CEO interview
Alexandre Ricard on a ‘must-win’ market
Alexandre Ricard heads one of the world’s most powerful brand companies, French wines & spirits giant Pernod Ricard. Having assumed the reins of the company that bears his name in February 2015, Ricard, 47, has led the business through a strong growth period, characterised by premiumisation, differentiation and a strong commitment to Corporate Social Responsibility. Travel retail is a key priority for Ricard, who spent two years running the channel in Asia. At the TFWA World Exhibition in Cannes, he talked with Martin Moodie and Liam Coleman about his priorities, business philosophy and CSR values.
The Moodie Davitt Report: Pernod Ricard clearly takes travel retail very seriously, having for several years treated it as a standalone, dedicated channel. How would you describe its role to the group?
Alex Ricard: Travel retail for Pernod Ricard is one of our four must-win – absolute must-win – markets, alongside the US, China and India. We treat travel retail as a [single] market, thus the creation three years ago of global travel retail, GTR. This was purely based on common sense. Travellers travel – they don’t have business boundaries. It’s not like if you’re in Asia and you travel to Europe you move from one business unit to another. You’re just in the same channel, which is travel retail.
Consumers don’t see any internal silos, do they?
Consumers don’t see the silos, so it was critical for us to create global travel retail to be in a position to really track and follow travellers around the world with the variety of different touchpoints that we have across the channel – the famous travel trail story. So, as a market, travel retail today is our third-biggest profit centre, just after the US, number one; China, number two; and just ahead of India, which is number four.
So it’s really critical; not just from a financial point of view but also from an amplification and showcase point of view for all of our products. Travellers are in airports waiting, for several hours in some cases, for their flights. It’s such a captive audience that you can engage with in terms of experiences, products, innovation and so forth.
Has the channel changed much such you ran it [Alexandre Ricard was Pernod Ricard Asia Duty Free Managing Director between September 2006 and June 2008]? If you roll forward to today, and the creation three years ago of your Global Travel Retail entity under Mohit Lal, has the channel’s role in the Pernod Ricard firmament evolved much?
I ask, because it strikes me that right now, if you look at beauty or luxury or premium spirits companies, travel retail has never ever been in the internal ascendancy that it is today. If you read Lauder’s results, L’Oréal’s results, your results, travel retail always gets a prime mention.
Hands-on approach: Alexandre Ricard talks with Martin Moodie and Liam Coleman (right) in Cannes: “We’ll be judged in 15 years on what we’re doing today”
Yes, and I think two things have happened. Over the past five to ten years, travel retail has radically changed for the better. It has become what we call the theatre… a place where we can activate experiences around brands and really build brands in a profitable way.
We and many others across different categories have come to truly realise that it’s a big opportunity. You have your captive audience, you have the place, and you have all that it takes to make it happen. So that is the big change.
The second opportunity which has arisen over the last few years is clearly the rise of Chinese travellers. The dynamism of Asia and Asian travellers, starting with the Chinese, has really driven the market growth.
Do you feel Pernod Ricard and the brand portfolio is in the right position to appeal to those Chinese consumers, or do you need to do more on that?
Well, we’ll always do more, but obviously, the foundations are here, the brand portfolio is here. If you look at our positioning in China alone, we have close to 50% share. The exact number is 45% market share of the premium international western-style spirits segment in China. So almost one bottle out of two which is sold in China is a Pernod Ricard portfolio brand.
This gives us quite a solid foundation to capitalise on our strength, and on our portfolio and the equity of our brands in travel retail. We are able to focus on Chinese travellers with the likes of, first and foremost, Martell, for example with the recent launch of Martell XXO. That is spectacular. There are also quite a few [travel retail] exclusives as well in terms of Martell Cordon Bleu and so on.
But we can also capitalise on Chivas, which is still the most well-known international spirit from a brand awareness point of view in China. Last year saw the very successful launch of Chivas XV, which did very well in travel retail.
There are also the other whiskies. Take Ballantine’s – the aged range capitalises on the awareness of Ballantine’s, especially among South Korean and Japanese travellers. Ballantine’s is very strong, while the real emergence that’s been ongoing for a number of years is single malts. On the one side you have The Glenlivet, which is starting to be quite well known in Asia, but on the other side, you have The Secret Speyside Collection, which includes some very rare – unknown and vanished in some cases – distillery malts.
