Cognac and the Urban Market

Posted on | March 1, 2003   Bookmark and Share
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It doesn’t get much better than leading rap star Busta Rhymes and pop/hip-hop impresario P. Diddy writing a Billboard chart-topping song promoting your spirit brand. The video, which played in heavy rotation on MTV complete with bottle-shots, received a nomination for Best Hip Hop Video 2002. In dramatic understatement, Stephanie DeBartolomeo, Allied Domecq’s group marketing director for Courvoisier and Sauza says, “We were flattered that such a popular icon so embraced us.” But was this a brilliantly orchestrated scheme, or a true case of art imitating life? Both Busta and Allied Domecq maintain their independence. “There was no affiliation with Busta or P. Diddy. I think this recent phenomenon epitomizes how we have modernized a classic in the eyes of urban trendsetters who now embrace Courvoisier as part of their lifestyle.” says DeBartolomeo. But Allied Domecq does accept some credit for their lyrical success. “It was a culmination, or an outgrowth, of our efforts for the last 24 months plus of speaking to young adult tastemakers – that’s what created the buzz in the marketplace.”

What many outside the music industry may not realize, is that Pass the Courvoisier is indeed a culmination, not the beginning, of the trend. For over a decade, leading hip hop artists have promoted Hennessy, Remy-Martin, and Alizé, as well as premium vodka and other luxury brands ranging from Rolex to Burberry to Mercedes. Even in his seemingly singular ode to Courvoisier, Rhymes goes on to rap “Give me the Henny, you can give me the Cris. You can pass me the Remy, but pass the Courvoisier.” There is an amazing correlation between these popular culture references and Cognac category growth, apparent in statistics from Bureau National Interprofessionnel Du Cognac, the French trade organization. In 2002 alone, Courvoisier experienced a 20 percent sales increase.

Others believe the trend goes even farther back. “Cognac’s involvement in the African-American community began about 50 years ago,” explains Bill Cherrie, group director, Martell Cognac. “The anecdotal story we hear is that it dates back to WWII when our soldiers were in France discovering Cognac for the first time and bringing this back to their communities.” And these groups are growing fast. “Both the African-American and Hispanic communities are over 35 million people – the size of a small country. The urban market has become a huge part of the business for every brand,” Cherrie adds. The U.S. is by far the largest Cognac market, with shipments for the year ending July 31, 2002 numbering 43.6 million bottles. The next largest market is the U.K., which received only 10.9 million bottles for the same period. France themselves reserved only 7.3 million bottles.

Furthermore, U.S. consumption has shown dramatic growth every year since 1993, growing by 3 million bottles in the past year alone. Most importantly, the U.S is the only leading Cognac market which has exhibited growth at all. Other leading markets, including the UK, Germany, France and Japan, all are flat or significantly down over the past decade. We represent the great White, Latino, African-American and Asian hope, all wrapped into one.

Aware of this singular opportunity in the U.S. urban market, Cognac marketers have been keen to capitalize on the spirit’s aspirational image by courting key urban trendsetters. “I think it’s clear that there is a very elite set of urban trendsetting people who influence not only urban culture, but popular culture, and even worldwide culture,” says DeBartolomeo. “Discerning consumers like to discover the next hot thing for themselves. They are very aspirational and they embrace luxury brands. It represents a lifestyle that is premium and decadent.” To that end, Courvoisier has chosen to model their print campaign and overall marketing more like a fashion brand than a traditional spirits brand. Their new limited-edition packaging includes bottles reminiscent of Louis Vuitton luggage patterns. (They actually are designed by The House Of Field, of Sex and the City fame.)

Category leader Hennessy commands a whopping 50 percent of the Cognac market overall, and owes much of their success to their activity in the urban market. “We’ve always had a commitment to urban markets, particularly the African-American community. We do things that other people generally don’t do, like setting up scholarships and getting involved in educational initiatives,” says John Santos, Hennessy brand manager. “People call it multicultural marketing but it’s not a new phenomenon for us at Schieffelin-Somerset. We feel if you’re going to do business with people you do what’s right.”

