PERNOD RICARD’S 2018 CAPITAL MARKET DAY OVERVIEW
This summer, Pernod Ricard, the world's second largest distiller after Diageo, held their annual Capital Market day in Shenzhen as their chairman and chief executive officer, Alexander Ricard wanted to embrace their growth strategy fueled by digitalization and reaching Asian millennials. To set the wheels in motion to double their Asian market share of the imported spirits sector by 2025, they launched a strategic partnership with tech giant Tencent Holdings last year. By tapping into Tencent's vast consumer behavioral database Pernod has transformed itself to cater to the fast-changing marketplace of the growing middle class and millennials in China through product innovation, content creation and digitalization.
Pernod's Asia business experienced an 11% growth overall last year, largely attributed to a robust performance of Martell in China—up 19%, and growth in India—up 14%. As part of their plan to achieve double-digit growth, their vision is to have Pernod Ricard brands involved in every day life for the growing middle to affluent classes—from dining at home to dining out, going out to nightclubs and KTV, to special occasions and gifting.
In China, millennials represent 40% to 50% of luxury consumers with a higher spending ability than their predecessors. With the rise of the digital environment, especially among the highly impressionable millennials, consumer behaviors are becoming more sophisticated and individualistic. Entertainment has become more influential in encouraging different drinking habits in China. Within this sector, e-commerce is one of the keys to growth for premium spirits brands to drive volume as brand awareness and consumer engagement increases.
The largest social media platform in China is also owned by Tencent Holdings—where content is king. With over 1 billion users on WeChat, 98% of China's netizens are on Tencent's platforms and spend 56% of their online time within Tencent's digital ecosystems, including mobile payments. This is 11 times that of the U.S. Within this closed loop of connected apps consumers can socialize within their group, play games, listen to music, watch news and digital entertainment, read literature, shop, book medical appointments, and pay for everything they consume throughout their day in their on- and offline life. This wealth of data collected by Tencent can empower brands to dig deep into consumer insights, detailing and categorizing their interests, demographics and ad behaviors, leading to purchases that effectively measure creation, communication and conversion. It's what Tencent refers to as "social currency"—a ranking of consumers based on their social networks, apps and purchasing prowess.
One of the biggest impediments to penetrating China that foreign companies face is the regional differences and consumption patterns among the different areas of China and age groups where one marketing campaign doesn't fit all. However with Tencent's digital profiling and research, Pernod Ricard has been able to determine customer preferences to create localized strategies based on regional differences to overcome this hurdle.
Together Pernod Ricard and Tencent have developed innovative content to reach a broad audience to leverage their premium and prestige brands and bring them into the daily lives of Chinese consumers. To delve into the meal culture and introduce Martell as a daily beverage with dinner they created the dining entertainment talk show, Dining Temptation, which had over 500 million views. Martell has a strong association with the party culture in China and has strong relationships with some of the biggest nightclubs and KTV establishments in Asia. To create a party culture online, they launched the "Martell Party Channel" which showed unexpected offline party experiences and explored the party culture with a party guide and party reporters to leverage their connection with the affluent classes in China.
To reach Chinese millennials, Pernod Ricard and Tencent created digital platforms that tapped into Western sports and pop music culture. Ballantine's Live Music Channel features a Trendy Music Live Show, that celebrates pop music, as well as a true music community that fosters up-and-coming talent. Since Absolut has its roots in pop culture, Absolut was a key sponsor of The Rap of China, a reality music competition show with a hip-hop format. One of the most popular shows in China, The Rap of China experienced a record-breaking 2.8 billion views over 12 episodes. And they also launched the #Absolutnights campaign, encouraging Absolut consumption in the nightlife party culture. Because Tencent also owns the exclusive streaming rights for the NBA in China, Chivas has partnered with the NBA there to tap into shared IP resources, thus reaching a younger audience.
Other initiatives to promote drinking within the social networking microcosms include social gifting and an A.I. chatbot within WeChat. For example, there's a cocktail gift card that friends can buy for each within their WeChat network that is called "This one is on me." As the burgeoning cocktail culture is growing in popularity in China, Pernod Ricard introduced Ask Jerry on WeChat. This hipster animated bearded bartender is an A.I. chatbot that acts as a virtual barman giving information about cocktails and nightlife, while also learning the preferences of its users. By using artificial intelligence to learn more about its users, brands can target the best platform to engage the user in a more effective way. And this is just the beginning of what's to come.