The Conversation: Jean-Etienne Gourgues, Chairman and CEO, Chivas Brothers

The number of barrels of premium whisky distilled by Chivas Brothers, the €2.6 billion Scotch whisky arm of liquor major, Pernod Ricard, outnumbers the 5.5 million population of Scotland. The makers of popular brands such as Chivas Regal, Glenlivet, Ballantine's, Royal Salute and Aberlour contribute 23% to the revenue of their parent, €10 billion Pernod Ricard. Jean-Etienne Gourgues, chairman and CEO, Chivas Brothers, discusses the great shifts in consumer preferences — from premium whiskies to single malts; from flavouring to IMFL. Interview by Ajita Shashidhar.

THE NEW CONSUMER

Premiumisation is driving growth of the alcoholic beverage industry in India. What are the big trends in other markets?

It is premiumisation at a richer level. What was happening in wines is now happening in whisky. There are many more whisky connoisseurs, collectors and investors, especially in the secondary market. The demand for more than $1,000 whiskies has exploded in the last five years. Sale of whisky in auction houses has reached a peak. Premiumisation is happening in every segment, including the iconic or higher part of the market.

The second big thing is diversification of flavours. There is a strong appetite for flavours made naturally. The flavours depend a lot on the barrel. For instance, sherry, a traditional barrel, gives whisky a fruity and spicy perception. There is also the rum cask, which gives a sweeter perception, and the tequila cask. There has been an increase in choice of aromas. Some prefer sweet while some like drier whisky and that's where you can differentiate. In Mexico, for instance, we have launched Chivas 13, which is aged in a tequila cast. It fits in with the local culture and has helped us get new consumers.

There has also been a rise in consumption of aged whisky across the globe, including in India. There is a cohort of people who are switching from Indian-made foreign liquor to Scotch whisky. Regular Scotch whisky drinkers are opting for higher expressions. We advocate drinking less but better. Last year, we grew sales by 70%, but volumes dipped, showcasing premiumisation.

What are the examples of evolving consumer mindset in different countries?

Whisky consumers, across countries, are curious. If you compare the number of brands a whisky consumer enjoys versus the number of brands a consumer of gin or vodka or cognac enjoys, the whisky consumer's repertoire is two-three times bigger. He has a great desire to discover brands, expressions and tastes.

While in India, it is more about getting newer types of products and experiences, in U.S., there are already too many options. The biggest trend in U.S. is home-made cocktails. Consumers want to enjoy at home the elevated experience of cocktails that they have in the bar. We have introduced Glenlivet Twist and Mix in U.S. It's a pure single malt whisky with a capsule containing natural ingredients. The capsule keeps natural ingredients fresh. The inert gas pushes down flavours to mix them properly. You can see the cocktail being mixed in the bottle. People like the theatre effect. There is a preference for uniqueness and elevation.

In fact, the cocktail trend is strong across the globe. In China, there is an appetite for prestige whiskies and aged single malts. Casks are also a new phenomenon in many markets. It was happening in the past too but not at such scale. Consumers are purchasing a cask of whisky (typically 250-500 bottles). They are buying casks for special occasions like weddings when they want something unique.

The premiumness depends on the size of the cask and the age of the whisky. There is demand for limited edition whiskies, too. These are 2,000-3,000 bottles of a particular expression. We just released Royal Salute Jodhpur Edition, a unique blend, in a yellow bottle. These are bespoke products.

Indian alcoholic beverage industry regulations are complex. How has been your experience in other markets?

In India, each state has its own regulation, its own labelling. It is like managing 29 countries. We are working hard to navigate India with support from Pernod Ricard India. No other market is as complex as India, but it is also among the largest whisky consuming nations. But because of the size of the country, you have a lot of barriers, even the taxes are different. Markets such as U.S. have 52 states, every state has different regulations, but the tax system is uniform. It is a bit complex but not at the level of India.

How has the Indian market evolved?

There was much more consumption at home during the pandemic. This brought newer consumers and more diversity. This habit has stayed on. The retail experience, especially in NCR, has increased exponentially. People have become more knowledgeable. The shopping environment is much more women friendly. This has broadened the spectrum of consumers. More curiosity among whisky drinkers, more moments of consumption and elevated retail experience have paved the way for premiumisation. We have a lot more female Chivas Regal drinkers unlike three or five years ago. There has been strong growth at the higher end of the portfolio such as Chivas 18, which has grown more than Chivas 12. This has given us ideas about innovating better to meet consumer needs. For instance, we have released a specific version of Glenlivet aged in a rum barrel. Rum can give flavour of a tropical fruit and a lot of smoothness. We are introducing new variants and offerings to match different styles of consumers and engage them in the world of whisky. Ballantine's 7 is a relatively new expression launched in 2021. We are going to introduce a malt version of 100 Pipers which will have more spiciness.

THE DIVERSITY EQUATION

There is a lot of conversation around bringing diversity in product portfolio of alcobev companies.

Cocktail consumption has brought more women into the fold as women often find whisky harder. Cocktails bring them close to the taste of whisky. Whisky consumption ratio pre-pandemic was 80:20 in favour of men. Now, it’s 75:25. In some countries, it is even 60:40. This has made alcoholic beverage companies focus on innovating products that would appeal to a wider audience. When I say cocktail consumption has brought in more women, it's not that men don't drink cocktails; cocktails are as popular among men as women.

It is important for workforce to mirror your consumers. How are you going about that?

Our target is to ensure that 40% top management of Chivas Brothers is women (right now it is 34%). At the overall company level, proportion of women is already 43%. The second priority is to close the salary gap. The average gap in U.K. is 15% and we are slightly lower than 7%. Our goal is to close the gap in next two years.

SUSTAINABILITY

Sustainable business practices are a must to build businesses of the future. What's your strategy?

The biggest impact on climate is carbon emissions. The scotch whisky industry has committed to become carbon neutral by 2045. Around 95% of our production will be carbon neutral by 2026. By end of 2026, all our distilleries would be carbon-neutral. We are also looking at suppliers such as farmers or glass manufacturers. Our goal is 30% reduction in indirect carbon footprint by 2030.

You can't produce scotch whisky without water. So, water preservation and recycling is a major goal. We want to make it as sustainable as possible. In our packaging, we will still go for glass, but will use some recycled glass in each of our bottles. Glass is (anyways) better than plastic as it can be fully recycled and reused. The weight of Chivas Regal bottles has been reduced by 15-16%. We are trying to reduce the weight of Chivas 18 bottles by at least 13-15%. Gradually, our entire packaging would be 100% recyclable.

How expensive is sustainability?

It is an investment. The first step is maximising reduction of energy used. The idea is to produce the same but with much less energy. We have technology which can reduce energy consumption by 50-60%. There is a cost but RoI (return on investment), too.