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12.1969

Massachusetts Beverage Business

archivedFeaturedArticles

Cognac

Article By: Bob Bradford

Here, at the beginning of 2004, I confess to feeling like a total square. After weeks of research and interviews for this current, annual, in-depth Cognac category profile, any conceit that there might still be something hip and contemporary about me has been quickly shattered.

By ROBERT BRADFORD

I always envisioned myself, and still do, to be one of that discerning, meditative brotherhood of fine cognac cogniscenti, who've always believed in sipping and savoring a snifter in a deep leather armchair in some comfortable retreat, and maybe with a fine Havana cigar when the wife's not around. Not that I'm going to change, mind you. In my later 60s, I'm too old to change. But this is emphatically not the hip cognac image of today, as one top Remy Martin brand executive put it to me bluntly, in a discussion (below). "Robert," he quietly murmured almost sadly, "I just have to tell you that you do indeed fall into an increasingly ancient cognac consumer profile. And, for you, all that's happening today can understandably seem entirely shocking." In other words - I'm an antique!

Well, he's right. It seems I really am passe, compared to what's going on out there now. As it turns out, what is now driving the present-day cognac advertising market here in America is Hip-Hop culture, of which I knew woefully little before undertaking the research for this project. Other than the headline news, and now an intriguing feature film about murdered hip-hop messiah Tupac Shakur, I was totally ignorant about hip-hop superstar pop celebrities like Eminem, Busta Rhymes, Ja Rule, P. Diddy, Dr. Dre, LL Cool J, and a host of others. But all of this proliferating urban culture has now become mainstream, and emerged as a phenominal motivating force for cognac consumers everywhere. One of the results is that it has turned this category into the most exciting sociological marketplace in the entire beverage industry.

How profound is the impact? Here's just one extraordinary case in point. About two years ago, rap star Busta Rhymes came out with the pop hit, "Pass the Courvoisier". At the end of that same year, 2002, annual volume sales for #3 cognac category leader, Courvoisier, suddenly shot up from 450,000 9-liter cases - to 535,000. That's a one-year increase of 85,000 cases, a growth rate of nearly 20%. Consider that the brand's growth over the previous few years had averaged around 5000-8000 cases. You do the math. And Courvoisier brand executives candidly told me that this spectacular single year performance was very much a result of the Busta Rhymes hit song bonanza, and that they don't expect another growth year percentage quite like it anytime soon.

But Courvoisier is hardly alone. Virtually all cognac marketing in the US has adopted hip-hop strategies and celebrities. In a recent video, here's megastar rapper Eminem getting an intravenous feeding of Remy Red in a hospital emergency room. This, by the way, also sent cash registers spinning, and had a lot to do with Remy Amerique's sudden outdoor advertising campaign investment of more than $2.5 million last year. The year before they'd spent nothing. I learned that almost all this unprecedented new ad spend was focused on a new Remy Red billboard campaign.

Open up a December issue of Sports Illustrated, as I did last week, and, right next to the lead cover feature, there's a striking full-page ad for Martell Cognac showing an outrageously handsome, soulful black multi-media artist, Sanford Biggers, staring back at me with a compelling, challenging expression. The only text-over on this portrait reads, "My Expression Is My Truth" and, also, "Rise Above". The fact is that basic messages of aspiration seem to be the key buzz theme and common denominator underlying almost all the marketing initiatives going on in the entire arena of cognac campaigns. As Schieffelin & Somerset Hennessy Product Group Director Lori Tieszen, observes in our lengthy discussions about the ethnic marketplace, "Today, we're living in a world of aspirational imagery, and this is what cognac truly represents to consumers anywhere you go."

So, read on, my friends, and start getting hip to this very happy new year era for the fast-growing Cognac category.


