Camus teams up with cigarette marketer

Alliance to grow cognac sales in China and overseas airports

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BEIJING--The French cognac house Camus has teamed up with Shanghai Tobacco Group and some local liquor companies to grow sales in China as well as increase duty-free purchases by the rising number of Chinese travelers overseas.

China has long been an important market for cognac, the preferred tipple for business dinners and late-night entertaining in karaoke parlors. But the category's grip on the market is slipping as young urban sophisticates have turned towards whisky, vodka and in some cases, even back to rice wines that are less prestigious but more suited to the Chinese palate.

The trend is disturbing to all cognac marketers, but particularly Camus, a family dynasty dating back five generations that does not have access to mammoth marketing budgets and distribution channels controlled by rivals like Diageo and Pernod Ricard.

"Hennessy and Remy have the lion's share of the cognac market, followed by Martell. Camus is very tiny compared to that. We don't have the resources as a family-owned business to fight it out with them on the main market. We can still grow substantially though, " said Camus CEO Cyril Camus, 35, based in Cognac, France.

Seeking an alternative approach in China, Mr. Camus has pulled together an alliance called Spirit of China with Shanghai Tobacco Group, producer of Chunghwa, the most successful tobacco brand in mainland China, as well as the nation's leading baijiu (a popular type of white spirit) Kweichow Moutai, Gu Yue Long Shan rice wine and the Chinese winemaker Dragon Seal.

Camus is working with airport duty-free operators outside China to set up Spirit of China sections that will appeal to the growing number of Chinese travelers. Thirty million mainlanders traveled outside their home country last year, and the number is projected to top 50 million by 2010, according to government estimates.

They spend significant cash on cigarettes, perfume, cosmetics and, increasingly, designer goods in airports, but very little on liquor, because they are unfamiliar with many of the foreign brands and may also lack the language skills to ask questions. As part of the project, Camus has trained the salespeople at Spirit of China outlets about Chinese culture and they can speak basic Mandarin.

"As Chinese travelers visit duty-free stores, we need to make sure they can see very quickly that there is a place in the store, the Spirit of China section, that caters to them and where they will feel comfortable shopping," said Mr. Camus. To further whet their appetites, the selection of Chinese wines and spirits available in the Spirit of China outlets are not sold within China, only through the special themed duty-free outlets.

"At the same time, we want to bring to the non-Chinese traveler the level of product information and reassurance that is needed to make them comfortable buying Chinese brands of wines and spirits," he added, either as souvenirs or as gifts for mainland Chinese.

The most surprising result of the alliance so far is Chunghwa XO, a cognac blended by Camus for Shanghai Tobacco to appeal to Chinese drinkers, who prefer lighter, more subtle liquors over strong tannins and wood flavors.

The cigarette giant "saw Cognac as a good fit, they see this product as a way to reinforce their status as a high-end premium brand. The cognac is made by Camus, but it's an extremely Chinese product," said Mr. Camus.

It also gives the tobacco giant a way to get around tight restrictions on tobacco advertising in magazines and outdoor media and additional credibility.

Chunghwa XO is now sold only in airports like Singapore and Los Angeles, but it will become available at high-end retail sites within China in the weeks leading up to the mid-autumn festival, a major local holiday. Bottles of Chunghwa XO retail for about $100, roughly the same as other Camus XO blends.

Packaging on the back of the bottle has the Camus logo, but the front displays only Chunghwa's brand, a decision that "was debated for a long time," recalled Mr. Camus. "Is it all Chunghwa, or is it Chunghwa by Camus or is it Camus for Chunghwa?

"We took this approach, which in retrospect, may not have been the best. There is confusion. When consumers see the bottle, they think, 'It's Chinese cognac but cognac is not Chinese, so how can this be?' We have to clarify the message. The idea that a Chinese brand has gone out and adopted an international product and made it its own is something that is very positive in the consumer's mind. But our packaging doesn't communicate that enough, or it is so unusual that it does not seem natural yet for a Chinese brand to be applied to a foreign product."

The two companies do have one immediate synergy, said Viveca Chan, Hong Kong-based chairman of WE Worldwide Partners, the ad agency helping Camus carry out the Spirit of China project. "Cognac and premium cigarettes, especially Chunghwa, which costs twice as much as imported Western brands, are frequently purchased as gifts, an important aspect both of Chinese culture and business. Combining them makes a lot of sense."

Cyril Camus is thinking about more than China's growth potential in his efforts to expand the family business. As a trade relations manager for China, he lived in the Chinese capital from 1994 to 1998, can speak fluent Mandarin and married a Beijing native, Isabelle, in 1998. She now works as guest relations manager at the Camus headquarters in Cognac and oversees training and merchandising for the Spirit of China stores.

"We have two young sons and I don't know if they will grow up to feel more French or more Chinese, so I want to have a strong business in both countries," said Mr. Camus.

Profile on Cyril Camus, CEO of Camus

His Challenge? Grow Camus among Chinese consumers through alliances with local liquor brands, without the marketing muscle of rivals like Hennessy.

Top tip for foreigners in China? "Have patience and take time to do things properly. And don't forget to do the touristy stuff, it helps you to understand the people better, and that will help you understand how they do business."

Favorite Camus blend? Borderies XO after dinner, and Ile de Re XO before dinner, on ice.

Favorite restaurant in Beijing? Da Dong, a Peking duck restaurant at Chang Hong Bridge, near the Third Ring Road.

Favorite hangout in Beijing? "The terrace at Le Quai overlooking a lake, the perfect place to enjoy a glass of cognac and a cigar, if the weather isn't too cold."

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