So the breadth of our portfolio… and our leadership position in Asia, starting with China, is a very big strength for us to capitalise on in travel retail.
Absolut turns the language of hate into the spirit of love. The Absolut Drop bottle design was inspired by Absolut representatives visiting racist and anti-LGBTQ protests around the globe and collecting hate and intolerance-filled signs and placards. The ink from these messages was then extracted and repurposed to “spread a better message of positivity” by being embodied in the look of the Absolut Drop bottles.
You mentioned Chivas XV. We were there when it launched with Duty Zero by cdf at Hong Kong. It was a fantastic activation. That seems to very much now be the approach to launches: ambitious, integrated online-to-offline executions, the kind of campaign that would have been more associated with the beauty industry in the past. It’s all about creating an immersive, engaging experience. What’s the thinking there?
The thinking is that behind a brand there’s the experience, there’s the brand world, and overall there’s the emotion. In a way, we’re selling emotions. The brand is very strong, but I do believe that the spirits industry has moved over the last 50 years from selling spirits to selling products to selling brands, then to selling brands with an experience, and it’s now really about selling emotions.
Consumers and travellers pay a lot of attention and get immersed into that brand world. They identify the set of values a brand stands for, and that’s what makes it engaging. That’s very important. A brand alone now is not enough.
Pinch point or tipping point for the elephant in the room?
At the Pernod Ricard Global Travel Retail media conference in Cannes, The Moodie Davitt Report asked the division’s Chairman & CEO Mohit Lal about recent tender developments at Singapore Changi Airport. Here are edited highlights of that exchange.
The Moodie Davitt Report: We've just seen the tender for Singapore Changi Airport, one of the blue-ribbon airports of the world, and historically a tender that would have attracted a diverse and competitive field.
What happened? The incumbent of 40 years didn’t even bid. Many of the most powerful players in the industry didn’t even bid. So we had a field of three, two Korean companies, who have a real strategic imperative to grow offshore, and one European company, Gebr Heinemann, seeking to grow its footprint in Asia.
Does the absence of DFS and the absence of, say, a Dufry, a Lagardère, a China Duty Free Group, suggest that we are reaching a kind of pinch point in terms of the sustainability of the business model? Is that potentially the biggest headwind of the business?
Mohit Lal: I buy completely what you’re saying there. But if we look at how business models historically have changed – for any business, remember that the Kodak camera eventually became a camera on the phone – it happens when you’re compelled to look at pinch points.
Pinch points are bad for industry – temporarily. But they offer great learnings for an industry in the long run. So, there are learnings for Changi that none of those big players went for them… that their choice is now restricted to three.
Is that learning going to percolate across other areas? I come back to one key point. The ecosystem has the capacity to allow growth for everyone – the airlines, the airports, the retailers per se.
It’s how the pie is desired to be split which is an issue and many times that’s driven by an opportunity for short-term versus long-term gain.
The moment the entire ecosystem starts to look at this longer term, the moment you start to have franchises that run 15 years as opposed to five years, retailers’ ability to invest, retailers’ ability to drive the oil that is the data and start using it starts to rise.
So I do agree that these things are not good for travel retail but I think the learnings that are beginning to come out of these will stand the industry in good stead, if we let them.
Do you think this is a potential tipping point?
I do believe it is a tipping point, but I also believe that it is for the industry to start talking now, not about things that were purely theoretical – about an imaginary elephant in the room – but addressing the real elephant in the room.
Because you see it not just in Changi. You saw it in DFS giving up Hong Kong as an airport. You are beginning to see other players across the world giving up and not rebidding for the same airports. So that trend is starting to accelerate.
Now we could say that it can go the way the high street in London is beginning to go, but that ecosystem [airport retail] needs to survive because it is one part of a bigger ecosystem.
So they will learn from each other. I think what we are going to see will be a tipping point.
If you examine the craft phenomenon, which has been such a big part of the drinks industry in recent years, and then you consider Martell, or your single malts and your blends, you were craft long before anyone was using the term, right?
