Carafes of Culture: Don’t Judge A Bottle By Its Label
Beverage is a personal business. Of all consumer product categories, it is the one that seems to connect most intimately with consumers, certainly more generally, but especially in alcohol. As a beverage marketer, you are selling something that people literally put inside their bodies that is then absorbed and impacts how they think and feel (repeatedly and 99% of the time by their own “choice”). Given this intimacy and sometimes visibility, there is more weight that goes into these purchase decisions than others, as multiple factors combine to ultimately result in the decision.
According to Professor Jill Avery, Senior Lecturer at Harvard Business School, for these kinds of, “‘high involvement’ purchases, consumers make more measured choices and may take into account functional value, economic value, social value, ego-expressive value, and emotional value.” It’s the “social value” mixing with the “ego-expressive value” and “emotional value,” particularly, the resonance between self-identity and broader culture, that truly make the beverage business so fascinating, and so complex.
Avery points out that the setting of consumption is a major factor that plays into the brand power and unique brand personalities present in the category, particularly in alcohol: “The things we buy and consume [in public] say something about who we are and who we would like to be to ourselves and to others. They are used as signals of our social status, as a marker of belonging, as a sign of our tastes. Beverages (particularly alcohol brands) tend to be consumed in public — therefore they say something about the person who orders them.”
For generations of beer drinkers, for example, one’s beer brand of choice was a point of pride, and part of an identity. With the breadth of options and rise of other categories available currently, today’s younger consumers tend to be more omnivorous and adventurous in their choices. The beverage market in recent years has expanded with an abundance of new options competing with alcohol ranging from THC-infused substances to psychedelics such as psilocybin, (1). This may indicate an evolution of personal preference from prioritizing expression to personal experience.
The sexiness and emotional draw of many beverage brands still remains steadfast when compared to consumer choices in other categories, such as financial services or laundry detergent. Other status markers used in public view such as cars, clothing, or accessories may have similar resonance with the consumer making the purchase.
It’s then no surprise, then, that beverages and beverage brands show up so frequently in popular culture. Cowboys and country music stars sing about beer and whiskey. Steely Dan sang about Jose Cuervo tequila. In the world of hip hop, by far the longstanding esprit du jour has been high end cognac. Indeed cognac is a category to watch precisely because of its cultural significance in two major markets: China and the U.S. The major cognac brands (and particularly their clear leader Hennessy) have themselves leaned into this defined cultural appeal. Built off of what some might call “niche” cultural marketing, the cognac category is expected to grow at a strong CAGR of 6.4% between now and 2032, effectively doubling from ~$5Bn to $10Bn+. The overall global spirits projected CAGR for the same period is a bit lower, at 5.2%. (2,3). But how did cognac become a niche to be reckoned with and what lessons can we learn from this?
An Abridged History of Cognac
When one says “cognac” or mentions one of the many famous houses of the region (Hennessy, Remy Martin, Martell) one’s first instinct might be to conjure images of an estate somewhere in the South of France or 18th century French nobles drinking that sweet dark liquid out of oversized crystal snifters. Indeed it’s that classic, high class, bourgeois French culture that made cognac so appealing across cultures globally for generations. Cognac, a type of hard liquor made from white wine, by definition, is the brandy distilled in and shipped from the legally delimited area surrounding the town of Cognac in West Central France,” (4). However, as of 2016 over 97% of all cognac consumed is exported overseas, primarily to two different markets (China and The US) for two different reasons (5).
Cognac was first introduced in China via transoceanic trade in the late 18th century and has since occupied a coveted ceremonial place in that society thanks to a strong culture of gift giving as part of the cultural phenomenon of guanxi (“interpersonal relationships”), which is a cornerstone of business dealings (especially around holidays such as the Lunar New Year). The country, contrary to the US, also has a largely collectivist culture, where social norms and trends benefit from a powerful network effect: that is, once they start to spread peer to peer, they are rapidly and broadly adopted, (6). These factors, combined with an explicitly-social drinking culture during meals, a newfound taste and accessibility of luxury brands, and the sweet approachability of the liquid of cognac, have made this libation the gift of choice for millions in this society, (7).
