Market Analysts See Foreign Investments In Chinese Traditional Liquor As Smart Move To Cash In On Emerging High-End Domestic Consumer
LVMH's baijiu joint venture with Wenjun Distillery could be a huge money-maker in China; But will it appeal outside the country?
Although most westerners may be unfamiliar with baijiu, the traditional spirit of China, drinkers within the country have been sipping the powerful, often tear-inducing alcohol for centuries. Less famous abroad than Japanese sake or Korean soju, two of its descendants, baijiu is most certainly big business in China, with the most expensive bottles often selling for more than $10,000 USD. This high-end spectrum, populated by rare bottles produced by only a handful of companies, has apparently garnered the attention of more than one foreign company looking to get a piece of the premium baijiu market, as Diageo bought a 43% share in baijiu producer Sichuan Chengdu Quanxing Group last year and, recently, LVMH Moet Hennessy acquired a 55% stake in one of China’s top producers, Wenjun Distillery.
This acquisition should fit seamlessly with Louis Vuitton Moet Hennissey’s broader China strategy. As we wrote earlier this week, LVMH is making a massive push into the Chinese market, buoyed by figures that indicate China has leapfrogged past traditional luxury markets like the United States this year and should surpass the Japanese market within five years. Acquiring a premium baijiu with real brand pedigree — the first Asian brand to be owned by the LVMH group — is being greeted as a gutsy move, as the high-end baijiu market is both exclusive and highly competitive. As Karen Cho writes, the acquisition of Wenjun has huge potential as incomes grow throughout China, but — as uncharted territory — presents LVMH with a host of new challenges:
“This is the first experience for the whole LVMH group owning an Asian brand,” says Allan Hong, development manager at Sichuan Wenjun Spirits Sales Company. “Because of the great potential in China, the whole group decided to run the Wenjun brand as a super-premium brand in China,” he adds.
Posted in Business, China, Investment, Luxury
Tagged alcohol, baijiu, China, diageo, high-end, liquor, louis vuitton, Luxury, LVMH, moet hennissey, premium, spirits, wenjun, wenjun distillery
Growth Among Chinese Luxury Customers Pushes Them Beyond Japanese, Americans To Become Top Consumers Of LVMH Brands
Chinese drinkers have made the country Hennessy's top market, surpassing the United States
LVMH Moët Hennessy • Louis Vuitton S.A., the mighty global juggernaut, has had a bit of a rough year in the traditionally reliable markets of North America, Japan and Europe. Despite cutbacks in spending in these established markets, however, there have been bright areas for LVMH, namely in emerging markets like China and the other BRIC nations and pockets of Southeast Asia. In regions where LVMH has only operated for a few years, or a few decades at the most, newly rich consumers are opening their wallets and flaunting their wealth in a way never seen before — and all of this translates to high hopes for luxury’s standard bearer.
In the wake of the global economic crisis, China has leapfrogged its developed-world counterparts in many high-end segments, driven mainly by the country’s second-tier urban growth, which — fueled mostly by commodity industries like coal which have not been as badly affected by the downturn — continue to grow and attract foreign investment. Second- and third-tier cities, which have seen high-end foreign boutiques opening up only in the last few years, have been a boon to major foreign brands because customers in these smaller cities present virtually no signs of “luxury fatigue” and feel that expensive luxury brands are an excellent way of conveying their newly found status — the flashier the better.
Earlier this year, China surpassed the United States as the world’s second-largest luxury market, and the country has Japan, #1, firmly in its sights. Many analysts believe that China, given current growth figures, should overtake Japan as the world’s top luxury market within five years. So what does this all mean for luxury brands? Today, the Wall Street Journal’s Matthew Curtin looks into LVMH’s “China Syndrome,” and make the case that where LVMH goes, so goes the luxury industry:
Chinese customers, both at home and on holiday in the shopping malls around the world, have become the biggest buyers of Louis Vuitton clothes and handbags and Hennessy cognac ahead of the Japanese and overtaking Americans.