Yes.
They are all craft. They are a real touchpoint for modern-day consumers who are looking beyond the aura of the brand for the heritage, for the realness. And great spirits are as real as it comes, because they’re coming from the land, and then man gets involved. There’s wood, there’s ageing, there’s time. So you were ‘craft’ all along. Maybe you just didn’t bring it out in the past?
That’s a good point. Let me talk about emotions. The human brain has two sides to it, the emotional side and the rational side. As a brand, we need to convey both messages, the emotional message and the rational message.
So on the rational side of things, we have the heritage, the quality and the age of the brand, and the whole authenticity around it. And then on the emotional front – that’s where you get the whole set of values. What the brand stands for, the story.
Consumers need both, and I think that is what we’ve been working on for the last few years, to really combine both. If you only focus on the craft credentials, you’re missing part of the whole story. And if you only focus on the lifestyle, which we’ve done in the past on some brands, then consumers start forgetting the whole craft credentials.
Mohit [Lal, Global Travel Retail Chairman and CEO] used a good word to summarise it [at a press conference the previous day], when he said, “That’s what we call purpose.”
Carefully curated: The Secret Speyside collection includes some rare gems
Is that sense of purpose even more prominent in travel retail where you’ve got a captive consumer in the right mindset – where you can actually pull on the emotional strings a little bit more and create more theatre?
Yes, and then you need to make sure that the messaging is simple and short because the attention span of travellers – especially newer generations – is getting shorter and shorter. So you need to make sure it’s impactful in a very limited timeframe.
Tell us about your leadership philosophy. We’re always fascinated by family companies, and particularly multi-generational family companies which prosper, because that’s not easy as the generations go by. I know you were very influenced by your uncle [former Chairman and CEO Patrick Ricard, who passed away in 2012] and by others. Do you feel the responsibility, perhaps even the burden, of the generations that preceded you?
I feel the responsibility, not the burden. For me, it’s not at all a burden. If it was, I wouldn’t be there, to be honest. It’s more of a pride and responsibility. If I had to summarise leadership in three words, I would start with saying, number one, people. It’s all about people.
If you want to convey the right messages behind the brands, people do that. You can have the best brands in the world, but if you don’t have the right people, you’re going to go nowhere
Behind every brand – and I’m not just talking about marketing people and salespeople, but also master blenders, masters of maturation, craftsmen, and so on – if you have the right talents and if they work as a team with no silos, then I can go on the beach and relax!
Strategy is strategy. Do we have the best strategy in the world? I don’t know. I believe we have a strong, very clear strategy, but then execution of that strategy is key and that’s all about people. It’s about getting people to be happy about what they do, be proud of what they do, be fully engaged, and completely buy into the vision.
The second word would be, common sense.
“Consumers identify the set of values a brand stands for, and that’s what makes it engaging. A brand alone now is not enough.”
Common sense? How so?
Yes. Common sense. I do think, when making decisions, that the number one thing to take into account is common sense, and our consumer-centric model is, at the end of the day, a common-sense model.
What would the consumer think? How would he see this? You know, it’s very easy to complicate things in big organisations, and it’s very complicated to simplify them. But if each time you sit back and think about the consumer and make common sense-based decisions, it works.
That’s the litmus test?
Absolutely, and the third and final word is empowerment. It’s all part of our decentralised organisation, but for me it’s not just decentralisation. Maybe decentralisation is a way we’re organised, but what lies beneath, which is the real thing, is empowerment. Just make it happen whichever way you want, however you want. It’s your business. Just do it. If you want me to come, invite me.
Tell us who has most shaped or inspired that leadership philosophy. Who have been the biggest influences in your professional life?
I’ll tell you, from a common sense and empowerment point of view, it was part of our way of being in my family. My grandfather started with that [principle]. It was all based on common sense. My uncle was very driven by people – it was all about people.
Outside of my family and outside of Pernod Ricard – and more from a disruptive point of view and breakthrough or innovation point of view – it is Steve Jobs. I never met him, unfortunately, but he inspired me through his entrepreneurial story, and I read his authorised biography.