ALEX LEE
BRAND MANAGER
REMY MARTIN COGNACS/REMY AMERIQUE

ROBERT BRADFORD Year after year, since the early '90s, Remy's consistent growth performance has played a significant role in fueling the Cognac category's impressive overall forward progress of the past decade. And your brand's dynamics over the past five years, in particular, have been especially noteworthy, moving at a steady double-digit clip since 1997. As of year 2000, the overall Remy brand family vaulted ahead of Courvoisier into the #2-leading volume cognac position here in the US, and last year you reached the 600,000 annual 9-liter-case plateau. Indeed, your sales have grown 300,000 cases, more than doubling in just five years. This is a rather astonishing track record by any standards in a beverage alcohol category. Where do you see all this momentum coming from?

ALEX LEE A great deal has to do with today's increasing mainstream popularity and growth of so-called Hip-Hop urban culture. Remy, along with some other cognac brands have been benefitting from a lot of extraordinary recent exposure from pop-hit videos with rap stars like Eminem, Ja Rule, Busta Rhymes, and many others. Of course, America's cognac sales have always received huge driving support from an Afro-American consumer franchise. Traditionally, for many years, over 80% of all cognac in America was consumed by the Afro-American consumer segment, but, now, Hip-Hop has expanded far beyond Afro-American ethnics. Just consider, for example, that the current superstar rapper, Eminem, isn't even black. He's a white guy. Yet, his popularity virtually carried the Hip-Hop record industry last year. The fact is, as has been widely reported, that if it weren't for him, the Hip-Hop record industry segment could easily be experiencing a deep recession, right now.

Hip-Hop, in general, has become so fashionable that a number of the original black star rappers like P. Diddy have really become more like entrepreneurs. Today, they're really more businessmen than musicians. P. Diddy's got things like a clothing and shoes line, which, I believe, grosses something around three or four hundred million dollars annually. He's also got a record company and a talent search company. You name it. This guy's into everything. Like I said, he's now much more about his businesses, not so much the music.

On the other hand, Eminem is all musician. And in a recent hit video there's a little scene where he goes into a hospital emergency room and is being given Remy Red intravenously. Another prominent rapper, Ja Rule, has a video with a scene where he's in a fabulously expensive mansion, surrounded by all sorts of luxurious lifestyle cues, and basically he's drinking Remy XO. Even J. Lo (Jennifer Lopez) has a video with LL Cool J where the two of them are sort of lovers, relaxing in a comfortable, well-appointed livingroom and sharing a bottle of Remy XO. This kind of thing does phenominal things for any brand's image.

 

RB Are these product placements your doing, or anything related to your ad strategy initiatives, or was Remy selected by these video producers independently as their product of choice without any prompting or financial reward?

AL This is a point that should be made crystal clear. It's a protocol understanding that video producers will approach us to get our approval for using a Remy product in their project. We're careful not to invade their creative territory, but, by the same token, we want to be sure that our brand is displayed and used in a tasteful responsible way. So, there is some discussion and an agreement beforehand about product use. But these are not Remy ad executions in any way. We never pay for any of this. Rather, what this demonstrates is where our brand equity is. And it's all directly related to a hierarchy that seems to exist about cognac brand perception.

You start with the fact that cognac, itself, is generally regarded as a luxury premium spirit. But, beyond this, you find kind of a caste system of brands. Remy's perceived at the top of the scale in terms of quality and aspirational appeal. Frankly, we've always owned the higher marque market in the US, and actually on a global basis, too. Over 70% of all VSOP action in the American market continues to be Remy. At this level, we've always offered the quality of Fine Champagne cognac, a blending of the two finest Grande and Petite Champagne districts of Cognac's Charente appellation - and we've maintained a price point around $36 for a 750ml. Our leadership at the XO level is also increasing. We used to outsell our nearest XO competitor by 2-to-1. Today, we're closer to a 3-to-1 margin. Even in this ridiculous economic time, our XO business, with a $120 to $125 price point for a 750 ml, is still growing at a very healthy pace. All this has helped create a super-premium image for Remy, irregardless of ethnic persuasions. What we're representing today is something that's more generally aspirational to a consumer audience-at-large. And this, of course, makes the brand unusually appealing for these luxury-oriented video productions.