Posted in Business, China, Economics, Economy, Investment, Luxury
Tagged China, chinese, consumption, global economic crisis, japan, louis vuitton, Luxury, LVMH, LVMH moet hennessy, north america, southeast asia, united states, wall street journal
American Retailer Looking To Target Lucrative (And Still-Growing) Chinese Tourist Market?
Is Macy's going to push for more brand recognition among Chinese shoppers?
For years, American retailer Macy’s has adopted several strategies to entice foreign tourists to spend more at its flagship location in New York’s Herald Square, from discount cards for international shoppers to promotions tied to free coupon books. As the global financial crisis bit down on New York tourism in the last year, there are signs that stores like Macy’s may be looking abroad to markets they have never before targeted specifically, namely China, where the number of tourists traveling overseas has skyrocketed in the last 20 years. Cities like New York, where travelers from places like mainland China tend to spend most of their time shopping, are expected to benefit the most from the oncoming wave of Chinese tourists, and since the relaxation of some travel restrictions last year, a noticeable rise in Chinese tourists has already been noted in New York — where Chinese spend an average of $2,200 each, making them the city’s most profligate foreign tourists.
With its size, midtown location and historical pedigree, Macy’s has always appealed to foreign tourists looking for a “New York shopping experience” (or those who just want to take advantage of a comparatively weak dollar to stock up on clothes). If Macy’s truly wants to target the Chinese market, and get a larger slice of the Chinese tourist dollar, they would be well advised to learn a few cultural particularities about Chinese tourists:
1.) Chinese travelers love giveaways…and will go out of their way to get them
Posted in China, Culture, Luxury
Tagged bus, China, chinese, ferrari, gray line, gucci, guidebooks, louis vuitton, Luxury, macy's, manhattan, midtown, New York, porsche, prada, shopping, sightseeing, tour groups, tour guides, tourism, tourists
Newest Luxury Brand-Museum Partnership Follows Previous Louis Vuitton Exhibition in Hong Kong
Cartier's exhibition at the Forbidden City is designed to reflect the brand's interest in growth in the Chinese market. Photo © CCTV
CCTV’s English-language bureau reports on Cartier‘s new exhibition at the Forbidden City in Beijing, organized to display a wide range of the luxury brand’s antique jewelry and watches. This partnership follows the success of the Louis Vuitton “Passion for Creation” exhibition, held at the Hong Kong Museum of Art earlier this year.
As CCTV writes, the exhibition is designed to showcase Cartier’s interest in faster expansion in the Chinese market. Within the next four years, Cartier executives have indicated that they intend to double the number of free-standing locations in China. In that same time frame, Cartier believes China will become its largest single market.
Posted in Art, Business, China, Culture, Luxury, Museums
Tagged Art, cartier, China, chinese, forbidden city, gugong, louis vuitton, Luxury, museum, partnership
Middle Class Estimated At Upwards of 150 Million And Growing; Consumers Hungry For Entry-Level Luxury Products That Offer Status As Well As Quality
Spending by China's middle class is expected to grow exponentially in the next 20 years. Graphic © Foreign Policy magazine
It has become a well-established fact that companies of all stripes are looking at the Chinese market as a source of sustainable revenue over the long term, as the country’s growing middle class increasingly becomes a consumer class on par with many more established markets. However, as many brand marketers — particularly from western countries — have found, reaching the Chinese consumer can be a complicated task, as the Chinese market differs greatly from other developing and developed markets…another well-established fact.