In the U.S., after African American soldiers returned from Europe during both World Wars I and II, cognac began to take hold in Black culture more broadly. France was a kind of cultural melting pot and was also relatively embracing of African American culture during those periods, so, in turn, many African Americans embraced French culture, including French liquor, (8). Fast forward to more recent times and this emotional connection would eventually be enshrined in hip hop culture through Busta Rhymes and P-Diddy’s 2002 hit “Pass the Courvoisier.” Notably, sales of the spirit skyrocketed after the song’s release. (7) Courvoisier earned renown for being the preferred tipple of Napoleon (his silhouette is their logo). U.S. society oftentimes encourages a more individualistic, aspirational culture that values personal expression and innovation, along with wealth, so cognac’s foreign nature and high class French roots easily lend to the image of one’s unique “affluent” personal brand. With all these societal forces, coupled with new consumption habits popularized by prominent hip hop artists (mainly combining with other mixers), African American consumers and cultural icons blazed a new path and in doing so created a new market for the category. They effectively took what was once a constrained, traditional post-dinner formal consumption occasion in France and made it their own, expanding its occasions and paving the way for broad appeal and accessibility, (7).
It’s little surprise then that China boasts the highest sales of super-premium, top shelf product lines of the major brands, often enthroned in designer boxes, perfect for presentation. Meanwhile, the U.S. has the highest sales of more “affordable luxury” product lines of premium labels, easier entry points for signaling and more appropriate for mixing in social drinking occasions, where being seen consuming a bottle emblazoned with “Remy Martin” or “Hennessy”, no matter what the price point, is itself enough to signal to the world, “I’m a little different, I have taste, I have some money to throw around.”
What Brands are Doing Today
Given the tradition and heritage synonymous with French high end liquor and wine, one might expect the cognac houses to largely stay true to their upscale French roots when it comes to marketing. After all, that’s what originally gave these products their cachet and novel appeal in overseas markets. The current strategy is very much the opposite. Peruse some of the liquor stores south of Houston Street in NYC’s Chinatown and you’ll find stacks of boxes emblazoned in red and gold, sometimes with Chinese characters. Hennessy in particular has leaned into the gift giving occasion both in the U.S. community and overseas, with super premium packaging collaborations with prominent Chinese artists. You’ll find this echoed in their hyper-targeted marketing campaigns, such as this one with the artist Zhang Huan: https://www.hennessy.com/en-int/stories/chinese-new-year.
In the U.S., you can find niche targeted ads from Hennessy as far back as the 1950s in newly-formed African American publications such as Ebony and Jet Magazine. In the 1960s, the company brought on the African-American Olympic medalist Herb Douglas to be their VP of Urban Market Development, (9). So, long before Busta’s song, Hennessy was building major cultural relevance in an authentic way, which continues to this day as illustrated in the below major ads and partnerships: one with the popular rapper Nas and the other with the NBA, a sport dominated by and perpetuated by players of color who have themselves become cultural icons. Hennessy clearly has confidence in its particular cultural relevance stateside when it declares that it is not just a “proud partner” of the NBA (as so many brands do in these kinds of sports partnerships) but “the spirit” of the NBA. This implies that it’s at once the preferred libation and the soul, the core identity, of the league, its players, and its fans. They are essentially claiming “we are the culture.” When a brand has the license (and the money) to do that, it has achieved something truly special.
Broader Implications
What are some lessons we can apply from this?
A brand, especially one in beverage, and particularly alcohol, must understand who its consumers are in all of its markets, particularly ones with the most buying power, and what their needs are that the product is fulfilling. Why and how are consumers engaging with the product? Hennessy markets itself very differently at different levels of premiumization in China and the U.S. because it understands these nuances in need and therefore consumption and engagement.