 

RB You're making me feel like a real square. I confess to knowing very little about Hip-Hop music or rapper celebrities. And being an older fine cognac fancier in my later 60s, brought up in the after-dinner-cigar, sip-and-savor snifter tradition, I have to confess to being somewhat startled by how all this current Hip-Hop phenomena has been impacting the category. Seeing how it has proliferated and become such a dominant feature of today's cognac marketplace at all levels continues to amaze me. Does any of it surprise you?

AL Robert, I just have to tell you that you do indeed fall into an increasingly ancient cognac consumer profile - and, for you, all that's happening today can understandably seem entirely shocking. But consider that this year marks something like the 30th anniversary of Hip-Hop. I mean, hey, Hip-Hop's been around for quite awhile. So, for these young new cognac drinkers in their later 20s, and even early 30s, they've grown up with Hip-Hop music. Many hardly know a thing about Rock 'n Roll or Rhythm & Blues or whatever it was you grew up on. By now, that's all history. Today's hip-hop culture is everywhere. We're now even seeing the emergence of a new star rapper who's Chinese-American from Brooklyn named Gin. All this had made cognac one of the most culturally exciting categories you could imagine, particularly right here in America. It's absolutely fascinating from a sociological point of view.

RB When I last took a turn-of-the-century look at the total Remy brand lineup, you were putting a large new emphasis on a low-end VS product entry, Grand Cru. You also were introducing a stratospherically-priced, ultra-limited edition of a 750ml Baccarat crystal decanter extension of Remy's top-of-the-line Louis XIII, which has been a world-famous icon of finest quality cognac for decades, coveted both by leading on-premise fine-dining and drinking establishments and by off-premise collectors. The new product was called Louis XIII Diamond. It apparently contained the exact same blend of extremely old cognacs as in Louis XIII, but had a 1.5 carat, amber-colored diamond encased in the stopper. And it's $6000 retail price made it the most costly cognac offering on the market. How have these initiatives been working?

AL Louis XIII Diamond was a one-time thing. It was a very conspicuous product that had great appeal to serious collectors with a lifelong love of Louis XIII. But it also was purchased by a whole cross-section of people just wanting the best-of-the-best. So, it was a mixture of old and new money. For old money, it was a lifetime opportunity to add an ultimate crown jewel to their collection. To new money, it was a confirmation of the fact that they've made it. We did well with it while it lasted. Now it's all gone, finished.

As for our Grand Cru initiative, we've been growing double-digit ever since launching, and we're probably going to increase the overall exposure, because the opportunities are huge. But they way we are positioning the whole portfolio is this: it's all about the aspiration to Remy Martin. I mean, we all want a Mercedes, and maybe an XS-600, in particular. But this is difficult to afford. This is why Mercedes has the 230 with a smaller engine and all that, plus other lower-priced models. But they're all Mercedes, nonetheless, and they all have that Mercedes stamp of quality and class. Likewise, we want to make it a bit easier for some consumers to come into the House of Remy. This is exactly what our VS level, Grand Cru, is designed to do. We're not doing any large advertising on it. But it provides an entry point for Remy, at around $26 for a 750ml, that's been very successful, so far.

Our other marques continue to do well, also. There's our $55-range 1738 Accord Royal, which is a cognac blend commemorating the Royal Recognition of Excellence decreed upon Remy Martin by King Louis XV in 1738. One of Remy's product distinctions is that we distill on the lees, which gives our cognacs those rich, fatty, complex characteristics. With 1738, we actually distill twice on the lees, which enriches it further. It has a copper color tint, with intense Limousin oak and candied fruit aromas, and is superbly smooth on the palate. Critics have called this blend particularly suitable for chocolate. It's also an attractive and affordable trade-up from the VSOP level.

The next notch up is Remy's XO Excellence at an approximate $125 price point, then comes Remy Extra around $350, and, finally, of course, Louis XIII, retailing around $1200 to $1250. And Louis sales just keep right on rolling. Whatever is available, we sell - it never ceases to amaze me. But there just doesn't seem to be any other spirit that seems to have the stature of Louis XIII among cognac consumers. In this category, it's almost as if it had no competition at this pinnacle level. It's a luxury item unto itself, and we really don't do any creative stuff with Louis at all. It is what it is.

