Hennessy wooing China's young drinkers

Although the cognac market in China remains weak due to the ongoing austerity campaign, LVMH-owned Hennessy chose China's southern city Guangzhou as the first stop of a global tour to celebrate its 250th anniversary, hoping to tap into the country's expanding middle class.

Bernard Peillon, chairman and CEO of Hennessy, says he believes the Chinese market is transforming and entering a stage of maturity similar to what the US experienced years ago.

The dynamic sales of Hennessy's VSOP and Classivm - a brand designed for Chinese market only four years ago to cater to young people - gives him confidence of a bullish future.

"I'm quite confident our sales will grow this year. The question mark is which part of Hennessy is growing faster," Peillon says.

Since the government launched its anti-corruption crackdown three years ago, sales of cognac brands have been mired in a slowdown or even decline, including Remy Martin and Martell, which used to benefit from their high-class image.

Hennessy has also been affected by the crackdown. But their portfolio of products, especially VSOP and Classivm, makes the company optimistic about its future in the Chinese market.

Peillon says the average age of their cognac drinkers is younger than it was 15 years ago, and today many people in their 30s enjoy going out to trendy bars. Their market is becoming bigger due to the expansion of the middle class, many of whom are well-educated and well-paid.

All brands will benefit from the expansion of the global middle class, but the broader base of Chinese drinkers offers a very promising market, Peillon says.

"China is the No 1 market across our global business in value," says Peillon, who refused to provide concrete figures.

To signify the importance of the Chinese market, Hennessy held a celebration in March in Guangzhou, Guangdong province, to kick off its global tour marking the brand's 250th anniversary. The celebration included an art show that invited top artists to demonstrate the history of Hennessy and an official release of its 250 Collector's Blend, which costs about $600 per liter.

Hennessy will hold similar celebrations in Moscow, New York, Johannesburg and Paris.

China's booming e-commerce sector and growing number of people making purchases on their mobile devices also provide an opportunity for Hennessy to increase their presence in the country. Hennessy has cooperated with Jingdong, a major Chinese online retailer, to make its products widely accessible.

"I'm surprised by the speed of the increasing volume rate coming through the e-commerce channel. It increases almost every month," says Peillon.

Although Hennessy has already built distribution channels that covers about 80 cities in China, expanding deep into some tier-four cities in offline shops, the significant number of Hennessy products sold online makes the luxury brandy brand to think seriously about its involvement in the e-commerce era.

"We're targeting the thumb generation. We need to be part of the e-commerce business. But how far, how big we're still not sure," Peillon says.

Hennessy has also become an investor in China's alcohol market. In 2011 it invested in a sparkling wine vineyard under the brand of Chandon in Ningxia Hui autonomous region in 2011.

Two years later, it bought a vineyard in Shangri-la, Yunnan province. It also stepped into the popular baijiu market by buying Wenjun, a Sichuan-based baijiu company.

Peillon has just tasted the very first sparkling wine produced in their Chinese vineyard a few weeks ago and was impressed.

"We believe we can expand our portfolio ... through such kind of initiatives. Hennessy is going to keep growing in China," he says.

(China Daily European Weekly 04/24/2015 page25)