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Project No. 1: The Luxury Industry | LXFM 730 | Winter 2013 |Professor Jinah Oh by Lea Truc Le

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Executive Summary

This project is an analysis of Wine and Spirits sector, segmentation at the market, company, brand and consumer level. This report based on data from the 02 major players in the category: Diageo and Pernod Ricard with additional insights from the strategic evaluation report by Euromonitor International profiles, World Luxury Association (WLA) and International Wine and Spirit Research (IWSR) etc. Due to the scope of this project, this report will mainly focus on the Spirit category with fastest growing luxury cognac brand i.e Martell from Pernod Ricard.

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CONTENT Wines & Spirits Definitions and History Market and Trends Industry Segmentation Martell – the Leading Brand Target Consumers Future Direction

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FASH 501 - Professional Concepts and Theories for the Fashion Industry Professor Franca Canepa Project No. 2 by Truc Xuan Le

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Project 1: The Luxury Industry | LXFM 730 | Winter 2013 |Professor Jinah Oh


Wine are made only from fermented grapes or fruits. Spirits are made by grain mash fermented then distilled. Spirits have many varieties i.e whiskey, rum, vodka, gin, tequila, cognac etc. (Lichine, p.365) Wines and spirits are often part of important social events in different cultures; they are legally consumed in most countries, and over 100 countries have laws regulating their production, sale, and consumption. Earliest reference is the chemical traces absorbed and preserved in a pottery jars from the Jiahu village in northern China. This revealed that a mixed fermented beverage made from rice, honey, and fruit was being produced as early as 9,000 years ago. (Forbes, p.125)

CONTENT Definitions and History Market and Trends Industry Segmentation Martell – the Leading Brand Target Consumers Future Direction

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Project 1: The Luxury Industry | LXFM 730 | Winter 2013 |Professor Jinah Oh


Wine and Spirits are among alcoholic beverages together with beers. However, “the level of sophistication that sets wine and spirits apart from beer and other fast-moving, repeatpurchase products because they are expensive, are often gift items and clearly part of brand identity construction”. Sophistication and selective consumption entitle wines and spirits to be included in the luxury category. (Michel & Gerald,p. ix ). Wines and Spirits may be considered accessible luxury representing a bottle of whisky. For instant, Martell cognac is luxury because it satisfied 03 criteria (Michel & Gerald,p. x) a. Strong artistic content: bottle and packaging profound aesthetic-research process. b. Craftsmanship: distilling process through 03 or more years even up to 110 years. c. International aspect: global appearance in 75 market companies of Pernod Ricard.

CONTENT Definitions and History Market and Trends Industry Segmentation Martell – the Leading Brand Target Consumers Future Direction

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Project 1: The Luxury Industry | LXFM 730 | Winter 2013 |Professor Jinah Oh


The market size of spirits by 20 billion and Wine by 28 billion liters in the huge 245 billion liters of Alcohol drinks in 2011. (Euromonitor International 2011 – UB group, p3), Particularly, the top three major players in world’s leading distiller by volume are Diageo, UB Group and Pernod Ricard. All had identical shares of global spirits, at nearly 5% of the market.

CONTENT Definitions and History Market and Trends Industry Segmentation Martell – the Leading Brand Target Consumers Future Direction © Euromonitor International ALCOHOLIC DRINKS: DIAGEO / Pernod Ricard, UB PLC PASSPORT p.2

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Project 1: The Luxury Industry | LXFM 730 | Winter 2013 |Professor Jinah Oh


KEY PLAYERS BY POPULAR BRANDS

CONTENT Definitions and History Market and Trends Industry Segmentation Martell – the Leading Brand Target Consumers Future Direction © DIAGEO / Pernod Ricard, annual report 2012

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Project 1: The Luxury Industry | LXFM 730 | Winter 2013 |Professor Jinah Oh


Also based on their strategic evaluation of alcoholic drink industry, the global spirits sector has continued to become more consolidated over 2006-2011, despite global spirits volumes growing by 10% over the same period. (Euromonitor International 2011 – Diageo group, p9)

CONTENT Definitions and History Market and Trends Industry Segmentation Martell – the Leading Brand Target Consumers Future Direction

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Project 1: The Luxury Industry | LXFM 730 | Winter 2013 |Professor Jinah Oh