In an April 18th, 2023 interview with Stanford SEED Exec. Director Darius Teter for the Stanford GSB podcast Grit and Growth, GSB marketing professor Dr. Jonathan Levav stated the simple yet powerful question, “What need are you actually meeting?”, in discussing consumer brands in developing countries. He goes on to say in regards to marketing evolution, “you can create competitive advantages along values that are way beyond the very literal thing the product does.” In Hennessy, we have an example of a brand that has understood the disparate needs of two significant, yet specific consumer groups. Early on the company carved out a competitive advantage for itself along the cultural values of those groups that strayed far beyond the traditional, rigid “Frenchness” that the category once held dear. This practice has and will continue to sustain the brand’s, and the category’s growth.
It therefore follows that once you establish who your core base is, you must meet your consumers where they are by finding ways to tie your brand to events, influencers, partnerships and co-branding opportunities that signal an authentic engagement with the culture of these core consumers, along with featuring members of these communities in your targeted advertising. Though basketball is a somewhat popular sport in France and Europe more generally, there’s a reason why Hennessy leaned into this sport in the U.S. with the label that it did, as it’s a sport with significant cultural relevance in the Black community where over 70% of the players in the NBA are of color. To stay authentic, as brands and the corporations that manage them are made up people, Hennessy has continually hired and partnered with those from their target communities who can steer the brand in directions of authentic connection.
Consumer brands, and beverage brands in particular, should examine underlying trends with their brand and category and deep dive into who is consuming the product, why (their needs), and how. This will establish how segmented the consumer for this product actually is. There are schools of marketing philosophy that claim that niche marketing doesn’t work and that all consumer brands should strive to appeal to as broad a swath of consumers as possible, that all brands should try to be all things to all people. On the contrary, the cognac category exemplifies that understanding and appealing to its unique segmentation is critical for success.
Song, Wei, and Bergiel, in their paper on cognac consumption state this plainly: “In order to fully develop the market potentials, tailored communication strategies instead of standardized ones should be designed for each market to cater to distinct market appeals,” (7).
According to Harvard’s Prof. Avery, “if consumers have different needs, preferences, or journeys to purchase, then it is advisable for managers to select a particular segment to target and to customize the marketing mix strategies to that target.” Thus, it behooves a brand to first understand these journeys, preferences and needs, and the cultural idiosyncrasies therein in order to properly tailor their marketing efforts to find traction and ultimately success with consumers. Hennessy is an example of finding success first through Socrates’s age-old mantra, “Know thyself.” For a brand, “thyself” at the end of the day is your consumer base, their needs, and how they perceive the brand vis a vis those. Acting in this Socratic way means a constant striving to understand this and closely align brand management practices with those learnings. It means being open to change by not just accepting but embracing that those learnings may take you into uncharted, yet exciting and highly lucrative waters far from your roots, original brand identity, and “traditional” consumption occasions.
Aaron Finder serves as Market Development Innovation Manager at The Vita Coco Company, a market leader for coconut beverages, growing its innovation brands in new routes to market through targeted sales strategy, community partnerships, and cultural events. The information contained herein represents the views and opinion of the original author and does not necessarily represent the views or opinions of The Vita Coco Company, Inc.
Sources:
- https://www.goodbeerhunting.com/sightlines/2023/10/20/with-more-alcohol-choices-than-ever-young-drinkers-wont-settle-for-beverages-of-the-past
- https://www.thespiritsbusiness.com/2023/08/cognac-sales-to-hit-10-2bn-by-2032/
- https://www.prnewswire.com/news-releases/spirits-market-projected-to-reach-us-92-9-bn-by-2032--at-a-cagr-of-5-2-says-future-market-insights-301504151.html
- https://www.dictionary.com/browse/cognac
- https://www.cognac.fr/cognac/_en/4_pro/index.aspx?Page=metiers
- https://www.myrecipes.com/news/how-cognac-became-status-symbol-china
- https://www.sciencedirect.com/science/article/pii/S2212977418300012
- https://slate.com/human-interest/2013/12/cognac-in-african-american-culture-the-long-history-of-black-consumption-of-the-french-spirit.html
- https://vinepair.com/articles/hennessys-popularity-is-not-due-to-hip-hop-the-story-is-much-deeper-than-that/