Hennessy posted growth on all their Cognac marques for 2002, but VS remained their frontrunner, topping 1.5 million case sales. In addition, they have seen double-digit growth in their VSOP with the proprietary name Privilege. “Consumers are calling our brand Privilege, not VSOP,” says Santos. “We created XO, and there you have a market that was once owned by us; it’s now been taken on by others. We feel why not make sure we continue with that innovation in an ownable way. That’s the idea behind Privilege.” In 1997 the late Tupac Shakur rapped about a drink he called the Thug Passion – Alizé Gold Passion Liqueur mixed with Hennessy. In reaction to this drink and overwhelming consumer inquiries, Alizé launched a “reverse line extension,” introducing pure VS and VSOP Cognacs in 2000. The company now promotes a mixed drink called the R&B, which is a spin on the Alizé Red Passion and the blue-colored Cognac label – as well as being an obvious allusion to the music genre.

Ironically, Alizé seems highly focused on quality issues and consumer education, particularly following their August 2002 first-place ranking among VS Cognac by the Beverage Tasting Institute (BTI) in Chicago.

Alizé brand manager Adam Gam says, “When you look at the competition they all have image-driven advertising campaigns: Courvoisier is fashion, Hennessy the man in the suit, Remy the couple in the tuxedo. Nobody’s talking about the quality of the product anymore.” Gam speculates that despite the popularity of mixing Cognac in cocktails, “Half of Alizé is consumed straight.”

According to Gam, Kobrand has a long history of dedication to the urban market, a worthwhile investment considering his assertion that African-American males are three times more likely to be Cognac consumers than Caucasian males.

The greatest rewards of marketing to the urban community may not yet be reaped. Camus, a new Cognac entering the market seeks to capitalize on that. “The ethnic markets in the U.S. offer valuable growth opportunities for Camus,” says Laurent Fortin, VP of Camus. “Our products are very popular in Asian and European countries and we hope to expand that popularity in the U.S.” Hip hop music, after all, is considered by some to be our nation’s greatest and most recognized global export.

“Clearly our focus is on the mainstay urban consumer, since that’s where the growth is being fueled from,” says Hennessy’s Santos. “The hope is, other people will rise with the tide. It trickles into the mainstream, just like urban fashion and trend sets.” From Harlem to Detroit and Atlanta, then onward to middle-America, Cognac heralds the rebirth of cool.

retailer roundtable

Beverage Media Group, in collaboration with Allied Domecq Spirits, recently convened a highly diverse roundtable of industry professionals to obtain their insights on Cognac and the urban market. The roundtable took place at Compass restaurant in New York City. Robert Beleson, former president and CEO of Remy-Amerique, Inc., and former president of M. Shanken Communications, moderated the discussion. Participants were: Adrienne Nagy, brand manager of Courvoisier and S. Madison Bédard, promotions manager for Courvoisier; Shawn Phillips, who has for three years served as director of African-American marketing for Fedway Associates, Inc., a New Jersey wine and spirits wholesaler; Anthony Lodati, second generation owner of Lowery Liquors & Wine in the highly ethnically diverse community of Sunnyside, Queens; Helene Creel, president for over eight years of Tudor Wine and Liquor, in the upper middle-class and highly diverse Nassau County, New York; Bobby W. Kumm, a buyer for discount retailer Five Towns Wine & Liquors, which serves a culturally rich community with large Jewish, African-American and Hispanic-American contingencies; Bob Battaglia, who has twelve years of retail experience and is currently district sales manager for Staten Island, Brooklyn and Queens, for Charmer Industries, a New York wholesaler; Moon Lee, VP, Augustine Wine & Liquors in New York City; and Glenn Vogt, Distinct Expressions, Inc., and operations advisor for Compass restaurant. Glenn was also the former general manager for Windows on the World.

Here are some excerpts from the discussion:

On Consumer Education…

Creel: I think it’s time we stepped up and improved the marketing toward [the urban market]. The consumer loves information. The more you give them, the better they like it.