I remember specifically he was mentioning they had a meeting where they were presenting to his leadership team the iTunes concept on iPhone. And the whole team said, “But Steve, you’re crazy. If you do that, you’re going to kill the iPod. You’re cannibalising yourself.”
And he said, “Well, so what? I’d rather kill myself with something new than have other people kill me.”
From an innovation standpoint, it was very interesting, and I did get a similar question a couple of weeks ago when we presented the brand new distillery we’re building from scratch in China. Somebody asked me, “Did you do a market study? What’s the potential for Chinese single malt?” And, you know, it doesn’t exist yet. If we only did innovation based on what consumers already know exist, the iPhone would not exist.
Pernod Ricard unveiled the ultra-premium Royal Salute 25yo in Cannes
Where did the distillery thought come from, from the heart or the head, or a bit of both?
It started here [taps his heart], because things that start here then end up working, compared with if you over-intellectualise a project. I fundamentally believe that projects that are born from emotion have a lot more potential for success than those which start on a PowerPoint slide trying to rationalise the reason for a project.
I remember when we first met many years ago, in September 2007. We were flying off to Changi Airport from New York with DFS for a new launch, Chivas 25yo – the definition of what we now call a Trinity partnership. The bottle even had its own seat! How do you see the Trinity model today? What does a good partnership look like to you, and do you think the Trinity is working?
I think that the two key success factors in a partnership are these: number one, full alignment of all partners. So in the case of the Trinity partnership, we need to make sure that whether it’s the airport, the retailer or the supplier, that we’re all fully aligned.
The second is collaboration. The more we collaborate in transparency and so on, the more we can align on basically targeting the traveller and making things happen.
Pernod Ricard partnered with social media influencers around the world to initiate a global conversation on what ‘love’ means. The campaign reached an estimated 400,000 people, engaging with over 11,000 consumers who shared their different interpretations and experiences of love.
As soon as any given member of the partnership doesn’t align and doesn’t take into account a long-term value-creation vision, and starts thinking short term, or taking specific short-term actions, then we start to see disalignment and it doesn’t work.
But the world is such that at the end of the day partners always come to the realisation, after ups and downs, that alignment is what maximises value. I remember in the early 80s this big price war between Coke and Pepsi in the US – it’s an MBA business case today. That price war destroyed so much value for the entire soda industry in the US and it took them a number of years to realise that, forget price, think consumer, think experience, think brand equity, think brand vibrancy, and so on.
So it’s the same with travel retail. At the end of the day, going back to the Trinity partnership, interests need to be aligned. There needs to be a long-term view, and it has to be about collaboration.
Finally, let’s touch on CSR. Firstly, I want to congratulate you on some of what you’re doing with the likes of the Absolut inclusiveness campaigns, Born Colourless and Absolut Drop, for example. Where does CSR sit as a priority for Alex Ricard?
I’ll answer very factually. The first thing I did when I was appointed Chairman and CEO – that very first day – was that I asked the board to enlarge the governance and appointments committee’s role and responsibilities to also oversee sustainability and responsibility. That committee is now called, The Governance, Appointments and Sustainability and Responsibility Committee.
That’s absolutely clear and very important. It’s also inherited from the previous generations. My grandfather founded the Institut océanographique Paul Ricard in 1966, which is the oldest independent institute for the ocean in Europe.
The Born Colourless campaign seeks to inspire people to look beyond assessing others based on skin colour. This short video proclaims that for the world to become a happy and colourful place, it must first become colourless.
So it sits very, very high on the agenda for many reasons, including personal ones but also others. I don’t do interviews anymore [with new staff], but what I do is little coffee times with new entrants and new talents that join us, and all their questions are about sustainability and responsibility, not about strategy. If you want to recruit and retain talents today, that’s vital.
It’s the same for consumers. Based on what we can see now, some people are judged today on things they did 15 years ago, and we’ll be judged in 15 years on what we’re doing today.
I’m convinced from that point of view, sustainability and responsibility is becoming increasingly important and relevant to talents, to consumers, to everybody – and if we don’t start today, we won’t be where we want to be in time.
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The Moodie Davitt eZine
Issue 269 | 15 October 2019
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