Today, Investopedia examines two strategies that have been adopted by western brands like Luxottica and Coach in their quest for market share in China’s huge, competitive entry-level luxury market. While it will be incredibly difficult for ambitious brands to unseat luxury powerhouses like Gucci, Louis Vuitton and Porsche in China, as this article notes, brands that adopt a specifically China-centric strategy when dealing with the middle class may create a strong foundation for future growth:
Posted in Business, China, Culture, Economy, Luxury
Tagged asia, China, coach, Economics, Economy, emerging, gucci, louis vuitton, Luxury, middle class, porsche, spending
Michael Michalsky Signs Development Deal With China’s Leading Sportswear Brand To Create China-Only Fashion Range
German designer Michael Michalsky sees China as a future fashion hub, rivaling Japan, France, and Italy
German designer Michael Michalsky, one of the country’s rising fashion stars, has recently signed a deal to produce a range of high-end sportswear, paving the way for other western designers to create China-only lines in partnership with China’s quickly-emerging domestic luxury brands. Michalsky has established himself as something of an iconoclast in European fashion, as he has set his sights primarily on the China market, rather than targeting traditional fashion centers like Milan or Paris.
As Michalsky told Deutsche Welle, his decision to focus on China’s fashion and luxury markets came naturally: “China is the most exciting market for fashion right now…The Chinese are really open to fashion, and let’s face it, the future of the world lies in this region.” Deutsche Welle’s profile of Michalsky shows a designer whose interest in the potential of the Chinese market is led as much by personal fascination as new business realities. As China’s position as one of the world’s top markets for luxury goods is heightened by falling consumption in developed countries, it seems likely that Michalsky is the first of many designers to work with Chinese luxury brands in coming years rather than an anomaly:
Posted in Business, China, Fashion, Investment, Luxury
Tagged adidas, berlin, bmw, cartier, China, Fashion, germany, gucci, jil sander, louis vuitton, Luxury, michael michalsky, uniqlo
Blending Of Art And Luxury Becoming More Common As Commercial Tie-Ins Prove Lucrative For Luxury Brands And Artists Alike
Will the Hermes-obsessed Chinese artist Zeng Fanzhi become the first in China to take part in a domestic luxury-art partnership?
Today, Art Market Monitor, by way of Newsweek magazine, looks into the phenomenon of art-luxury commercial tie-ins, which have existed in some form for decades but are becoming more common as well as more commercially viable. We have discussed the art-luxury tie-in before, in our profile of Hong Kong’s “A Passion For Creation” art/product exhibition, organized by Louis Vuitton. But the articles in AMM and Newsweek point out some interesting nuances about the art/luxury collaboration.
AMM summarizes the article very concisely as one in which the writer “wonders about Vacheron’s new line of $367,000 watches inspired by African and Oceanic masks, Ikepod’s Jeff Koons watches and Louis Vuitton’s association with just about everyone else. (Okay, just Richard Prince and Takashi Murakami.)” But building on some of the observations in our articles about the melding of art and luxury, and how much of these partnerships can be boiled down to market necessity (as many luxury and art buyers may continue scaling back amid the ongoing slow economy), Newsweek’s Nick Foulkes expertly breaks down how the separate spheres inhabited by the arts and luxury brands are, rather than being entirely separate, have a symbiotic, Venn diagrammatic relationship.
Posted in Art, Business, China, Chinese Art, Culture, Fashion, Investment, Luxury
Tagged Art, chanel, ferrari, frank gehry, gucci, hermes, hong kong, louis vuitton, Luxury, LVMH, maserati, mondrian, prada, range rover, rem koolhaas, seoul, yves saint laurent, zaha hadid, zeng fanzhi
Bar, Part Of Dunhill Flagship Store At Plaza 66, Extends Dunhill’s British Style And Traditional Atmosphere
The Aquarium by Kee in Plaza 66, Photo © Shanghai Daily
Plaza 66, a sprawling office and mall complex in Shanghai’s Jing’an District, recently unveiled the new Aquarium by Kee bar, part of the Alfred Dunhill flagship store. Designed to be an after-work sanctuary for the area’s businesspeople, the 40-seat bar extends Dunhill’s sophisticated style to every aspect of its decor as well as its drinks list.Unique marketing efforts like this are nothing new to Dunhill’s China operations, which last year built the world’s fourth Alfred Dunhill “Home” in Shanghai, following London, Paris, and Tokyo. These “Homes” are designed to represent the sort of lifestyle promoted by Dunhill (as well as their products), and function as private clubs that, as Dunhill CCO Sven Gaede said, “are not just retail environments, but will also incorporate ancillary services such as a club, restaurant, spa, and barber shop, as well as bespoke tailor services and Bentley chauffeur services.”
