ALEXANDRE RICARD wants to talk boxing. He runs Pernod Ricard, a firm that sells Chivas whisky and Absolut vodka, among other drinks. Formed by his grandfather in 1975, with roots in a Pernod distiller set up in 1805, it is the world’s second-largest seller of wine and spirits, with a market capitalisation of €32bn ($37bn). He brags that Floyd Mayweather, an American pugilist with 19m Instagram followers, recently endorsed one of the company’s tequila brands. Such a “key influencer” on a digital channel “gives us speed and scale”, says Mr Ricard.

Celebrity endorsements are an old ploy: French singers, actors and racing drivers used to push Pernod Ricard’s liquor. But with 90% of sales in markets outside of France, punchier efforts are needed. Two years ago the firm commissioned a global study of boozing habits, which totted up all “moments of consumption” for drinkers, identifying 20 important ones in America, the biggest market. Teams of marketers are now told to push a brand for each such experience: the firm’s tequila when American friends gather to watch sport; its cognac at Chinese weddings; gin for Spaniards sharing an aperitif.

The firm must respond somehow, because drinkers, especially millennials (the generation which roughly includes those born between 1980 and 1996), are no longer loyal, says Mr Ricard. “Back in the day, you had a one-brand consumer,” who took a favoured tipple on almost any occasion. “Now it depends who you are with, where you are, the time of day. A consumer might have six brands,” he says.

Across Paris, Emmanuel Faber, the head of another large French consumer-goods firm, Danone, is facing a similar challenge as consumers of yogurt and bottled water prove fickle too. His style—ascetic and almost monkish, as an acquaintance puts it—differs sharply from that of his compatriot. But the two bosses are responding to the same phenomenon: a lack of growth in food-and-drinks sales at big firms. “People are walking out of brands that they’ve been consuming for decades,” says Mr Faber. To stop feeling disconnected from the origin of food, he says, they are switching to small, local firms that might produce organic foods, for example.

Of the two firms, Danone faces the biggest and most immediate shift in consumer tastes. Although he heads a global food firm with a market value of €46bn, Mr Faber warns that time may be up for standardisation in food-making. The food industry “is going nowhere”, he adds, because short-sighted companies see only a “transactional relationship”, not a deeper one based on values, with their customers.

These days people have little faith in the makers of their food and drink. Mr Faber talks at length about disenchantment shown by voters and consumers alike towards elites. Surveys show the public barely trusts CEOs such as himself when they speak about their companies, he says. Consumers “care about the sovereignty of their food, taking control back”.

Danone’s response, like that of Pernod Ricard, is partly about niftier marketing—it runs an ad campaign called “One Planet. One Health”. But the company is also changing some basics. Two decades ago Danone sold “beer, wine, chocolates and candies”, he points out. It has switched entirely to healthier products, betting that long-term growth lies there. The firm aims to be entirely carbon-neutral.Most striking, Danone wants to get certified as a B-Corp—a for-profit firm that shows high social and environmental standards. It would be the largest company globally to do so. In America that requires registration as a “public benefit” firm, letting board directors legally promote the interests of staff, customers and others, along with those of shareholders.

Markets are not entirely convinced by Danone’s strategy, however. An American activist investor, Corvex, has taken a small stake, worth $400m, in the company, and is agitating for its operations to be improved and growth lifted.

Yet investors have drunk in the simpler story at Pernod Ricard—of a mix of resilient Western markets and growth from developing ones. Its share price has risen by roughly 50% in the past decade, whereas Danone’s has been flat (though it has climbed since Mr Faber took over in 2014).

Still, there is a risk for Pernod Ricard, too: that younger, health-conscious consumers, who increasingly shun tobacco and sugary drinks, will also turn against liquor. Sales of spirits have been robust in recent years, even as consumption of wine and beer has fallen in many countries, but millennial shoppers sound increasingly puritan. Goldman Sachs notes in a recent report on millennials that 72% of such young consumers in America disapprove of others who drink “nearly every day”.

Mr Faber’s bet is on the trend towards healthy behaviour. “To survive and regain leadership as a big brand, we must do big things,” he says. If he is right about a “revolution” among consumers, then the firm must fight to keep their trust. Mr Ricard’s view is more old-school: consumers are less loyal, but he still believes many will long be happy to enjoy a drink.

Source: economist
The bosses of two famous French firms struggle to keep customers