 

RB This brings me to a question about Remy Red's identity. I've included it in writings about the Cordials & Liqueur category, but it clearly is also included in your Remy cognac family of brands. Some have even suggested that it represents a whole new category segment of flavored cognacs, along with Alize; and some other fruit-flavored, cognac-based products. How do you classify it?

AL Technically, it's most properly defined as a fruit liqueur. But, with a base of Remy Martin cognac, it definitely also belongs in the portfolio of Remy products as an extension of our cognac offerings. It's role is to serve as stepping-stone to make it easier for the younger audience to come into the cognac category. We don't emphasize the cognac aspect, because some people, initially, might not have an approachable perception about cognac that we want them to have. But we're trying to give them some understanding of a cognac taste and particularly what it feels like. In this way, it's been very successful in recruiting those people whom we might not be able to recruit with core cognac introductions.

We've launched an entirely separate advertising campaign to support this, which, so far, has gone spectacularly well. It's particularly targeted to women, who, although still technically considered a consumer minority, are the fastest-growing consumer segment out there, and they're drinking more than ever. And, this past year, we've added some new flavor extensions to Remy Red. One is a Strawberry-Kiwi Infusion and another is a Grape Berry Infusion. The 750ml bottle is a totally new design and they're all selling at an $18.99 price point. What this is really all about is expanding the overall appeal of the Remy Martin brand.

 

RB When it comes to your marketing strategies and advertising, I have noticed one major recent change that arouses my curiosity. You've traditionally never been a huge mega-million dollar advertiser like the #1 Hennessy and #2 Courvoisier ad-spend leaders. However, according to industry reports, you, suddenly last year, invested over $2.5 million in outdoor advertising, although had spent virtually nothing on it the year before. What's behind this sudden new advertising initiative?

AL A couple of things to point out here. Number one, we really haven't been doing a lot of advertising in years past. But the sudden increase you refer to is really tied directly to the recent launching initiatives for Remy Red. That's really the bulk of it. However, as far as our other cognac products are concerned, we're still not advertising all that much, which is a very different approach from our competition. The heart of our thinking here is that we want everything to grow organically. Nothing forced. We want people to have real personal feelings about our brand.

In other words, I have a policy about this. Let's say somebody is a movie star or a big media celebrity, and they're approaching me about getting such and such a Remy product for a party or a video or a film, or whatever. My first question always is, "Do you honestly drink Remy Martin?" If they're not real consumers of our brand, I don't send them anything, because I don't want any forced relationship or anything to be fake. I will only support those who are genuine Remy drinkers in real life. This is our commitment to organic growth, which means only wanting to associate the brand with people who really have a passion for it. I mean, take the Busta Rhyme's example of his "Pass The Courvoisier" pop hit. Yes, undoubtedly, it was an enormous bonanza for that brand while it lasted. But, after that, what's Busta Rhymes drinking with his friends? It's Hennessy. You know what I mean? That will never ever happen with us.

So, this is a very big part of our strategy, and we've been doing a lot of below-the-line activities to create that meaningful and real consumer connection. We run this program called Urbanity, which is basically all about very high end, upscale events where we cultivate and nuture key individuals to adopt Remy. For example, we hosted a gala party for Beyonce, the hottest female singer right now. She was launching a new album and is a loyal Remy drinker. This was an exclusive event at the Sky Bar in LA with a great many celebrity guests. And, as the main sponsor, we had an obvious central presence. The whole idea was having a high-powered, interactive crowd enjoying themselves with a glass of Remy. We try to be involved with the hottest parties like this with trend-setters and what I like to call "key influencers", because they really do have great influence on people's consumption and purchase patterns. So, we encourage them to adopt our brand naturally. Word of mouth spreads. And by creating this organic relationship, we make it real.

 

RB Getting back to the impact of ethnics on the category, do you see this trend continuing?

