Podcast transcript #54: Everything you need to know about running a French restaurant business in China
Find here the full China paradigm episode 54. Learn more about Charles Carrard’s story running a French restaurant business in China in China and find all the details and additional links below.
Full transcript below:
Matthieu David: Hello everyone, I’m Matthieu David, the founder of Daxue consulting, a strategic market research company in China and its China marketing podcast, China Paradigm. Today I’m with Charles Carrard. I had heard of you for a long time since you were in Beijing 8 years ago and I arrived in China 10 years ago. At that time, you were in a digital agency and close to O2O strategy in China. You have been in China since 2005. You have been involved in the French restaurant business in China initially. The biggest experience you had was with Paradox Asia.
Now, you’re the general manager at Boisset la Famille des Grands Vins, a company selling wines from almost all over the world, except one, Bordeaux wine, the most famous French wine. But you have Burgundy, wines from California. It’s very rare to have a French company in the wine industry to sell wine also from California and with you in China. First question is about the size of your business now at Boisset.
Charles Carrard: For Boisset, I just have one figure to share, the turnover from the head office in France and America, which is about 350 million euro. I’m not authorized to communicate our figures in China. The wine market in China is a very important strategic market for us, which I just joined last November. We are not big enough to compare to what we are in other markets, because in France, we are the number three wine producers. We cover a lot of areas, Burgundy, Beaujolais, Rhone Valley, Languedoc and California, which is another company we created 30 years ago. The idea of this company is that there are a lot of innovations in China’s wine industry. It’s winery and a totally independent endeavor of wine making, process, and harvest. It represents more than 25 wineries belonging to the same family. It’s not small, but it’s not big enough.
Matthieu David: 250 million euro? That’s huge. Is it small in the wine industry?
Charles Carrard: What we do now in China is small, but what we do in France is not small.
Matthieu David: Would you prefer to talk about your experience now?
Charles Carrard: It’s kind of linked. I arrived in Beijing, China in 2005 for Lanson International Diffusion to take charge of Asia. In 2008, I created a digital company. I first started my career in the wine industry. In Beijing, a long time ago when champagne was not popular at all in China, but it was popular in Japan and in the rest of Asia. So, I was doing what I am doing now, but at a very small scale. At Paradox Asia, I didn’t start as its vice president. I started in taking charge of the on-trade in Beijing, which means hotels and restaurants in China’s imported food and beverage industry. After two years, it asked me to come to Shanghai and take charge of all the east of China. Then I became in charge of all the sales department in China, which is quite big. We had more than 1,000 people. Now, I’m back to my route of products. Because for 10 years, I have been in charge of mainly super and hyper markets, with which we don’t talk much about products, but more about rebates, discounts, margins, and budgets.
Matthieu David: Talking about your entrepreneurship in China in 2005, you had a French restaurant business in China and were involved in a digital agency called altima° China. In terms of timing, could you tell us more about the beginning?
Charles Carrard: In China, everything starts with friendship. When I was working for Lanson, my friends proposed me to join the company because of my long experience before in O2O strategy in China and creating a website back in France, 2002. I was working a lot in my garage. I created a lot of websites. That’s how I could enjoy a good life in China. In 2008, I created altima°. The business model was more for South Asian and Chinese products going back to France first. Then, France moved into the SEO and SEM, which is all about marketing your online website for E-commerce, for instance. In 2010, at the same time I opened my first French restaurant business in China in Gubei, Shanghai. It was a small French restaurant. We had only two people, so I was managing three things at the same time, which was not an easy task. That’s why I hired managers very fast to run this French restaurant business in China, because I couldn’t be there every day anymore. Basically, I had three jobs at the same time, the wine industry, which I was in charge of the east of China, the French restaurant business in China that opened at night only, because I couldn’t work there during the day, and a digital agency where at that time I was more in the operational side, instead of strategy parts. It was two years after we created it and I couldn’t manage three of them, so I left my partners.
Matthieu David: How did you manage a French restaurant business in China at night? The eating habit of Chinese is arriving at 6 pm, French arriving at 8 pm, and Korean and Japanese arriving at 10 for whiskey, champagne and other things. How did you manage all this?
