker a better idea of what moves their potential customers. For example, a white paper jointly launched by Pernod Ricard and Tencent, found that BEYOND, a Hong Kong rock band was most listened-to by single malt scotch lovers, and pianist Richard Clayderman is preferred by wine collectors.
While many see imported spirit brands directly competing with local baijiu makers, Liya Zhang, Pernod China brand director said most new customers were beer drinkers. The fast adoption of western spirits among Chinese consumers has to do with rise of premium bars and night clubs, according to Gourgues.
"Night clubs and bars enjoyed very strong growth," he said. "There use to be an ocean of cheap beers in Chinese bars, but it is changing." Gourgues added that the company also plans to expand into more second-tier cities such as Qingdao, partly to reduce business risks. Currently its markets are still limited to tier-one cities as well as Guangdong and Fuijian provinces.
"The best way to reduce risks in China is to diversify," he said.