AL What's going to happen is this: this so-called urban culture is clearly being led right now by predominately African-Americans. But, meanwhile, the subscribers of urban culture are people coming from all different ethnic backgrounds and walks of life. And what's also becoming urban and fashionably mainstream is a much larger mix. We're now seeing Latino and Hispanic urban. As I mentioned earlier, we now have a Chinese rapper, which adds an Asian angle to it. So, no longer is this a mainstream market of just one single ethnic group or ethnic identity. It's all about fusion, basically. So, what Remy wants to do is understand these emerging social undercurrents and what's leading them. We want to know how they're going and where they're going. And we intend to be at the forefront of these trends and styles and specific ethnic communities, communicating our brand with a contemporary relevant tone.


LORI TIESZEN
VICE PRESIDENT, PRODUCT GROUP DIRECTOR
HENNESSY COGNAC/SCHIEFFELIN & SOMERSET

ROBERT BRADFORD For the past 12 years, America has been emerging as the world's largest cognac consumer, and gaining an increasingly widespread audience on a consistent basis. And, at the forefront of this expanding US market, is the House of Hennessy, which has been this country's overwhelming category leader for well over a decade. According to this year's projected volume sales totals, you now are weighing in with an impressive annual 1.8 million, 9-liter cases, which makes you one of the true spirits giants in this country. Also impressive is the fact that, while your two nearest competitors, Remy and Courvoisier, keep fighting it out in fairly close competition at the #2 and #3 category leadership positions, with both showing strong growth performances in their own right, you, meanwhile, are still managing to gallop ahead by well over 100,000 cases a year, and continue to maintain a whopping 3-to-1 lead in the US marketplace. So, first, I'm interested to learn what you find especially significant about the dynamics of this rapidly growing category, right now, and, also, the plans you have for your own brand's forward progress.

LORI TIESZEN This is a good topic to get me going on. Although I'm fairly new to the Hennessy brand team, I've been in the wine and spirits business for 20 years, with 10 years in sales and the last 10 in marketing. All this time I've been watching Hennessy's ongoing successes from a remote position with a genuine sense of awe and respect. And, now that I find myself at the helm of the ship, I can't tell you how excited I feel about the opportunity to be directly involved with its performance.

To give you some idea, you might have seen the November 2003 issue of Impact which ran an article that talked all about Blue Chip spirits brands. Only eight were cited, Hennessy being one of them. The article points out that, while quite a number of brands can realize one or two good growth years, to sustain 10 or more years of growth on a consistent basis is a truly rare achievement. But this is what the Hennessy brand has been all about here in America. And what's really exciting is that I don't see anything but continued expansion up ahead. We look in extreme detail at demographic trends, and if you examine the way this country is growing with its multi-ethnic consumer base, this is Hennessy's strength. We've always had a notably strong African-American core consumer base that continues to grow. But we also have been seeing a very significant Hispanic and Mexican marketplace developing that we've been strongly focusing on during the past year. And now its Asians, too. So, you look at the growth trends, and how these demographic groups are on the rise, and we realize how we are really poised to keep growing with them.

 

RB How do you target these various ethnic groups?

LT Because we have such a large portfolio, we have a distinctly multi-pronged approach. VS is far and away our most dominant brand, and the primary consumers for this is the young 21- to 29-year-old urban audience, both African-American and Hispanic. And, now, with the fast-expanding advent of Hip-Hop culture, you're starting to see many more young consumers drinking cognac in the more general marketplace. Also, there are several newly emerging ethnic populations that have been growing for us. For instance, Hennessy has a tremendous franchise in Russia, right now, that's grown from nothing, really. And we're huge in Ireland, with over a 90% market share of all their cognac sales. It obviously doesn't hurt that our brand has an Irish name. We also have always had an enormous loyal following in Asia. And, now, you find a great many cognac drinkers in traditional vodka strongholds like Sweden and Finland. All this, obviously, gives additional positive momentum to the Cognac category and immigrant consumer trends here in the US, as well.

 

RB What do you feel gives Cognac such international appeal?

