“Goods of ostentation” - from Burberry coats, to whisky, to Louis Vuitton handbags have become terribly popular among the Chinese middle classes and newly rich for a while now…
Great news for people like Cyril Camus, who owns one of the smaller cognac houses, but which has profited from his product’s success in China and elsewhere in Asia.
But it was a complication, to put it mildly, when President Xi Jinping just about prohibited displays of excess by rich Chinese businesspeople and public officials. All of a sudden, spending money on a 20 year old brandy seemed rather too decadent.
He admitted that sales had fallen heavily in China, but are now recovering. Alternative markets had to be found. But he had a healthy dose of philosophy too - as a business founded in 1863 must have, I guess.
First of all : you get used to peaks and troughs.
Things become fashionable. And when they do, the price goes up. When the price seems too high, demand goes down - or the fashion falls away. That’s the most common cycle of all. So best never to rely on whatever is happening today, to happen forever. A good thing to have in mind.
The house of Camus has its own vineyards - but they deliver only about 8 percent of the grapes the house needs. Like others, Camus buys in grapes from elsewhere. As a smaller concern, it has to compete harder for quality grapes from other growers. So : no point in pitching low-quality brandy, and an additional disincentive to over-producing.
The grapes for cognac are rather bitter, so turning them into wine is not a good idea. If you’ve got too many grapes, they tend to be pressed into ordinary juice instead.
But the long view, not the annual view, is king.
There are still ways you can increase growth. New territories. Airport sales. Niche shops. Sponsorship and marketing. New flavours. Population growth.
China has been a tremendous opportunity for Cyril Camus - and it’s why he’s lived in Shanghai for a long time. You don’t learn the market and its mechanisms otherwise…
But in case you think this is another example of how hard it is to do business in China, think again. If you want to import liquor into the United States - you are legally obliged to use a go-between - another layer between you and the customer, someone who takes a slice of the profits, and helps puts up the price.
The reason? Prohibition. The start of the anti-alcohol law in the US may have been nearly a hundred years ago (1920, it was repealed in 1933), but there are one or two ‘hangovers’ today! And one is the government wanting to know who’s bringing the hootch in.
You have to employ a registered importer - even if you know the destination for your booze already, and don’t really need that help. And to this day, they’re mostly the same families that looked after casks and crates a century ago.