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Strategy

Camus Cognac finds a brave new world in China

Mrinalini Reddy |

Camus Cognac ventured into China looking for a way to save the business. What it found was a new lease on life…and demand for a few new product lines.

It was 2005 when Cyril Camus, fifth generation President and bearer of his family’s cognac producing tradition, was wrestling with giving up a nearly 150-year-old ancestral business. The international wine and spirits industry had been experiencing a significant period of consolidation, and, to resist meant competing with big global companies and streamlined, efficient distribution lines.

“If you are not part of that stable of brands, it becomes difficult to keep and maintain your access to the market,” said Camus in an interview with INSEAD Knowledge on the sidelines of the Global Entrepolis Summit in Singapore on October 17, 2011. “If we [could not] be in those existing pipelines, we said, let’s create a new business model that’s completely different from what the other guys are doing.”

China quickly became the window of opportunity for Camus to retain the family crest and build something new. “It was a bit of a free fall,” reflects Camus of China, “everything seemed to be possible in a way.” Collapse of the state monopoly for liquor distribution and the sheer size of the market resurrected the Camus business and Asia including China now represents some 50 percent of global sales.

What worked?

Camus’engagement and interactions with consumers. “This is different from the traditional distribution system of importer, wholesaler, retailer,” explains Camus. “In the wine and spirits industry, there is no direct contact between a brand owner and his customer. What we created is a way to engage directly, and we find out a lot more about our consumers that way, so we know which product they want, how they want it and so on.”

Handle with care

Like other luxury brands in China, cognac quickly became symbolic of status, consumed at banquets, corporate events, or used in gift exchanges.  But Camus says he’s targeting the small but growing segment of consumers that drink for appreciation and self-satisfaction. Their initial strategy entailed taking an authentic positioning during a time when international luxury brands were also flooding the Chinese market. “Within all that mass of products and brands, we presented ourselves as just ourselves,” says Camus.  “We just said this is who we are, we are available and if our value is of interest to you then this is the brand for you.” 

It made financial sense for the independent producer to pursue a niche segment given cognac’s limited production capacity, he explains.   Annual turnover at Camus is US$80 million, 98 percent of which comes from export markets.  It's a fraction of what the big four cognac houses—Hennessy, Rémy Martin, Martell, Courvoisier—produce. The four account for some 90 percent of all the cognac produced.

Camus built the China operations from scratch; it was separate from the rest of the company from the start.  “We saw that as a learning ground and we wanted to not be influenced by preformatted ways of thinking,” says Camus.  The company set up an independent import and distribution structure and operates five dedicated retail stores in cities including Shenzhen and Guangzhou. Last year marked the launch of Maison Camus an exclusive lounge in downtown Beijing’s business district—no music, no entertainment—just an intimate venue to soak in the culture of Camus.

Wine, teapots and more

“When you talk to expats, they see their jobs as teaching the Chinese how to do business,” says Camus. “What I [found] is there is a lot to be learned.” 

Consider service levels. Compared with Europe where service expectations are fairly standardised, Chinese clientele have no limitations to what they expect, explains Camus.  “Once a relationship is built, they will use the relationship to what they believe is an appropriate level and it is our job to supply the service,” he adds.

INSEAD professor of strategy Gabriel Szulanski concurs and explains that the perception of the Chinese customer is different.  “They need to trust you and in order to trust you, they need to test you.” His early observations from on-going research of business franchise models in China has shown that companies have had to adjust their models to become successful because the China market presents different opportunities.  Pizza Hut, essentially a pizza delivery business in the U.S., is a hugely popular dating spot for the Chinese, he illustrates. “You need to adjust to the opportunity – a myopic narrow model doesn’t necessarily work in China.”

That learning for Camus has spurred new ventures as it began to diversify into distributing new products—wine, champagne, coffee, and, even teapots, serving trays and cutlery. Why? “Because it is being expected of us,” Camus says.  “They are all part of the same world.  People say you make great cognac but I don’t have the proper glasses at home. Our customers don’t want to talk to someone they don’t know about choosing their wines and so they ask us.”  These new products come from reputable European brands, just not established in China yet.

But it is a fine balance, cautions Szulanski, particularly for heritage brands like Camus, where moving too fast and too quickly risks diluting a carefully crafted product and identity.  “My advice is to not forget their expertise in producing cognac and lose it by doing whatever the consumer asks. You don’t want to get too confused.”

Making mature markets new

Meanwhile, a tough lesson from Japan and over-reliance on a single luxury market has Camus striving for greater geographical balance. The 41-year-old chief is hoping to transfer his China learning not only to grow emerging luxury markets including Vietnam and Russia but also mature markets like the United States which remains the biggest cognac market. Rather than relying on importers, Camus is establishing an independent sales and distribution operation in the U.S. “The things we have learned from our Asia and China operations – that a new way to access consumers – is applicable to mature markets and that makes them new markets for us,” says Camus.

Today, Cyril Camus is based in Beijing. With a worldwide staff of around 300 people, the business has been passed down from father to son for more than five generations when Cyril became president at the age of 33 in 2004.

Can the independent family-owned cognac house continue its upward trajectory in China? Yes, says Szulanski. “But they need to allow themselves sufficient time to first experience China through the optics of their existing model before they attempt to reformulate it. That’s the paradox of China.”

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