LT The one thing that's universal around the world is that Cognac presents a distinctive upscale, premium-priced product image. People drink it so differently in different countries, but the prestige aspect is always pretty much the same. For example, it's actually huge in Barbados, right now, which has always been a mainstream rum culture, of course. Yet, I'm hearing that cognac consumption down there, today, has become as popular as rum. And I suspect that a good reason behind this is that rum, being domestic, is not premium priced and doesn't have that prestigious cognac image to Barbadians. Today, we're living in a world of aspirational imagery, and this is what cognac truly represents to consumers anywhere you go, whether it's Barbados or anywhere else.

 

RB What are some of these different usages you just mentioned?

LT Well, VS, which represents about 80% of our volume sales and retails in the $27.99to $29.99 range, primarily has mixed usage. African-Americans drink it with a lot of Coke. Hispanic consumers like to drink it in something like a Pina Colada or with gingerale. And there's a wide variety of special trendy cognac cocktail creations you're seeing right now, like one called The Incredible Hulk. It uses Hennessy VS and the popular new vodka-cognac-based fruit liqueur, Hpnotiq, which has a sky blue color and makes this Incredible Hulk cocktail turn green, like the main monster/man character in the recent movie.

When you move up to our Privilege, which is our VSOP level, you get more straight consumption in snifters or on the rocks. Privilege represents about 15% of our volume with a $37.99 to $39.99 price point. And it's here where you really begin seeing a broader-based consumer audience. Along with the African-American and Caribbean-Hispanic consumer segments, we also have a very strong Asian consumption of VSOP, as well as a very wide-spread general market.

At the higher marque levels of our XO, which retails around $125, and our highest standard luxury $250 Paradis Extra - this is where we're really seeing a lot of new growth, although, admittedly, on a small base. But this is where you really start talking entirely about luxury consumers, and fine hotels like the Ritz-Carlton, and fine-dining establishments everywhere. And this audience is truly multi-cultural in its entirety, because, now, it's all about high-end image product appeal across the board.

 

RB What are some of your strongest markets?

LT Actually, if you look at market index statistics in publications like, say, Jobson's, you find that most cognac brands pretty much follow the same market strength patterns. But, specifically, up where you're located in Massachusetts has been showing some very significant recent growth for us. And, more generally, although we look at our national market on a state-by-state basis, you'll find our strength lies in urban centers. You look at the top ones like New York, Chicago, metro-Boston, Minneapolis-St. Paul, Detroit, Atlanta, San Francisco-Oakland, Los Angeles-Long Beach, San Diego, Baltimore, Washington, DC, Philadelphia, and many more, these are the category drivers. Sales reports tend to be indexed by states, but the action is really centered in the cities.

 

RB Clearly, incredibly strong core-loyal urban ethnicity drives this category more than any other. And, historically, it seems Hennessy has shown a more pronounced response and sensitivity to its supporting ethnic consumer franchises for over a great many years, now, perhaps more than any other brand. Maybe, in fact, this is your greatest strength. For instance, I'm familiar with Hennessy's unusually creative marketing campaign, launched about 2001, which featured the paintings of budding African-American artist, Leroy Campbell. His scenes portrayed African-American daily life, and the entire theme was all about celebrating African-American accomplishments in American society. And, as I understood it, you also commissioned him to do some work focusing in on African-American holidays and special recognitions like Black History Month, Martin Luther King Day, Black Music Month, etc. Plus, many of these paintings were actually made into gallery exhibits and displayed at Hennessy points-of-sale. All this struck me as a marvelously meaningful, creative way to express appreciation to your principal core consumer audience, while, at the same time, effectively reinforcing the overall image of your brand. Is this kind of thing being reflected in your current marketing and ad campaigns for these different audiences?