In Shanghai, Dunhill is extending their exclusive marketing tack to appeal to many (primarily male) luxury buyers’ desire for “sanctuaries.” With few places remaining in this bustling city to have a calm drink or relax among other businesspeople, Dunhill is basically importing the old British model of the men’s club to Shanghai, where China has always had its own versions of this. Mixing them together — and throwing retail into the mix — Dunhill is scoring what I would consider a marketing coup. Brand-Lifestyle tie-ins have become incredibly successful in Asia in recent years (Just look at the “Passion for Creation” exhibition in Hong Kong), and Dunhill’s male-centric strategy will probably pay dividends. Their brand is already well-established in China among middle-aged luxury consumers, so they have to go beyond simple brand-building to brand sustainability and flexibility — what works in Shanghai may not work in Beijing or Chongqing.
Posted in Art, Business, China, Culture, Fashion, Investment, Luxury
Tagged alfred dunhill, asia, China, Culture, dunhill, ginza, hong kong, jing'an, London, louis vuitton, Luxury, LV, Paris, passion for creation, plaza 66, shanghai, sven gaede, tokyo
Demand For High-End Liquor Remains Strong In China, Following Massive Turnout At Wine Auctions Earlier This Year
Huge in China - Martell's $3,600 per bottle L'Or cognac
Bloomberg reports that cognac brand Martell has sold out of its $3,600-per-bottle L’Or cognac, mainly because of strong demand in the Chinese market, where cognac has increased in popularity rapidly over the past 15 years. As developed markets like the US become less dependable in the face of economic concerns and consumer cut-backs, distillers have had to look eastward, and the growing popularity of cognac, wine and other liqueurs has counteracted the falling demand in other global markets.
In East Asia, much of the success of cognac depends on the China market, where Chinese drinkers have responded well to branding and marketing efforts of brands like Martell and Hennessy, and brand tie-ins have boosted the visibility and consumer recognition of major brands. And although Martell still lags behind Hennessy in the Chinese market, major initiatives like television sponsorship and bar promotions have significantly boosted their market share in the last few years. As an earlier Bloomberg article points out, “[Martell’s parent company] Pernod has established a strong foothold in the Chinese market, overtaking Rémy Cointreau Group for second place, with 26% market share, compared with Rémy’s 20%, as of 2007, the latest data available from Euromonitor. Both companies still lag behind leader LVMH Moët Hennessy Louis Vuitton, which holds a 44% market share.”
Posted in Business, China, Luxury
Tagged alcohol, China, cognac, hennessy, l'or, liquor, louis vuitton, LVMH, martell, moet, pernod, remy cointreau
Growth Of Brands Like Gucci, Burberry In The Mainland Shows Growing Faith In Chinese Consumer Among Western Luxury Retailers
Luxury brands like Louis Vuitton have stormed the mainland in the last five years, growing quickly even in second- and third-tier cities, as consumption rates in developed markets slow
As signs that the worst of the economic crisis may have passed are increasingly pointed out by Bloomberg, The Wall Street Journal and others, attention has spread to the beleaguered global luxury market. While growth in this market has come to a screeching halt in traditional markets like Japan and North America as consumers cut back, analysts have predicted that the corresponding rise of the Chinese consumer — a rise that has been expedited by the Chinese government’s rapid shift to promoting a consumer-based, rather than export-based, growth plan — helps luxury brands ride out the ongoing global slowdown. According to many luxury CEOs, the key to their brands’ continued survival and expansion in this market lies solely in emerging markets like Russia and China. So the question has become, will it be enough to keep these brands afloat?
Posted in Business, China, Culture, Fashion, Luxury
Tagged bloomberg, BRIC, China, chinese government, christian dior, consumer, gucci, hennessy, japan, louis vuitton, Luxury, LVMH, recession, russia, seeking alpha, versace, wall street journal