Vodka and scotch whisky are two key growth drivers, Cognac experiences fastest CONTENT Definitions and History Market and Trends Industry Segmentation Martell – the Leading Brand Target Consumers Future Direction

recovery for this sector: Over one-half of the 14 million additional cases sold on the international spirits market in 2011 were of vodka or Scotch whisky. These two categories —market heavyweights with a 21% market share each—posted higher-than average volume growth rates of 5% and 4.2%, respectively. Vodka’s growth stemmed primarily from North America, while that of Scotch whisky came mainly from Eastern Europe, followed by South America and Asia. In addition, cognac experienced a marked recovery in 2011, with an increase in sales of 7.2%, owing to its growth in Asia and Travel Retail. In wines, the market posted growth of 3.2% in 2011. (Pernod Ricard, annual report 2012, p21)

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Project 1: The Luxury Industry | LXFM 730 | Winter 2013 |Professor Jinah Oh


The Premiumisation phenomenon continued to gain momentum in 2011: the top-of-therange product segments saw the strongest growth of all. The Prestige brand segment (sold at a price of over USD84 per 75cl bottle in the United States) stood out with its phenomenal growth of 19%. (Pernod Ricard, annual report 2012, p21)

CONTENT Definitions and History Market and Trends Industry Segmentation Martell – the Leading Brand Target Consumers Future Direction

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Project 1: The Luxury Industry | LXFM 730 | Winter 2013 |Professor Jinah Oh


The Premiumisation phenomenon continued to gain momentum in 2011: the top-of-therange product segments saw the strongest growth of all. The Prestige brand segment (sold at a price of over USD84 per 75cl bottle in the United States) stood out with its phenomenal growth of 19%.

CONTENT Definitions and History Market and Trends Industry Segmentation Martell – the Leading Brand Target Consumers Future Direction

(Pernod Ricard, annual report 2012, p14)

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Project 1: The Luxury Industry | LXFM 730 | Winter 2013 |Professor Jinah Oh


WLA-World's TOP10 Liquors 2012: L'or De Jean Martell Louis XIII (Remy Cointreau) Richard Hennessy (Moet Hennessy) Chateau Petrus Wine  Chateau Lafite Rothschild Macallan Meritage

CONTENT Definitions and History Market and Trends Industry Segmentation Martell – the Leading Brand Target Consumers Future Direction

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Project 1: The Luxury Industry | LXFM 730 | Winter 2013 |Professor Jinah Oh


Martell - the oldest of the big cognac houses. The history of Martell & Co dates back to 1715, when Jean Martell founded the company with the wish to produce only the highest quality in cognac. Pernod Ricard strongly implanted itself in the luxury goods market, and has sales of around 15 million liters every year.

CONTENT Definitions and History Market and Trends Industry Segmentation Martell – the Leading Brand Target Consumers Future Direction

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Project 1: The Luxury Industry | LXFM 730 | Winter 2013 |Professor Jinah Oh


Martell - the only cognac brand to pass the milestone of one-million cases in China. A recorded growth of 24% in 2012. Martell is also a global leader of the XO category (with Martell XO and Cordon Bleu) with a 40% market share.

CONTENT Definitions and History Market and Trends Industry Segmentation Martell – the Leading Brand Target Consumers Future Direction

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Project 1: The Luxury Industry | LXFM 730 | Winter 2013 |Professor Jinah Oh


“We have a unique portfolio of Prestige brands that is perfectly positioned to take on the luxury segment. This segment could grow annually by 8% to reach sales of some USD250 billion by 2015.

High Net Worth Individuals—those 11 million consumers around the world that have over one million dollars in financial assets—are the primary target of luxury goods and thus of our Prestige brands”.- MARTIN RILEY, Pernod Ricard Chief Marketing Officer

CONTENT Definitions and History Market and Trends Industry Segmentation Martell – the Leading Brand Target Consumers Future Direction

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Project 1: The Luxury Industry | LXFM 730 | Winter 2013 |Professor Jinah Oh


“Our brands evoke desire, in an exclusive, timeless world. We steer lear of ostentatious, ‘bling-bling’ luxury”.

