At the TFWA China’s Century Conference in Guangzhou last week, speaker after speaker lined up to talk about the changing face of Chinese luxury consumerism. Gone are the days when premiumisation in China meant sticking some red and gold glint on the packaging and raising the price by 30%. When it comes to brand awareness, China’s Millennials are much more savvy in their brand awareness than their parents.
“Unconditional love for luxury brands in China is being reassessed,” Bally CEO Frédéric de Narp told delegates. “Every brand has craft, quality and heritage, so you need to offer more.”
Luxury suppliers such as Bally are shifting gears to appeal to Millennial Chinese, who are estimated to account for 85% of the country’s luxury purchases in the next ten years. The generation is critical to the Travel Retail channel, as it accounts for just a quarter of the population but three-quarters of outbound travellers.
This new landscape should be fertile ground for new brands in the Chinese – and broader Asia-Pacific – markets, as Millennial consumers seek fresh experiences and innovative, creative products. But, Travel Retail has always been a difficult market to break into, as established products defend their hard-won territory and older attitudes prevail. A creeping awareness in the industry that younger consumers want more than just the same old brands has yet to change that.
“Every meeting I go to, they tell me they love my product,” Gautom Menon, creator of Indian rum brand Wild Tiger, tells just-drinks. “But, when it comes to crunch time we just hear the same things – you need to be in more countries, more people need to start asking for it.”
Menon launched Wild Tiger last year after a decade-long gestation period. But, despite some strong successes on Tiger Airways’ in-flight retail – where Wild Tiger Dark has outsold Johnnie Walker Black and Absolut vodka – he faces challenges convincing Travel Retailers to back his brand.
The 34-year-old former Oxford business student is a canny marketer and knows the importance of pitching at the Millennial Asian consumer. “I think the Millennials are looking for a story,” explains Menon, who donates 10% of Wild Tiger’s profits to tiger conservation. “With a brand like Wild Tiger, there are a lot of activations we can do. People are buying the bottle and putting it up on social media.”
And yet, he says, he still finds retailers unreceptive. “One of the major feedbacks we’ve had from them is that to add a product, they literally have to delist someone else. Space is a huge constraint for them,” he says.
Across Asia-Pacific, as elsewhere in the channel, the power of brands that are already settled in the Travel Retail sphere is a major obstacle to newer players. Larger spirits players defend their retail space vigorously, and will demand that their brands are not placed next to new brands, should they distract consumers’ attention.
“With brands like [Edrington’s] The Macallan, it is a collaboration, the retailers work with the brand,” says Jean-Christophe Cadoret, who works in Singapore for French wine trader and distributor Peuch & Besse. “For us, it’s a conquest. We have to work so hard to convince them to stock us.”
With the market changing, though, retailer attitudes appear to be changing, too. Some, at least.
In a channel that wants to attract the younger consumer, very few Millennials have yet made it into leadership positions. Eudes Fabre, Lagardère Travel Retail’s CEO for Greater China, is something of a rarity in Asia-Pacific Travel Retail – an actual Millennial. “We are a bunch of old people trying to sell stuff to young people,” Fabre admits.
Yet, Fabre is on a mission to combat that. Finding the chain of command slow to react to the pace of change in China, Fabre implemented his own, bringing his unit up to speed on demand for e-commerce and mobile interaction. His next crusade is to give consumers what they want: For him, that means new brands.
“[The industry] is behind on that,” Fabre tells just-drinks. “In fact, that is one of the big challenges I want to face. We have limited space, and the industry is quite inflexible, part of which is down to the brands themselves. I want to bring in new, edgy, exciting brands, but they’re up against established brands that don’t want to be positioned next to the new brands. That’s why we have such low conversion rates in Travel Retail. You walk into these places and see the same stuff everywhere.”
His solution? “We need to make ourselves more approachable [to suppliers]. And, we need to be willing to fail.” Not everyone shares Fabre’s zeal. The CEO of rival retailer DFS, Philippe Schaus, tells the Guangzhou audience that Travel Retail is “not necessarily the best place to introduce an entirely new brand to the public”. “People, when they travel, to some degree they want to be exposed to the brand before they buy it.”
Speaking to just-drinks off-stage, Schaus says bringing in new brands depends on where you do it. “You have to be super careful,” he says, warning of the high rents in airports such as Hong Kong that limit retailers’ choice in what they stock. Downtown retail zones, which are becoming increasingly common across Asian cities, offer a better environment to try out new things.
Meanwhile, DFS is experimenting with month-long pop-up stores in airports to test-run different products.
“In all categories, we are trying out brands,” he says. “If there is any traction there, then we can make it work. Then, we go to the next step.”
Ask Wild Tiger’s Menon what he thinks of possible improvements, and he remains unconvinced. He needs to see more from retailers before he’ll believe they have changed their ways. “They make it seem that they are always looking for innovation and keeping the assortment fresh, but it doesn’t happen as much as they’d like or as much as the suppliers would like,” he says.
But, it won’t deter him from trying to break the market. He’s got a long-term plan to seed Wild Tiger in as many markets as possible, and to build up the kind of momentum the industry won’t be able to ignore.
“It’s good to keep knocking on the doors,” he says. “I think these things take time.”