Kumm: My experience is that it breaks along certain demographics. I notice a lot of Asian people, especially Chinese, are aware of VSOP as the minimum type of Cognac that they will consume. XO is their regular Cognac if they can afford it.

Lee: I think we’re at the high point of style over substance. Consumers care about the bottle. I’m not selling spirits anymore; I’m selling bottles.

Kumm: The one thing I think a brand like Hennessy is doing well is developing one of its products called Privilege, rather than attempting to develop the category of VSOP. It’s really digestible for people to say ‘Privilege’ rather than to know what VSOP is all about.

On Hot Brands…

Lodati: Hennessy is still by far the leader. Sales are up on the smaller sizes which is good. I think smaller sizes always bode well for a brand. It means you’ve made inroads in the right areas.

Lee: I think right now Courvoisier is fairly hot because they’ve done a good job of marketing, of understanding who their consumer is and marketing directly to them. In my store sales have doubled and in an inner-city urban market that seems about right.

Vogt: Over the last couple of years, there has been a real cocktail craze in New York City. And cognac is a wonderful ingredient that reads really well on the menu as an ingredient in an interesting cocktail.

On Rap References…

Battaglia: You’re tying together two of the most powerful forces you can put together: one is advertising and the other one is music.

Kumm: I think it’s made an impact with Jay-Z and Belvedere, not really mentioning the item, but including it in the video. It’s almost an editorial not a paid advertisement. Someone’s not being paid to smile and say it makes my clothes cleaner.

Lee: Trends tend to come not from the higher levels of society, but bubble up from the bottom. So, with something like urban rap, because sociologically it’s caught on with suburban white kids, you’re reaching a far wider market.

Kumm: Something that I see [among African-Americans], if you become accomplished and a professional you have to be legitimate – you can’t just have street credentials. And there has to be some connectedness to the urban community.

On Effective Urban Marketing…

Lee: I think promotions outside of retail stores have much more impact than promotions inside the store.

Kumm: You hitch yourself to the leading brand. What we’ve done in our store is cross-promote other Cognacs to Hennessy. We cross-market other Cognacs of the same grade at a similar price point or lower. It makes the retailer look savvy because you’re bringing new products to the consumer.

On Premium Brandy…

Lodati: I have not seen any mass- switch or volume from the brands, but it could be down the road. They have to do more than make a fancy bottle with a fancy name on it.

Lee: Suppliers have to get customers to trade up from brandy rather than trade down from Cognac.

On Mixing….

Phillips: I think CV, as a call for Courvoisier, is working on premise.

Vogt: I think Cognac is still considered very much an after-dinner, digestif, relaxation, the night is coming to an end. When you’re mixing with Cognac, you could mix brandy with a lot of things for less money and still get the same flavor.

Kumm: Chinese Americans will drink XO with Coca-cola because it’s very prestigious, and because they don’t really like the taste. Some of the Russian consumers drink lots of it. And, they drink it straight. They don’t adulterate because they believe in the quality of the product.

On Theft…

Lodati: Anything that’s over $50 or $60 is on shelves behind the checkout where you can see it but can’t touch it, like Remy’s Louis XIII…. The high priced Champagnes are all behind the checkout. I don’t think any store of size can stop shoplifitng because they’re good.

Lee: I’ve been discovering a new breed of shoplifter…. when I catch them they may have a Joseph Phelps Bacchus Vineyards Cabernet Sauvignon. It’s a shoplifter taking orders from people…and then going shopping.

Kumm: Don’t be naive: People will steal anything whether it has value or doesn’t have value. It’s not even a price issue, because I can put out a $75 bottle of Napa Cabernet and people won’t think about, but if I put out a $20 bottle of Hennessy Cognac, they will try to steal it.

Lee: I’ve stopped women with four Liter bottles under their dress. It’s amazing what they will do.

On Consumer Attitudes…

Lee: I think consumers in general have changed. It used to be 15-20 years ago consumers had their brand… but now consumers are more like the MTV generation – a five minute attention span. Whatever’s hot, whatever’s trendy. Bottom line: It all depends on what’s trendy and what the consumer feels is cool right now.

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