Friday, June 16, 2006

Jay-Z, Cristal, and Emergent Strategies

Jay-Z, Cristal, and Emergent Strategies

Louis Roederer, the makers of Cristal champagne, are facing their worst nightmare: A boycott by rap artists.

Remember, it's these same artists that have made Cristal the 8th most mentioned brand in Top 20 songs, behind stalwarts such as Mercedes, Bentley, Nike, and Rolls Royce (pretty good company, one would think!).

In the most recent issue of The Economist, Frederic Rouzaud, the managing director of Roederer, was asked if he thought that the association between his high-end champagne and endless rap lyrics and videos could be detrimental to his brand.

His response?

"That's a good question, but what can we do? We can't forbid people from buying it. I'm sure Dom Perignon or Krug would be delighted to have their business."

I'm not sure if it would be possible to create a worse response without using ethnic slurs. Let's review:

1) I've basically said that I don't like my best customers.
2) I've implied that I would like to forbid them from buying it.
3) I've told them that they should go to my competitors, then I mentioned their brands.

Jay-Z probably fell out of his diamond-encrusted executive chair when he read the article, and wasted no time in responding:

"It has come to my attention that the managing director of Cristal, Frederic Rouzaud views the 'hip-hop' culture as 'unwelcome attention,"' Jay-Z said in a statement released Wednesday. "I view his comments as racist and will no longer support any of his products through any of my various brands including The 40/40 Club nor in my personal life."

This is a classic example of a business refusing to recognize an emergent strategy. Roederer didn't plan on selling to black rap stars, but once that market opened up, they should have jumped in with two feet. Instead, Rouzaud made it clear that he found the market faintly distasteful.

What he should have said was, "We at Louis Roederer couldn't be happier that Cristal is enjoyed so widely by the hip hop community. These artists are discerning consumers and the fact that they choose Cristal is an indication of its quality. Cristal is the kind of drink that every consumer can enjoy. Holla!"

3 comments:

MJ said...

Absolutely true. On the other hand, there may be something about Crystal's market that we don't know. If, say, hip-hop markets account for less than 10% of its revenue, too strong an association with hip-hop risks freaking out the squares -- who buy the other 90%.

Luxury branding is a difficult balance. Check out this Malcom Gladwell article about Jews at Harvard. There is a common wisdom that too many of the "wrong" consumers can kill a luxury brand. I don't know if that's true or not, but it's an interesting connundrum (sp?)

Chris said...

MJ,

Very good point. But I'm willing to bet that a) hip-hop influenced sales account for the majority of revenues--especially among younger purchasers, and b) the squares are unlikely to be watching 50 Cent videos.

For certain super-premium customers, you can kill a brand by allowing in the wrong kind of consumer. There's a reason why no luxury brand is willing to sell at Wal-Mart. But I don't think that's the case here.

Frans said...

Companies consistently keep making this mistake - in particular when it applies to "emerging markets". Perhaps a more diverse perspective would enable them to see opportunities more clearly...