Pernod Ricard is a French spirits company that was founded 43 years ago by Paul Ricard and has such famous brands in its portfolio like Chivas Regal, Absolut, Jameson, Perrier-Jouët and Malibu. Pernod Ricard has a presence in over 86 countries, it is still managed by members of Pernod and Ricard families and had annual sales of $11.08 bn in 2017.
Company’s organizational structure is decentralized, with the market companies and brand companies connected through the headquarters in Paris.
The company has been putting a lot of efforts to make its marketing strategy more responsive to the consumer needs in an increasingly digital environment, with the new generation of digital-first millennials joining its clientele. Digital acceleration focusing on the consumer-centric approach is among its 4 key pillars of growth.
Company has been addressing digital transformation in its marketing operations through digital advertising and Internet of Things (IoT).
- Digital advertising
As many other consumer goods companies, Pernod Ricard realized the power of using real time data to improve its advertising campaigns, as well as using mobile-first approach to geolocate the customer and provide more personalized experience through mobile apps.
The company has continuously increased the share of digital advertising in its media spend, reaching 40% in 2017 (from 25% in 2015). Having real time data insight helped the company to change the way it builds ad campaigns. Historically, advertising campaigns were static – not analyzed until the end of their duration and hence could not be optimized simultaneously. With digital advertising, Pernod Ricard has embraced a completely opposite approach to running its campaigns: close monitoring is carried out every day of the campaign with the opportunity to refine it by retargeting customers’ profiles, changing the message and running A/B testing non-stop, allowing for much more efficient campaign. Budget allocated to one audience or another, one digital platform or another can also be adjusted daily if not hourly, making ad spend more effective. Pernod Ricard open and collaborative culture has been a great facilitator of such transformation internally.
To help its marketeers around the world embrace shift to digital, Pernod Ricard has also established a Global Media Hub, which has been working closely with the market and brand companies and developed in-house digital tools and resources for them. Global Media Hub relies on data analysis of all running digital and social media campaigns to provide suggestions and improvements, as well as sharing best practices with all the affiliates within the organization. It has implemented a programmatic (automatic) approach to purchasing digital advertising, which relies on real-time data. Such transformation helped to shift to performance-driven metrics, improving company’s strategy and operations alignment.
Pernod Ricard has also started exploring IoT to improve consumer engagement, especially at home (as the company calls it, a hometainment). One of the IoT experiments orchestrated by the company’s Breakthrough Innovation Group (BIG) is OPN – first connected drinks library, which was officially announced at the Consumer Electronics Show 2017 in Las Vegas. OPN offers a new and engaging way to make cocktails and enjoy spirits at home – and you can control it with a mobile app.
OPN is an elegantly designed collection of cartridges placed on a tech-smart tray that contain Pernod Ricard spirits. Tray has an ability to track remaining levels of liquid and notify OPN system via the app (or a website) about the new orders as well as adjust cocktail recommendations based on what’s available. OPN app relies on a catalogue of over 300 cocktails and offers a simple and visual guide for the user. Each cartridge is 25 oz, just like a bottle of spirit, but is designed to fit any interior seamlessly. Each cartridge is an independent part and can be substituted with any spirit (or wine). Finally, the system arranges a shopping list for its user based on the cocktail preferences alongside with the refill orders. Initially launched as a beta version in 2014, the OPN digital bar should be available for purchase in the end of 2018 and the company promises 30-60 minutes delivery of the refill cartridges.
Pernod Ricard has also monitored how consumer’s house has been evolving with the new wave of IoT devices and launched “What cocktail” skill on Amazon Show (for now in the UK only) to provide a voice-operated visual cocktail guide.
Finally, the company has experimented a lot with connecting the packaging to the consumer and making it more informative and fun. For example, it developed a special NFC-enabled Malibu bottle that can be used with a NFC-reading app and offers to unlock Malibu feature music, win prizes and learn about new cocktails. NFC packaging helps build loyalty and increase interaction with the brand at home. In a similar manner, Ballantine’s launched its connected bottle last year. Ballantine’s Lumen can project video, text or image sent from a smart phone app connected via Bluetooth.
Some of these experiments are pure PR-moves, but some are consistent attempts to keep in touch with the younger consumer and adapt to the changing reality of human interaction.
- Challenges and tensions
There are several challenges facing Pernod Ricard on its way to digital transformation.
- Designed to drive fast decision-making and agility, group’s decentralized organizational structure can become an obstacle to implement digital changes. Each market company is set to launch its own activations, which are not necessarily shared with the group to learn from the best practices (unless they are very large). Additionally, launching digital transformation separately by different market and brand companies (Malibu and Ballantine’s connected bottles were developed separately by two brand companies) results in higher cost. It would be more effective to focus on several large projects centrally and drive their activation by market companies once ready. This could give stronger negotiating power to the central office and reduce costs. We have seen this being attempted with introduction of BIG and Global Media Hub, but there is no consistency and the number of projects developed by many different parties keep ballooning.
- Slow pace relative to the market. It took BIG 3 years to confirm the launch of OPN, which is incredibly slow comparing to technology development and fast shift in user preferences. Similarly to the place of VnS within Havas, BIG does not have either a clear communication with the rest of the company or the power to influence market companies decisions to launch its projects. Instead of being kept aside, BIG needs to be closely integrated with the rest of the company, increase visibility and communication about its projects and secure support of the headquarters to ensure fast-track approval and global launch.
- Projects like OPN pose larger questions about the operating model of the company. By introducing delivery services with OPN, Pernod Ricard needs to make logistic decisions about providing such services, which are out of its capacity right now. Does it mean additional burden on the local distribution partners and if so, at which cost? Or does it suggest creating a delivery unit within many market companies? In case of the latter, is the holding willing to adjust its business model and does it have ability to drive economies of scale in a relatively niche premium spirits market?