just the Answer - Martell's CEO & chairman, Philippe Guettat

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Pernod Ricard's Cognac unit, Maison Martell, is about to celebrate its 300th anniversary. just-drinks caught up with Philippe Guettat, Martell's CEO & chairman, to discuss how the party preparations are going, why China demand is at a crossroads and what lies ahead for the unit in Africa.

Philippe Guettat, Martells CEO & chairman

Philippe Guettat, Martell's CEO & chairman

"It's kind of a dream to be head of Martell for this celebration," says Philippe Guettat, CEO & chairman of Pernod Ricard's Cognac house. Martell is 300 years old this year and Guettat is knee-deep in preparations for the landmark event.

It will, however, be one of his final projects at the Cognac unit - after just-drinks spoke to Guettat, Pernod announced that he would move to Hong Kong to lead the company's Asia division. It is another high-profile role for Guettat, who has helmed The Absolut Co and Pernod's China unit in his 20-year career at the French spirits and wine group.

Behind him will lie a turbulent three years at Martell that has included the anti-extravagance measures in China, which saw demand for highly-profitable luxury Cognac brands tumble and Cognac makers race to readjust their global presence. He has also overseen the re-emergence of the US as a primary market for Cognac as brown spirits have started to bite into vodka's long dominance.

But despite the challenges, Guettat will exit Martell on a high. Indeed, he will get what must surely rank as one of the most extravagant leaving parties ever. The tricentennial celebrations, which started earlier this year with a global ad campaign, culminate this month in a massive party amid the splendour of the Palace of Versailles. The former home of France's kings and queens will once again resound with the clink of Cognac glasses as hundreds of well-heeled guests toast the world's oldest operating Cognac house. Last month, Pernod announced that actor Diane Kruger, who played Helen of Troy in the Hollywood epic Troy, will host the event in her new role as Martell global ambassador.

"A lot of different generations of marketers and communications people as well as my predecessor have been working on it, so it's an accomplishment for all of us to see this come through and create a stir," Guettat says. "Every time I'm in the market, clients are asking, what are we going to do for this 300 years? This kind of occasion is very rare."

just-drinks: Has leading a 300-year-old Cognac house been a different experience to running Absolut?

Philippe Guettat: Oh, there's a lot of history with Absolut. The brand was created in 1879. But, it's true that here you feel more the weight of the heritage, of the history, of the tradition. Our job at Martell is to keep on improving it but to keep to the traditions.

j-d: It has been a difficult time for Cognac. How do you see the category at the moment?

PG: Our last fiscal year was a difficult year. But the first quarter (of the new fiscal year) has shown an improved trend for Martell, with volumes up 7% and sales down 4%. (Martell Cognac volumes in China increased by 13% over the Chinese New Year period compared to a 5% rise in the eight months since that start of its fiscal year in July.) We've seen in China the good resistance of Martell, driven mostly by the Noblige brand, which has accelerated its rate of sales.

There are two sides to our business in China - there is banqueting & traditional entertainment, and this part has been down, while the other side, which is towards individuals - the middle class going for the private entertainment in restaurants and clubs as well as private gifting - is going well and increasing. So, we are at a crossroads between these different trends.

But, we are pretty optimistic that we will see gradual improvement and, at the same time, I remain optimistic about the long-term future of the China market.

j-d: Have you been surprised at how long the anti-extravagance measures have lasted?

PG: I would say yes and no. Yes, because you can expect that this will happen every time there is a change of leader. No, because, at the same time, it was clear that there will be a need to take action to ensure the long-term stability of China - to bridge the gap between the social classes.

There was an increasing disconnection between the masses and the rulers. So, I think it was very much needed to bring unity to the country and to ensure there will be a more harmonious development in the future for business, and for the overall society.

j-d: Are we seeing the end of high-end Cognac in China?

PG: I don't think it's the end of it. It's the end of an era of... lets say, over-the-top luxury, but in every form. Not only in wine and spirits.

But, on the other hand, I think it's the beginning of an era of a new type of luxury that is much more grounded in personal wealth. People who have money - and will get even more money - they will aspire to the best in terms of products, what they can drink and appreciate.

For Martell, that's exactly what we're doing; to provide the proper reasons for people to drink Martell, to chose this Cognac. They will be more selective and we will have to provide them with really good reasons to choose us.

j-d: So, is there still a lot of love for Cognac in China?

PG: I think it depends on the capacity for brands. People consume brands more than categories. It's for each individual brand to be able to answer better the new needs of the new generation of middle class Chinese - to create aspirations and really strong imagery that can appeal to consumers. Our 300-year celebration is even more important in this context.

j-d: Which markets excite you?

PG: Asia is doing very well. Last fiscal year, outside of China, we grew volumes by 16%. Malaysia, Singapore, and Indonesia as well as Vietnam are doing well and we are seeing great progress in Taiwan alongside Travel Retail, which is a very important channel,

We are going back to reconquer the US. We launched Martell Caractère in 2013, initially in California, and that will be expanded into other states to recruit new drinkers to Maison Martell.

And we can see more positive momentum in the UK, which is traditionally a very strong market for Martell. Beside that, we are making a lot of effort in Russia and eastern Europe.

But, next for Martell is Africa, on the back of development of Pernod Ricard in sub-Saharan Africa.
Before, the key markets were Nigeria and South Africa, along with Kenya and West Africa.

j-d: Is selling Cognac in Africa different to selling in Asia?

PG: It's like Asia, but 20 years ago. We can see a lot of excitement for the Cognac category and for real powerful brands that can inspire. So, there there is similarity. There are differences from cultural and social points of view, but the drive and the dynamism can be compared to what Asia was like 20 years ago.

j-d: There has been a lot of movement in the Cognac category recently. What's it like to be on this roller coaster?

PG: The performance of Cognac is linked to the global economy. Prestige spirits are impacted by the morale of consumers and clients which is linked to the perception of the economic situation. It's a roller coaster but this roller coaster is trending upwards and has been for the past 20 years, This is part of the business life, and I would say we are even more protected than in other types of business.

j-d: Does it make it more fun?

PG: Yes, otherwise we'd be bored.

j-d: Are you happy with your stock levels?

PG: Yes, we are happy and continuing to replenish our stocks. In October, we increased our purchase price of wine by 3% to show our confidence and trust to wine growers to ensure the growth of the Cognac industry. We have a healthy level of stock and we continue to invest, so all the signals are green.

j-d: You've been with Pernod since 1994. Do you ever see yourself leaving the company?

PG: I've had many different careers with Pernod Ricard, so it's not like I've been in the same company for a long time. I have a great love for the brands and a great fit with the people and values. As long as I'm needed and wanted, I'll be happy to stay with the group.

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