Hitting the bottle

After battling it out for more than a year, France-based alcohol group Pernod Ricard has finally resolved its reputation crises in China.

The International Finance News recently made a formal apology to Pernod Ricard and its subsidiary company Chivas Brothers Ltd for publishing a false report about Chivas Regal 12 Year Old scotch whisky in January 2006.

In the apology the newspaper published on its front page at the end of last month, it admitted that it "made no efforts to verify the article's contents, which were false and have misled consumers," and apologized for "the damage caused to the reputation of Pernod Ricard China and the Chivas brand."

Philippe Guettat, managing director of Pernod Ricard China, says Chivas Regal 12 Year Old is a premium-quality brand blended with malt and grain scotch whiskies, each of which have been aged in oak casks for at least 12 years.

"It is widely recognized by international connoisseurs as one of the best premium scotch whiskies of consistently high quality," he says.

The company claims its production process and age statement on the label of every bottle of Chivas Regal 12 Year Old are strictly regulated by UK and EU regulations, and its import into and distribution throughout China fully complies with Chinese law.

All Chivas Regal products are produced and bottled in Scotland, and each shipment must receive a Certificate of Age from the British government's HM Revenue & Customs, the company says.

At the beginning of last year, International Finance News ran a front-page story quoting an anonymous Chivas insider as saying that the whisky sold by the brand in China is substandard.

In the report, the insider claimed that despite the 12-year guarantee on the label, each bottle cost only 25 yuan to produce, because it was actually a blend of younger, inferior whiskies.

The claims against the Scottish malt, which retails for between 200 and 300 yuan per bottle, prompted Chivas Brothers Ltd and Pernod Ricard China to sue for defamation.

The case was recently settled when Chivas Regal reached a reconciliation agreement with the paper.

While the incident is now behind Chivas Regal, it still faces the challenge of marketing to a Chinese customer base that is largely uninformed when it comes to whisky.

According to a report on China Today, only an elite few Chinese drinkers can distinguish a blended whisky from a single malt, and most Chinese dislike the snobbery and connoisseurship associated with drinking fine whisky.

When asked to distinguish between the two legendary Scottish whiskies Glenmorangie and Laphroaig, Chinese whisky drinker Li Peng replies: "I don't even know how to pronounce either of them."

"Some friends tell you how to select a scotch and then tell you a bunch of interesting facts that whisky snobs should know. But in fact, they're drinking a liquid that most people find unpalatable and droning on tediously about it," Li says in the report.

Chinese customers are still in the initial stage of whisky consumption, and most of them are incapable of telling differences in quality and taste, says Wang Ruirui, qualitative research director of Map, a Shanghai-based marketing research company.

Most of the drink's sales come from bars, clubs and restaurants.

"Local customers regard drinking imported whisky as a way to show off wealth and high-class tastes. Therefore, the brand image is more important than the actual taste and quality," Wang says.

While European brands such as Chivas Regal and Johnnie Walker appear to dominate the Chinese market, marketing-savvy American whiskies such as Jack Daniel's are giving them a run for their money. The most popular US whisky variety, amber-colored Bourbon, suits the Chinese market well with its slightly sweeter taste. Bourbon gets its name from Bourbon County in Kentucky, where it originated.

The US whisky brand claims that it has maintained double-digit growth in China over the past five years.

While refusing to provide exact sales figures, Wang Jue, communications director of Pernod Ricard China, says that the company is experiencing particularly strong growth in China.

The Chivas brand has made the largest contribution to the company's growth in the Chinese market.

The new advertising campaign "This is the Chivas life" has been taken to nearly every major Chinese city.

Chivas Regal, acquired by Pernod Ricard in 2001, is today one of the jewels in the company's portfolio. It is now distributed in more than 150 countries.

Seeing whisky's market potential, Pernod Ricard last July introduced 15-year Ballantine's to China, which has provided local customers with a more diverse portfolio.

Martell, another strong brand of Pernod Ricard, which has been in China for more than two decades, has contributed greatly to the company's success in Asia. Martell's 37-percent growth in the region has been driven by key countries such as China, Singapore and Malaysia.

Globally speaking, Martell has grown by 17 percent in volume and by 25 percent in sales.

Since it was founded in 1975, Pernod Ricard has developed one of the richest portfolios in the industry through internal growth and ambitious acquisitions. Already the top producer in the Europe, Pernod Ricard has further consolidated its presence in Asia and Latin America and has taken the No 2 position in North America and Africa.

Headquartered in France, the company has approximately 12,250 employees and operates 72 production facilities around the world.

The company's 2006/2007 interim net sales have increased by 7.3 percent, including 9.7 percent organic growth.

It owes its strong growth to its key brands, 15 of which have grown 9 percent in sales volume and 14 percent in organic sales growth.

In China, the company is the leading importer of wines and spirits and has seven branch offices in Beijing, Shanghai, Guangzhou, Shenzhen, Xiamen, Wuhan and Chengdu.

(China Daily 03/05/2007 page7)