LT Very much so. We continue to do a great deal with African-American community. Schieffelin and Hennessy have a long, long history of involvement with the Tuskegee Institute, going back to when it was first founded. We've been very involved with the Thurgood Marshall scholarships for over 10 years. So there's real longevity here. It's not just taking, but also a lot of giving back. This is so important with ethnic communities. And, actually, we're still doing stuff with Leroy Campbell. He recently did some art work for us for a carnival. We've got a strong West Indian ethnic population in Brooklyn. And they do their Carnival Time, not at the traditional Mardis Gras time in February, but in September. It's really a huge week-long festival. There's a big parade. Leroy painted one of the flamboyant superstar dancers of Trinidad in action, and we used it on posters, on t-shirts, and festival advertising promotions. During this festival, Hennessy held a special breakfast event, and Schieffelin's president, John Esposito, was one of the Grand Marshall's of the parade, walking with the likes of Hillary Clinton and Mayor Michael Bloomberg. I mean, this was a very big deal, as well as a major star-studded exposure for Hennessy. Plus, it was a lot of fun.

Currently, with VS, we have a campaign called Never Blend In. Basically, the campaign theme focuses on a given celebrity who's being true to himself, who's independent, and who stands out above the rest. We're using the same format for both Hispanic and African-American executions because of the synergy that exists within this urban consumer segment. These are striking, compelling portraits like the ones we're using right now of Miles Davis and the rapper, Rakim, who's a super-famous celebrity in the Hip-Hop world. For our Mexican consumers, we're using the well-known musician, Saul Hernandez, who was legendary with one band, and then started another band. He's been around a long time and has a unique style all his own. Then, for our Caribbean markets, we have a star singer, Tego Calderon. He's from Puerto Rico, and what's exciting about him is that he's developed a style of music that's like a Spanish version of rap. All this reflects what you're starting to see more and more with urban culture, in general. There's all this cross-over going on, and just all kinds of different expressions happening.

For our Privilege campaign, which is our VSOP offering, the message is "Are You Privileged?". Whereas VS is very much 21-to-29, we're now talking to someone with more experience who's 30-to-39. In other words, VSOP is more sophisticated, more discerning. There's more of an emphasis here on things that you have already accomplished. Where VS ads are more about standing out, the VSOP approach is more internal and reflective in tone. And where we use a lot of broadcast and outdoor billboard ad placements for VS, our placements for Privilege are more in a broad range of top print publications like GQ, Esquire, and Playboy. And we're picturing a greater variety of different people types, different nationalities. These are still closeups of one or two people, but the picture captures them in thoughtful poses, gazing out, showing a reflective mood. They're clearly still out and about, present in a club or some kind of social venue in the background, but the subject is obviously caught in a moment of thought, more personally involved.

We're also doing a lot of on-premise promotions with our accounts, working the marketing mix, in other ways than advertising. It's direct-to-consumer contact. For VS, we've developed special signature cocktails we serve at promotions like the Femme Fatale and The Player. They're fun, they're colorful, and they taste good. Femme Fatale is Hennessy VS with cranberry juice, topped off with Moet nectar. It's served in a snifter over ice, so its got some fruit juice with a little spitz that makes it unusually festive. The Player is similar except we add sweet-and-sour instead of the cranberry juice.

With our higher-end XO and Paradis Extra, we do very limited advertising, but have had great success with experiential marketing. These are events we call "The Taste of Luxury", and this is where we really try to teach consumers about the fine points of cognac, the differences between the marques, more refined distinctions of greater aging, analysing layers of flavors and subtle complexities, and all that. And you might be surprised by the number of people who want this learning experience. There's a great deal of interest out there. As everyone moves up a notch, there's a tremendous desire to find out what the next notch is. Along this line, we're also doing a lot of private dinners and events with celebrities with is all related to PR and buzz marketing with the right people.

 

RB Any thoughts about future category developments?

LT You know the overall Cognac category really isn't that large, when compared to the percentage of something like vodka. But all the trends are going the right way for us with all these growing ethnic groups that continue to have an affinity for cognac. What we're also seeing developing in America is this kind of what I call a "premiumization effect", I mean, if anyone would have asked me 10 years ago if a $29.99 vodka could sell a million cases, I'd call them crazy. So, I think that when a consumer get a first taste of premium and, then, super-premium goods, there's no way they're going backwards. And cognac really fits into this. It makes a statement about an individual's image that continues to be unique. All I can say is that we continue to account for one-third of the world's cognac sales, and we're committed to holding onto this leadership.

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