Pernod Chairman Discusses China Localization Strategy

Chivas Regal Second To Rémy Martin Cognac As China’s Favorite Brand Of Premium Spirits

Pernod Ricard chairman Patrick Ricard

Pernod Ricard chairman Patrick Ricard

Anyone who has visited a bar in China over the past 10 or so years has likely seen raucous groups huddled around buckets of iced, bottled green tea and bottles of Chivas Regal scotch whisky, sold as in promotional packages and mixed together to create a popular drink rarely (if ever) seen outside the country.

While the sight of good scotch being mixed with soft drinks may make scotch purists feel faint, the parent brand of Chivas Regal, Pernod Ricard, owes the vast majority of its success in the Chinese market to this localized cocktail. After entering the China market in 2001, the popularity of Chivas Regal spread quickly from top-tier cities into second- and third-tier cities, making “Chivas-and-Green-Tea” promotions ubiquitous throughout the country and making Chivas Regal the second most popular premium spirits brand in China, second only to Rémy Martin cognac.

Clearly, localization — whether initially intentional or not — has been a key factor in Chivas Regal’s China expansion strategy. But how do the company’s executives feel about their tipple being seen as a flashy party drink, rather than a serious scotch for connoisseurs? Are Pernod Ricard’s marketing managers concerned that newer Scottish entrants to the China market — such as BenRiach and Glendronach — could capitalize on Chivas Regal’s relatively playful image?

Chivas + Green Tea (Image courtesy SixthSeal)

Chivas + Green Tea (Image courtesy SixthSeal)

Today, the Wall Street Journal talks to Patrick Ricard, chairman of Pernod Ricard SA (makers of Chivas Regal, among other premium liquor brands) to find out. Regarding the Chinese proclivity for mixing his flagship scotch with bottled, sweetened green tea, Ricard replies,

“If that’s the way they prefer to drink it, we’re very happy with that…Drinking our product with tea is a way of cultural harmony.”

Although Ricard’s attitude would likely send a serious scotch drinker into a fit, it’s no surprise he feels this way. As the Wall Street Journal article notes, Pernod Ricard owes its growing profits in China entirely to localization, and instead of reining it in and promoting the traditional heritage or background of the company’s brands in China, it’s actively looking to increase the “Sinification” of its spirits as it branches further into second- and third-tier cities. From the WSJ interview with Patrick Ricard:

WSJ: How do you balance your attempts to be local with the fact that you’re selling a product whose premium is its foreignness?

Mr. Ricard: When we are in a country, we are a citizen of that country. We are producing wine for China from within China, for instance.

That said, if people don’t want foreign products, then they are not going to want our product. It’s a fine balance—we’re selling imported brands, but we’re local.

WSJ: Are you worried about local competition in China?

Mr. Ricard: We’ve been surprised by the resilience of baijiu [traditional liquor] in China.

The baijiu producers want to fight on some level with the foreign brands. Maybe one day we will look into acquiring a premium brand when the law allows it, but it’s not yet in our plan.

Ricard seems to have the right idea for the China market. Localization — as brands from Chanel to Buick have found — might not be critical for every brand to succeed in China, but it rarely hurts a brand’s prospects there. Interestingly enough, Ricard — discussing his company’s future prospects in China — mentioned baijiu. Regular Jing Daily readers might remember that Pernod Ricard’s rival LVMH Moet Hennissey acquired a premium baijiu distillery, Wenjun, in the hopes of competing with native stalwarts like Moutai and Wu Liang Ye. Could we see a Pernod-LVMH baijiu face-off in China in the not-so-distant future?