If your drink of choice is Scotch whisky or fine champagne, chances are you’ve enjoyed sipping a tipple from Pernod Ricard’s vast beverage portfolio. As co-leader in the global wine and spirits industry, the company owns some of the most iconic brands: Chivas Regal, Absolut Vodka, Malibu Rum and Perrier-Jouët Champagne, to name a few. But even with a workforce of more than 18,500 employees in 80 countries, Pernod Ricard has opted for a more localised business approach, resisting the temptation of solely relying on global prestige for growth.
“I think one of the strengths of Pernod Ricard is that our decentralised business model allows each country to work with the brand owners to find the right portfolio and the right strategic mix of opportunity to maximise the business in the market,” says Tim Paech, president & CEO of Pernod Ricard Japan. With 25 years’ experience at the company on four continents, Paech champions the firm’s innovation strategy, which includes localising products to suit the needs of specific markets. Japan, he says, is a market that epitomises this strategy.
“We have a more developed local innovation strategy in Japan than in many other countries,” says Paech, who has led the Japan office for about a year. “There are more Japan-specific products than Taiwan-specific products, or Singapore-specific products, or Korea-specific products. I think this is because Japanese consumers are always looking for new opportunities, new trends. There’s a lot of trendsetting, a lot of creativity here. It’s a very sophisticated country,” he adds.
Innovation at his company has led to the development of premium products such as Chivas Regal Mizunara — created solely for the Japanese market. This unique Scotch is made possible by ageing traditional Chivas Regal 12-year-old whisky in Japan-made barrels. The mizunara oak, harvested from the northern island of Hokkaido, lends a slightly sweeter, more floral taste to the Scotch blend whisky. Paech describes it as “the “marriage of Scotch whisky production with the craftsmanship and tradition of Japanese whisky makers, by using Japanese wood in the finish.” Released about 18 months ago, the subtle Japanese twist has proved a success.
Besides Scotch, sparkling and still wine is another key market for Pernod Ricard in Japan. Their Jacob’s Creek brand is one of the top-selling Australian wines in Japanese supermarkets, and has also been at the centre of the company’s local innovation strategy. In 2013, Pernod Ricard launched both a red and white wine under the Jacob’s Creek brand WAH label. In the continual search to find wine pairings for Japanese cuisine, the company decided to produce original wines that would marry with various staples of Japanese gastronomy. Jacob’s Creek winemakers collaborated with top Japanese chefs, for example, to create a white wine to pair with Japanese seafood, and a red that would go well with wagyu beef. “These two wines were initially developed for Japan, and now they’re sold, or distributed, in a number of other countries,” says Paech. “So the innovation success in Japan has spread over to other opportunities.”
Though Japan is not the top Asian market for Pernod Ricard — China and India lead in terms of volume — the firm is one of only two global beverage titans that have a fully functioning affiliate/distribution company here. The other is Diageo’s LVMH, which includes Moët Hennessy — “A formidable competitor,” says Paech. Most other beverage producers will partner with Japanese firms that include Asahi, Kirin or Suntory, easing distribution in Japan’s notoriously competitive beverage market.
“In our case, we took the challenge on board 25 years ago, and we’ve got a lot of success to show for it. We have had the benefit of entering … in a smaller way and growing our business steadily, step by step,” says Paech. In addition to its own strategy, though, Pernod Ricard does partner with Suntory on the distribution of a few products, including Kahlua coffee liqueur and Malibu flavoured rums.
In 2013–2014, Pernod Ricard showed a 2% global increase in organic growth, a figure that Paech attributes to the company’s innovation and “premiumisation” strategies. “Premiumisation means up-scaling, up-selling, and upping the quality and the value of our products,” he says. Take the Chivas Regal brand as an example. With the success of the classic 12-year-old Scotch that solidified the brand’s image as a fine spirit, Pernod Ricard then embarked on a mission to develop the special 18- and 25-year-old whiskies. “(It) is a classic example of premiumisation, taking a more premium product to the loyal Chivas Regal consumer base and giving them an opportunity to try something more premium, higher value, of course,” says Paech.
Another key example of such strategy can be seen in the Jacob’s Creek line, which offers both simple varietal wines and those with a designated origin. The Jacob’s Creek Reserve range now offers a Barossa Valley Shiraz and a Coonawarra Cabernet Sauvignon, “products that are higher quality, more specific regional wines, and produced in smaller quantities,” says Paech.
Proud of his company’s innovative successes, Paech is viewing the digital world as the future for customer engagement. “At the end of the day, our objective is to bring convivial moments to the broader base of consumers and to live with those consumers through their lives, through their journey,” he says. “So the more touch points, the more engagements we have with consumers, the better for us.”
As for Japan, Paech says, “We have a lot of optimism about the future. So we’ll continue to invest, continue to grow. We see a lot of opportunity, having taken the plunge back in 1990. It’s starting to bear strong fruit.”© Japan Today