Rémy seeks ‘meaningful’ innovation

Rémy Martin’s CEO Eric Vallat has transformed the Cognac brand’s fortunes – but says he is “not looking for innovation for the sake of it”.

Rémy Martin’s CEO Eric Vallat

Imagine the scenario: you secure a new job in a sector completely fresh to you. It’s a big step change, but the category is strong and the role matches your expertise. Then, just as you are due to take up the post, the biggest contraction in living memory hits the business. The bottom (or, in this case, the top) falls out of the market. Everything your new team thought they knew about the category suddenly goes out the window. You’re in at the deep end, and your role as CEO is to lead your charges through the storm – except your compass is rigged and visibility is down to zero.

This is the scenario that befell Eric Vallat, the assured and clearly resilient CEO of Cognac house Rémy Martin. He joined the company from the luxury fashion industry in 2014, at the height of the global Cognac depression induced by the Chinese government’s 2012 anti-extravagance measures.

The category was immediately plunged into shock, with sales of VSOP and above Cognacs plummeting 13.3% by volume and 16.9% by value in the 12 months to July 2014, according to the Bureau National Interprofessionnel du Cognac. Rémy Martin total volume sales likewise fell 14% from 2012 to 2014, Brand Champions figures reveal.

“Well, when I signed [up for the role] it was just before, I didn’t know,” Vallat says. “But when I joined, this was indeed the case. But I would say I took it as an opportunity.”

It’s an opportunity he grasped firmly with both hands, and then ran with it. In two short years under his guidance, the brand has gone from strength to strength. Sales, both in volume and value terms, are up, and the brand is leading the global Cognac revival – so much so that it has been named 2016 Supreme Brand Champion. But how did Vallat guide Rémy Martin to such an emphatic rebound? From day one, it was all about strategic transformation.

“You’re more open to change when you struggle, you need to reinvent yourself,” he says. “If you are very successful, why change things?”

The biggest surprise to him, he says, was the open-minded nature of the industry. “And [everyone was] nice by the way. It’s a business where the perception of the products is [for] celebrating, sharing with others; so for me it has an impact on the overall mood in the business,” he adds.

“But I would say beyond that, the fact that it was very tough made it easy. Because clearly the message was: ‘Guys, we are in the middle of a storm. If you want to make it, we have to adapt our strategy, take our strategy to the next level’ and so on. So this actually has been helpful.”

Vallet’s two-pronged strategy has revived the business

Vallat credits both internal and external factors for the brand’s return to growth in 2015. “So first there is the US, which is a very dynamic and booming market,” he evaluates. He views the country as “critical” for Cognac, particularly today as consumer interest in both brown spirits and all things ‘craft’ crests.

“Second, I think we have some countries, rising countries, notably in Africa but also in some Asian countries, where the potential is huge and we can see growth, and growth becomes material, it is not anecdotal any more.” This material growth stems from the likes of South Africa and Nigeria, he explains, adding the caveat that some challenges may persist in Nigeria as a result of stubbornly low oil prices.

And of course, the improving situation in China is bolstering business. “I believe, in the general context let’s say, that the worst is behind us in China.” It’s a big statement, given recent history. “It’s going to be a long and slow recovery, but it’s been now three years since the severe headwinds we had to face.”

Clearly Cognac suppliers – and indeed the wider spirits market – need to adapt to a ‘new normal’ in China. Vallat agrees: “On our side at least we believe that there are ways now to build probably a more steady business than in the past, at a slower pace but more steady. And we can see our depletions back to positive in volume and flat in value, which means clearly there is still a challenge at the high-end, but the trend is back to growth.”

It is internally where Vallat’s vision, informed by his high fashion background, is resulting in real change. A two-pronged strategy has emerged: one, to push up the value side of the business; and two, to turn the culture on its head and implement a client-centric approach. His belief in driving value is as surprising as it is ruthless, especially in the core US and Chinese markets.

“We have been resetting and refocusing our priorities when it comes to product. We have clearly identified who the winners are for us and we’ve been investing in fewer topics but probably more efficiently.”

The “winners” on Vallat’s radar are Fine Champagne blends 1738 Accord Royal in the US, and Rémy Martin Club in Asia – both no-age-statement releases, but positioned above VSOP.

“These have proven a huge success: we’ve been growing 1738 by 50% in the US, so it might have been anecdotal in the past [but] it is now a product that is contributing to the overall volume,” he confirms.

No more VS

As with any revamped product strategy, old wood tends to make way for new. In Vallat’s case, it’s meant getting rid of VS expressions altogether.

“No more VS,” he confirms. “And we are now doing more volume in the US with VSOP and 1738 than we were with VS and VSOP, so it’s a very successful upgrade, let’s say.”

So not only has volume picked up, but value growth is running even higher. “And in a way, the more VS consumers you have the better because the more potential there is for upgrade. So this is something very specific for the positioning of our brand which is probably more on the high-end; our core product offer is from VSOP and above.”