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‘Martell Very Special Nights’ at Raymond Blanc’s, Brasserie Blanc, at St Paul’s in London on December 15th 2012


African-American, Asian and Hispanic consumers are loyal consumers in the cognac sector. (The Beverage Business, 2012) Targeted to African Americans. Martell VSOP launched its "Rise Above" promotion campaign last year. Hip-Hop has played a huge role in every cognac brand's success. The entire category's growth has been driven by Hip-Hop over the past 1O years," says Nicolas of Remy Martin. "Cognac is hugely an ethnic-skewed market. More traditional, CONTENT

Caucasian consumers don't drink it as often,

Definitions and History

and when they do it's from a traditional

Market and Trends

snifter by a fireplace in cold weather.

Industry Segmentation Martell – the Leading Brand Target Consumers Future Direction

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CONTENT Definitions and History Market and Trends Industry Segmentation Martell – the Leading Brand Target Consumers Future Direction

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Creating Value and Experiences The latest report on global luxury markets from The Boston Consulting Group indicates that Well-Heeled Shoppers Speeding Up Shift from Products to Experiences. As such, Pernod Ricard, Diageo and other major players have introduced Elite Club, a genuine VIP service to deliver luxurious lifestyle to the high net-worth individuals. For example, Members were also able to benefit from an exclusive programme and advantages: enjoy the best cigars and finest wines and spirits in a private lounge, access to Elite Club Pavilion, Elite Club yacht and invitations to dinner etc.

CONTENT Definitions and History Market and Trends Industry Segmentation Martell – the Leading Brand Target Consumers Future Direction

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Project 1: The Luxury Industry | LXFM 730 | Winter 2013 |Professor Jinah Oh


Maintain strong investment momentum in emerging markets Pernod Ricard advertising and promotional expenditure was 1,571m for the year, an increase of 7%. This was mainly allocated to our strategic priorities: Premium brands (3/4 of expenditure for emerging markets and innovation (China, Russia, India, Vietnam, Africa) Leveraging local brands. Acquire local established distillers to CONTENT

leverage distribution networks. New

Definitions and History

business model search for strong

Market and Trends

local brands to ensuring critical mass

Industry Segmentation

to fuel prioritized investment

Martell – the Leading Brand

imported global brands. Diageo –

Target Consumers

Shui Jung Fang, Moet Henessy –

Future Direction

Wenju, (LVMH annual report, 2012)

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Project 1: The Luxury Industry | LXFM 730 | Winter 2013 |Professor Jinah Oh


CITATION Lichine, Alexis. Alexis Lichine’s New Encyclopedia of Wines & Spirits (5th edition) (New York: Alfred A. Knopf, 1987), 365. Chevalier, Michel & Mazzalovo, Gerald. Luxury Brand Management. Wiley; 2 edition (August 14, 2012) Forbes, Robert James. A Short History of the Art of Distillation. Brill. 2010 UB Group in Spirits (World). Euromonitor Passport. May 2012. WARC – Jen Library http://0-www.warc.com.library.scad.edu/PDFFilesTmp/081b746b-42d6-4ab3-82a9-0dacaae73b62.PDF Pernod Ricard Annual report 2012. http://pernod-ricard.com/670/investors/publications/annual-reports Pernod Ricard Americas Conference Presentation. December 2012 http://pernod-ricard.com/files/fichiers/Finance/Documents/PRAmericas_Analysts-Call_12.12.13.pdf World Luxury Association Top 100 list – Liquors. http://www.top100luxury.com/wla/100/ Diageo Annual report 2012. http://www.diageo.com/Lists/Resources/Attachments/1341/Diageo_AR_2012_Low_res.pdf LVMH Annual Report 2012 – Wines and Spirits. http://www.lvmh.com/investor-relations/documentation/reports The Beverage Business- Cognac. 2012 http://www.beveragebusiness.com/archives/article.php?cid=1&eid=34&aid=260 American Industry Overview: Distilled and Blended Liquors. Gale American Industry Overview 2011. http://0-www.warc.com.library.scad.edu/Content/ContentViewer.aspx?MasterContentRef=a01fcd80-99a4-47c2-b486dbd479e47253&q=wine+and+spirits+history

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Wines & Spirits (project 1) _Martell Cognac  

Wines & Spirits (project 1)