Large or Small, Innovation Driving Liquor Growth
Steve Jobs once famously said “It’s not the consumers’ job to know what they want.”
French beverage company Pernod Ricard is applying a similar philosophy to its spirits business.
“The consumer is curious, but at the same time, they will not imagine (by) themselves what they want. It is our duty as a producer to propose innovation,” Pernod Ricard CEO Pierre Pringuet recently told CNBC.
Tapping into that innovation is paying off, with Pernod Ricard net profit rising 9 percent last year to $1.17 billion and the company posting its strongest growth in four years.
An example of Pernod Ricard innovation was on display recently during New York Fashion Week as the company unveiled Absolut Tune, a combination of Absolut Vodka and Brancott Estate sparkling wine, both Pernod Ricard properties. (Read More:Scenes from Fashion Week)
Targeted at female consumers, Absolute Tune is the result of Pernod Ricard’s recently formed Breakthrough Innovation Group, which likens itself to a “Silicon Valley start-up” in that idea generation is paramount.
The attitude has led to Pernod Ricard being named the “Second Most Innovative Company in Europe” by Forbes magazine.
In addition to innovation, emerging markets are now a key driver of the company’s growth, with China now its No. 2 market behind the U.S.
“The consumer [there] is drinking spirits as part of the social status. We see it in Asia, we see in in Latin America,” said Pringuet. “For the emerging markets, strangely enough, there is more focus on super premium and ultra-premium than the mature markets.”
As a result, Pernod Ricard is increasing the focus on its premium brands, which now account for 73 percent of its sales. So despite tough economic global conditions, Pernod Ricard has managed to give consumers worldwide a variety of products to meet their needs.
“Spirits are a product of entertainment and social life. [They are] something that you will always share with family, friends, colleagues,” said Pringuet. “It’s a social occasion, and really reflects who you are when you have a drink of Chivas 18 or 25, you tell the people around you that are a man of taste and that you have the right choice of product.”
Innovation is also a driving force behind the success of fifth generation family-owned Camus Cognac.
Camus recently released the first and only Cognac from Ile de Re, an island off the west coast of France that carries the Cognac designation of the mainland.
Ile de Re has three variations: Ile de Re Fine Island, Double Matured, and Cliffside Cellar, which each “highlight the unexpected aromas, flavors and personalities distinctive to the island of Ile de Re.”
While hoping to provide variety and capture the attention of cognac drinkers, the Ile de Rey Line highlights the salty, seaside notes that may also appeal to Scotch drinkers.
For Cyril Camus, president of the company, the Ile de Rey line is an approach designed to breathe some new life in a category many feared was getting stale.
“In the 1980's and 1990's when cognac was growing internationally, a lot of companies tried to produce blends that would satisfy the highest number of consumers around the world,” he said. “So the cognacs of that era converge into something that was quite similar to each other.”
Ile de Rey hopes to recapture the attention of the lapsed cognac drinker, while at the same time attracting new drinkers to the cognac category.
“We’ve had a very positive reaction from consumers who were bored with the category as well as from brown spirit drinkers that are open to different tastes,” Camus continued.
Camus credits being family-owned with allowing the company to take a long-term approach.
“We can concentrate on doing what we think is right, even if it's not right in the short term,” said Camus. “Our notion of time is quite different than the others in the industry and frankly what we are seeing that makes the success of the company now are all projects that were started 15 years ago when the market trends were not those we know today.”
The move is a vindication of sorts for Camus, which has resisted pressure to sell out to a larger entity. As consolidation has become the norm with the liquor industry, Camus said, the company was often told it would need to become part of a larger group in order to gain access to the market or advertising power.
“I grew up in an environment where people were telling me or my father that we were pretty stupid not to sell the company. We were told that there was no future for an independent company,” he said. “But we stuck to our guns and we see today that there is another business model and that is not being part of a large conglomerate and is remaining independent and quality driven, and that it works.”
-By Tom Rotunno, CNBC Senior Editor
(CORRECTION: Any earlier version of this story misspelled Pernod Ricard CEO Pierre Pringuet's name.)