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August 13, 2009

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Cognac prepares to take on whisky

CHANGING tastes are Malaysian Paul Chin's constant concern. The managing director of the Remy Cointreau Group's China arm, Chin sits in his Shanghai office overlooking the Luwan District and knows he is in a land of whisky drinkers.

In Shanghai, whisky is the undisputed king of the imported spirit kingdom, with the city's drinking habits originally influenced by a large Taiwanese community, Chin says.

"In Shanghai I would estimate that about 75 percent of the imported liquor consumption is whisky while the other 25 percent is cognac," he says.

Despite the giants of international liquor industry forging a presence in China, they still have to make major headway into the changing local tastes.

The entire market for imported spirits makes up less than 1 percent of the total spirits consumed in China in 2008.

Local spirits like baijiu (white spirit) rule the roost and most local spirit brands are state-owned enterprises.

Figures, compiled by the International Wine and Spirit Record (IWSR) and released in June this year, show that while both Scotch whisky and cognac have grown strongly, there is still a huge untapped potential.

The IWSR study reveals that whisky had stolen a march on cognac over a five-year period from 2003 to 2007 growing eightfold to 1.931 million cases in 2008.

Over the same period cognac doubled its cases sold in China but missed out on making cognac drinkers out of much of the so-called "entry-level consumers," typically young white collars in urban areas.

It is a trend that Chin is determined to reverse.

Having come across in 2007 from competitor Moet-Hennessy Diageo's China operations where he was regional director for seven years, Chin has refocused the group on winning over these entry-level consumers.

Shanghai is "an island of whisky lovers in a sea of cognac enthusiasts in southern China." Chin says that more than 70 percent of the imported drinking market in the south is dominated by cognac.

In the north it is almost a complete reversal with whisky dominating the imported spirits market.

"China has a diverse range of consumer habits. When people in the south sit down for a meal they drink cognac, but in Shanghai if you go to dinner you will mostly find people drinking beer and local red wine," he says. "If you go to northern China, most people are drinking baijiu."

Chin points to Xiamen, Fujian Province, as an example of how the battle for what gets served at the banquet table can be won. Previously dominated by whisky, the coastal city has in recent years seen a swing to cognac.

A typical strategy when taking on a whisky outpost is to focus on one or two flagship venues where the brand is heavily promoted.

In Shanghai it is at the CD Soho and Chin says they have not been as successful as they would like at linking their brands with key venues in the city.

"I believe people's tastes can change, it is just about educating them, about contemporizing our brand. But you have to constantly work," he says.

The Remy Cointreau Group has seen a major change in its distribution in the Asia Pacific region, departing from partner Maxxium last year and bringing its distribution in house.

Despite launching the new distribution arm in troubled economic times, the group's annual report shows it has performed strongly.

In its Remy Martin Cognac range which includes Club, VSOP and XO Excellence, it has achieved above market growth and increased market share.

In a nod to the premium market, Remy Martin also launched a new brand exclusively in China at the beginning of the year, 1898 Coupe Fine De Champagne.

Containing 30-year-old cognac, Remy Martin says it has recorded strong sales.


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