This is the second post in our Evolving Industries series. Join us as we take a deep dive into changing markets, technologies, and consumer expectations, and learn how leading companies are surviving and thriving in some of the world’s most unpredictable industries. Read the first post in this series here.
Ian McLernon, president and CEO of Remy Cointreau in the Americas
As we are told by Mr. Ian McLernon, president and CEO of Remy Cointreau in the Americas (RCUSA), "If you sell a premium product, you're not selling a product, rather you're selling an experience."
When the names Remy or Cointreau appear in the same sentence as the word "experience," certain images immediately come to mind: warm, wood-paneled rooms with quiet hearths and snifters in the palm. The Remy Martin and Cointreau brands have set standards of excellence for centuries. The experience these brands represent is that of the “Good Life” at its most refined and very best.
So how does a company sell such experiences amid a world turned on its head by COVID-19, a world of closed restaurants, self-quarantines, and social distancing?
With a background in luxury, fast-moving consumer goods (FMCG), retail, and consulting across Asia, Europe, and the Americas, Ian is the perfect person to ask for insight into the world of premium alcohol beverages and how it’s changed with the pandemic.
A History of Resilience
With such preeminent brands as Remy Martin and Cointreau, famously among the best in their respective markets, one would think that they are ever-constant. But while these libations remain constants in the glass, the world they sell to is always a turbulent place.
Remy Martin and Cointreau compete with other excellent products, and, as Mr. McLernon is so acutely aware, even in relatively stable times, markets are unpredictable. He reinforces what leaders in other industries have told us: in this time so starkly defined by a global pandemic, the ability to adapt quickly to roiled markets is vital.
With their long traditions, these labels have withstood the tests of time. In relatively recent history, that includes Prohibition, the Great Depression, two world wars, and various economic ups and downs.
Which brings us back to the onslaught of COVID-19 and Ian’s story of the American arm of the company.
2020’s Volatility
As fate would have it, COVID-19 emerged in the US just as RCUSA was presenting its budget in February 2020. At the time, Ian tells us, RCUSA had had a taste of the impact of COVID thanks to their experience in Chinese markets in prior months. Moreover, the Presidential election year was underway and, as with any business, political uncertainty caused some market uncertainty since regulations, tariffs, etc. affect sales and profits. In short, Ian knew things might get a bit unpredictable in 2020.
"The first thing I told my people when we sat down in February 2020 was [that] VUCA...[was] going to be our frame for the next year." VUCA stands for Volatility, Uncertainty, Chaos, and Ambiguity.
"What we've become accustomed to is that this volatility will continue. What we've learned is that you can write the best budget in terms of your strategy, but while the strategy hasn't changed, what we've done is to speed it up. It's the action plan that has to be adapted."
Other industry leaders we’ve spoken with have echoed Mr. McLernon, stating that one of the most significant effects of COVID has been to vastly accelerate trends that were already developing. "The same key themes that were there before have speeded up,” he remarked.
Changing Trends in the Premium Alcohol Industry
Ian noted two fundamental trends currently driving his markets.
The first is a trend called Trading Up.
Trading Up is a longer-term trend where consumers are drinking less but drinking better quality and seeking better options. “They want to know a brand's story, they want to understand how to make a Manhattan or a Cosmopolitan cocktail. We assume that people know, but they don't, and they're intrigued," Ian explained. Remy Cointreau sees this trend as a great opportunity: “We’re investing more than ever before,” says Ian. “The big opportunity is to continue that momentum of convenience and trading up, and to get closer to our end client.” While they want to get closer to their end client, RCUSA also wants to expand general awareness of their brands while having a social impact. With the changing times, RCUSA expanded their marketing strategy and for the first time, bought ad space during the 2021 Super Bowl.
The ad was made in conjunction with the Independent Restaurant Coalition (IRC), which represents a segment of the industry hit hardest by COVID-19 restrictions. Project “Love Letters” urged viewers to share their favorite memories by sending messages to their local bars and restaurants, thereby intimately connecting the brands with sweet memories of past times. “It’s not just about the short term, making money,” says Ian, “It’s about doing the right thing and helping connect with our trade partners and the end client.”
