Close Menu
Top 10

Spirits brands discuss the importance of luxury

High-net-worth consumers are changing – and so is the way they spend and what they drink. As the old models of luxury are called into question, we examine what the future holds for super- and ultra-premium spirits brands.

The is a new type of luxury in spirits

*This article was initially published in the September 2015 issue of The Spirits Business magazine

It is a warm March afternoon and Shanghai’s slick, ultra-modern Plaza 66 is buzzing. Three-storey high mega-facades glint in the spring sunshine, declaring the presence of luxury behemoths Hermés, Cartier and Louis Vuitton. The shops are busy; this is one of the country’s premier stretches of retail real estate. Yet the excitement is most palpable around the Fendi boutique just inside – Céline, a bastion of understated chic, is popular, too. No longer can one stereotype the well-off Chinese consumer as monogram-clad, conspicuously and expensively dressed head to toe in bling. No – a new quiet sophistication has come to Shanghai, and it’s not just in fashion, or indeed in China, where this revolution is being felt.

The overall number of luxury consumers in the world is increasing, says Bain & Company in its Worldwide Luxury Markets Monitor 2015 Spring Update. In the past 15 years the luxury shopping population has increased from 140 million to 350 million – with Chinese consumers accounting for more than 30% of global luxury spend. And as touristic expenditure now makes up almost half of all luxury spending, it’s crucial for brands and retailers globally to pay attention to the Chinese luxury climate – its ramifications are universal.

‘Enlightened luxury’

“Some markets are shifting from ‘statutory’ luxury to a more ‘enlightened’ luxury,” Hine Vintage Cognacs CEO, François Le Grelle, agrees. He reckons that markets which once leaned towards exclusively high-value items are now seeking a more educational approach – especially when it comes to understanding the processes behind spirits production. “This is a very encouraging shift in consumption, enabling customers to grasp the differences between the diversity of products they are exposed to.”

The perception of what it means to be “luxurious” is also up for debate as consumer priorities change. There is no one answer to what makes a product stand out to the affluent, says James Espey, chairman and founder of Last Drop Distillers. “Some people simply want limited, expensive products for personal gratification or to impress friends – for example, a Bugatti, not a BMW. So vintage and scarcity and reputation are all part of the mix.” But for others, experience is critical. La Grelle says that education is the main difference when it comes to luxury purchasing habits, and Balblair’s brand manager, Sarah McNaught, agrees. For her, it is food-pairing which successfully mixes the experiential with the educational.

But a great deal of misunderstanding and misconception surrounding who today’s luxury audience actually is adds to the transience, thinks Vadim Grigorian, Royal Salute global brand director. This marks a major shift, and one that is not easy to adapt to.

Last Drop Distillers produces an array of luxurious bottlings

Everyday luxury

“The consumers of luxury are almost everybody. It depends on when, which occasion, and how often [they] would consume. For example, someone who is very rich could consume Royal Salute on an almost daily basis and buy bottles to treat friends. But if you don’t have money, or if you’re not that rich, you can still buy a glass of Royal Salute for a special occasion if you like the brand. It really depends.”

This realisation that “luxury” has rightfully become a great deal more democratic and diverse is calling for a radical shake-up in how spirits companies “seduce” consumers, as Grigorian puts it.

For Maxxium UK this has meant a total restructuring of its operations as it seeks to revamp the way it reaches consumers. Two years ago the team created a Luxury Marketing Hub. Then, in a separate but related move, the company set up a London division which sees the city treated as its own market, distinct from the rest of the UK. Chris Anderson, Maxxium UK marketing manager, explains that the decision was in order to tap into high margin, high value opportunities across the city’s on- and off-trade channels. “We created a whole new sales team and sales structure. We can service the right outlets where our brands need to be and need to be seen in terms of affluent and high-net-worth individuals (HNWIs).”

From its “very diverse and very cosmopolitan” consumer base, Anderson identified two groups of HNWIs driving luxury in London and across much of the world: weekend millionaires, including millennials and travelling HNWIs from Russia, China, Qatar, and UAE; and “Generation Joneses”, older people who have typically paid off the mortgage and packed the kids off to university.

Generation Joneses

This hyper-targeted strategy was developed to reduce the space between Maxxium’s brands and the end consumer. “We have to understand how these people shop. The affluent consumers and Generation Joneses like the personal service; the bricks and mortar approach which is less about online and digital. They like to go in, they like to talk to people about the products, they want to be educated and they’re looking for that element of service. The flip side is true for the millennials; they’re looking for recommendations from peer groups or they will look online for reviews.”

Therein lies the rub: whoever the luxury customer is – and it is varied – they all desire a personal, tailored approach, be that face-to-face or online. How can such an omnichannel approach work when customers are so diverse?

Jane Ashley, Suntory’s UK brand manager, is convinced of the power of mobile. “[HNWIs] are becoming more savvy and mobile is becoming increasingly used for purchasing. They want something rare and exclusive, something with a craftsmanship and heritage story. They like to be well informed, and tend to do research ahead of purchases made.” She adds that almost two thirds (63%) of wealthy consumers have made a mobile purchase, while 53% own a tablet and 41% use one for researching potential purchases, according to the Luxury Institute.

According to Hine Cognac’s CEO, consumers are moving towards “enlightened’ luxury”

Informed purchase decisions

Caorunn Gin brand manager Ibolya Bakos-Tonner agrees. “Some consumers spend 15-20 minutes in front of the spirits shelves, reading the product label, searching for product information online and comparing prices.”

“You have to consider the touch points that consumers potentially have with your brand and ensure there is relevant engagement with them across those channels,” explains Edrington Global Travel Retail managing director Tellis Baroutsis. He recognises that in terms of understanding the complete customer journey “it’s still early days for travel retail”, but that it is “definitely important” to understand how different channels fit together.

“We need to understand where these consumers are influenced,” Anderson figures. “We’re looking at things like concierge services… the lifestyles of these high-net-worth individuals and affluent consumers – how can we actually be more [of a] fabric part of their lifestyle?”

He adds that the company is “not naïve enough” to think that simply holding a presence in the on- and off-trade is enough in the luxury sphere. “We need to make sure we’re understanding how [HNWIs and affluent consumers] live their lives – how do they travel, how do they purchase things, how do they make dinner reservations? We don’t have all the answers yet.”

Hedonistic luxury

The corporate world is offering up opportunities, too. “How do we get to decision makers in, for example, the top companies in London, the FTSE 100 companies? How do we influence what products are stocked in their boardrooms?” Anderson muses.

But ultimately “retailers are the only ones who can empower a customer to feel the product, the packaging, the ambience that comes within,” says Hine’s Le Grelle. Solely thinking omnichannel in a market where experience is everything is mistaken. “The hedonistic side of any luxury purchase is very strong and has to be at the heart of Hine’s global approach.”

Back in Shanghai and shoppers head out from Plaza 66, past those giant shop fronts, laden with all kinds of luxury. But it’s not the usual big brand names that feature. “The old models are being called into question,” says Claudia d’Arpizio, a Bain partner and lead author of the Worldwide Luxury Markets Monitor report. “In this new environment, brands must undergo a fundamental paradigm shift if they want to win in the years to come.”

It looks like you're in Asia, would you like to be redirected to the Drinks Business Asia edition?

Yes, take me to the Asia edition No