With a higher price point comes the need to rethink consumer engagement – which is where the client-centric approach comes in. It’s so ingrained in Vallat’s mind that he rarely uses the words ‘customer’ or ‘consumer’ at all throughout the interview. It’s now all about the ‘client’.

“We are in the process of building a client-centric model which I believe is the key to future success,” he begins. “When you go for a value strategy, you need to make sure you treat your consumers and clients accordingly. So it’s not only about doing the best product, it’s also about making sure you are offering the best experience possible, making sure you have a brand that is powerful too, and that delivers a very inspiring message that connects emotionally with consumers.”

China has certainly influenced this approach. Having moved from gift giving to more personal consumption, it’s become more of a “classic” market, Vallat continues. “Now you need to address every individual, you need to appeal to the client himself. The question is, how do you talk to him, how do you display your products in the store, how do you create loyalty?”

They are big questions, especially in the ever-crowded retail space. But perhaps they are even more pertinent for the global millennial generation – those born from the 1980s to the late nineties, in terms of alcohol consumers. Vallat cites those in their twenties and early thirties as key targets.

“Personally, I have daughters; the elder one is in her twenties now so I am sensitive to this. It is interesting to see; in the eighties I was showing I was successful. In the nineties I was showing who I am. And now, I have the feeling that millennials are showing what their values are in the products they pick,” he explains. “I think our values, authenticity, transmission, and also respect of the terroir and so on, are values that resonate among the millennials.”

The brand’s new OneLife/LiveThem campaign is aimed at the ‘slasher’ generation

Despite its universal brief, Rémy Martin’s recently launched One Life/Live Them campaign undoubtedly holds millennial allure. Unveiled in October 2015, the initiative sees actors Jeremy Renner and Huang Xiaoming as brand ambassador roles in various markets, while the wider campaign encourages people to embrace their multifaceted lives and talents. The ‘slasher’ generation – those who don’t pigeonhole themselves with one identity; think the slew of millennial celebrities self-styled as models/actors/DJs – is front and centre.

“I am excited to work with this iconic brand and to help launch this new campaign,” Renner said as the campaign kicked off. “The story of how to live your life really resonates with me personally. I think to fully realise one’s potential you must take action, remain curious, embrace your failures as they are gifts, and honour your successes with humility. We are all many things and cannot and should not be defined by one thing, which is truly awesome.”The slasher concept is one Vallat also personally identifies with.

“Everybody has many talents to reveal, everybody wants to lead many lives. Even me. I happen to be a poet as well. I like writing poems, I’m a sportsperson, I’m blah, blah, blah – everyone is a slash person.”

How is the campaign playing out in a practical sense? “What was very important to me when I joined is to make sure the message is one worldwide. So One Life/Live Them is one message. I don’t believe in activating various platforms worldwide because today, with the internet and the fact that people travel a lot, you are exposed to the brand everywhere… if we split our investment behind too many topics we will lose this efficiency.”

Part of the client-centric approach, however, is activating One Life/Live Them on a meaningful, local basis. “It’s one message because you need the consistency, and if you want to create value you need a brand that generates appeal beyond the product itself,” he explains. The secret, then, is a two-pronged approach: quality, plus an emotional connection to the brand. “It’s the difference between Louis Vuitton and the classic leather bag. It’s the universe, it’s the brand appeal.”

To build emotional engagement locally, Rémy Martin is tailoring the campaign by market. In China, Xiaoming takes the reins, while in the US, it’s Renner. And Africa doesn’t have a celebrity face at all. Vallat reckons it is a market where the team proved One Life/Live Them is “very campaignable”, provided you engage the right people.

‘Meaningful’ NPD

Scarcity and rarity are two factors that drive interest in any brand, and for Rémy Martin things are no different. In addition to the inherent sparsity of a finite, aged liquid, the brand produces a select number of limited editions to push this further – most recently Rémy Martin XO Cannes 2016.

“First, as you have noticed, indeed this limited edition is on XO and not on VSOP, which tells you about our value strategy,” Vallat says. “For me, this limited edition is quite refined and well done, [and] is a halo on a strategic product for us, which is XO.”

Will we see more of these releases in order to amplify the wider portfolio? “I come from fashion. In fashion, every six months you renew 100% of the collection. While here, for the first time in my life I am working on business plans for the next 40 years,” he outlines.

“So it’s a change of perspective which is radical and what I believe is it is very important to set clear priorities and create solid foundations to build long-term success for our products… I’m not looking for innovation for the sake of it. Same as for partnerships with designers, or whatever – it has to be meaningful, it has to serve a strategic purpose. This is the number one priority.”

That said, he does hint that we can expect to see something new later in 2016. “We will be tying up with designers; we have something coming at the end of the year, by the way.” While he won’t be drawn on details, we can be sure it will be consistent.

If one was to sum up Vallat’s over-arching strategy – spanning One Life/Live Them, the value-led approach and the client-centric philosophy – it’s that emotional connection. “What I would like people to say, those people who say today I respect Rémy Martin, they have a very nice product, but what I would like them to say in five years is ‘I love Rémy Martin, it’s the brand for me’.

“So you see the difference, of course. And this is what the brand platform is about.”