The expanding curiosity of consumers offers a great opportunity for premium brands to educate their customers and expand their consumer bases. The long, fascinating histories and steadfast traditions of these labels are ripe for expanding marketing opportunities.
Remy Cointreau is in an ideal position to take advantage of this trend: when it comes to defining premium spirits, it doesn't get more premium than what they offer, and every curious consumer looking to trade up is a potential new customer. With brands this good, most of those will be customers for life. "The opportunity is to always make sure your brand is front-of-mind," says Ian, particularly as consumers are drawn to higher-end spirits.
While premiumization is important, an even more important trend is the increasing availability and convenience of alcohol.
Consumers are becoming accustomed to having goods delivered to them, and that preference affects premium alcohol just as it has so many other markets. As yet, this is still a fairly small segment of the RCUSA market, but Ian believes this trend is sure to explode in the coming years.
He is not alone in that assessment: Uber recently purchased the Drizly delivery service for $1.1B USD. This makes alcohol more available and more convenient, though of course, it remains carefully regulated which, Ian says, “is just the way it should be.” This is making alcohol purchasing easier and that trend is growing fast. Ian reports that delivery and e-commerce used to represent about one percent of the market just a couple of years ago; it's now about eight to ten percent of those sales. He expects that trend to continue its growth and importance to the industry.
McLernon says that the trend toward availability and convenience was already in the cards, but that the market changes brought on by COVID-19 brought them on far faster than might otherwise have been the case. This evolution is bringing with it fundamental changes to the industry, and many of those changes have to do with the data available to businesses like his.
The 3-Tier Model
Traditionally, the US market for all alcohol has followed a 3-tier model: The producer makes the product (first tier), sells it a distributor (second tier), and that distributor sells it to a retail shop or venue where the consumer purchases or consumes it (third tier). Services like Drizly add another tier to the model.
But this added layer brings with it a great opportunity. Drizly is an e-commerce business, and that yields far more (and more precise) data about the customer, and to any manufacturer, that data is gold. Says Ian, “This helps all of us get closer to the end consumer. Digitization (e-commerce) makes it even easier to get closer to your end client and this is where data becomes even more important. The big thing over the next five to ten years is to understand how we can build those relationships with our customers.”
What Will the Future Look Like?
We asked Ian what impact these COVID-driven changes had on his plans and he told us they really had little impact, at least strategically. Everything, he contends, goes back to where you want to position your brands and how you plan to get and keep them there. He repeated: “Strategies don't change, plans do. Prepare for the worst and make sure your organization is adaptable and nimble enough to react to the unpredictable.”
He mentioned that communication with his teams has become ever-more important, and that he has moved his team town halls from once a month to weekly, a change he expects to be permanent. Amid the COVID world, multinational companies like RCUSA must be particularly attentive to keeping a finger on the pulse of individual markets. These are changes of implementation; the strategy hasn't changed.
Looking to the future, Ian sees things returning to normal in time, but that may be a new version of normality. He judges that the trends of premiumization and increased convenience and availability of alcohol will continue, though the pace may slow eventually. He believes that having a broad spectrum of brands will always be important and will likely become more so over time. But the biggest unknown yet to be seen will be how on-premise consumption (i.e., drinking at bars and restaurants) will return to the market.
Remy Cointreau sells experiences, and those are indeed closely tied to places. The consumer is buying a memory. “It’s not a functional experience. You pay for the experience. You want to feel special.”
“On-premise will be a social hub in the future. The bartenders will make a big difference,” claims Ian.
While Remy Martin, Cointreau, and the rest of RCUSA's brands are long established, they are always adapting to an ever-changing world and market. The market is evolving faster than ever, and adapting quickly to the unexpected is, and will continue to be, crucial to RCUSA continuing to thrive. They are very clear-eyed about their strategy, well-positioned in their various markets, and built to be agile in response to the chaos that seems inevitable these days. And their long traditions of excellence are consistent.
This article was a collaborative effort between Matthew Zingariello, VP of M&T at Keyrus US; Ina Benjamin, Data Strategy Consultant at Keyrus US; and Brian Maher, Technical Writer at Keyrus US.