Charles Carrard: I left the office quite early, because I arrived in the morning earlier. My boss at that time was nice to let me leave earlier. I took my motorbike, went fast to the restaurant, and then opened at six. I had a great French chef who was there the whole day, so he has already prepared the room for me with all the setting of the tables. It was not an organized restaurant, because it was my first French restaurant business in China. In terms of drinks or ice cube, I had to go to the second floor, because I was the only one taking orders, cleaning the glasses, and bringing the plates. My chef was the only one in the kitchen clean and cooking. We closed around midnight at 2 am. Then I went back to bed and back to work in the morning. After two months, I was totally dead. We had some profits, so I could hire a manager, a sous chef, and an I.E. Step by step, we could increase.
Matthieu David: What was your motivation behind this to be involved in so many things? I think entrepreneurship in China is very common. In France, your employer won’t understand that you have your own business at night. I feel that happens only in China.
Charles Carrard: I was single and had no child at that time, so it helped a lot to let me have a lot of time. I just arrived from Beijing to Shanghai. At that time, I was a bit disappointed with China’s imported food and beverage industry, which was a bit pricey and with a poorer quality than I had expected. I had an opportunity with a friend to open this French restaurant business in China. My boss was very happy as well, because I only used the wine from our wine company. At many occasions, I had the opportunity to taste a new kind of business model without taking any risks. After four years, I sold the restaurant to my boss, because he saw that it was working. It was a new way to make more sales and marketing about the wine in general.
Matthieu David: I feel running a French restaurant business in China is hard, because it is expensive. Managing and finding people is not easy. The turnover is high. You have to buy the right food at the right time for dinner, lunch and so on. What are the main challenges of running a French restaurant business in China and how did you succeed in opening five restaurants?
Charles Carrard: Actually, when you have only one French restaurant business in China, it’s not that difficult. Because you don’t pay yourself, you don’t have that high payroll every month. My chef was my partner as well. It starts to get very difficult when you hire more people. That was the main point when your French restaurant business in China starts to become too big for only two people to manage it, but not big enough to have a lot of people. This transition was harder. When we opened five French restaurant businesses in China, we realized that the business model needed to be very precise for everybody in each restaurant not have time to think, but just do what you plan precisely like payroll and staff. It is not easy to make money. When you are working inside, you can make a bit of money, because you have a very low payroll. But when you open a lot French restaurant businesses in China, it starts to be very difficult. You need to have very professional people who you can trust, especially when you are not in the restaurant and leave the cashier with your staff.
Matthieu David: Why do you feel a French restaurant businesses in China may fail? In Shanghai, the turnover and location of restaurants are changing often, even for people who have only one French restaurant businesses in China. It’s not only an issue of having a second or third restaurant. Even adding one restaurant is not easy. How do you analyze the challenges in the cost structure?
Charles Carrard: The main cost comes from the payroll and the human resource, more than the real estate. The real estate is important, but you can locate a very cheap place anywhere and bring people in. You have a lot of examples of restaurant with a lot of success. But if you think about it, the location is not what is working. The most important is who is managing your French restaurant business in China and what kind of experience to give the customers. Of course, the real estate is very difficult and a lot of people spend too much money on decorations. They want to show off and have a very nice restaurant so that when people arrive, their first impression is wow. But at the end, the key of a French restaurant business in China is still the food, especially when you are not a big name like Jean-Georges. The big mistake is to try to go at their level. People didn’t come to my restaurant for being fashionable or having a nice view. I do not have a nice view. I was not fashionable, but they came for the quality of food, like family and grandma style food. I didn’t spend any money on decorations for my first French restaurant business in China. It was just all handmade. When I opened the second one, I spent a bit more money and that was my mistake. Because if you spend too much money, you need more time to make it profitable. I will open a new one may be one day in the future, but I will not spend money on decorations. You can make something nice, warm, but not costly just by hand and by heart.
Matthieu David: I feel that regulations are a bit stressful of opening a French restaurant business in China is. How did you make sure that you were aligned with the regulations and knew all of them? Is it difficult to follow all the regulations or are they pretty transparent and easy?
Charles Carrard: It depends on the cities, because we have one in Beijing, one in Suzhou, and three in Shanghai. Shanghai is the most severe for all the rules of hygiene, fire protection and security. But it’s quite easy to follow them. You just need to ask the authorities to come and tell you everything what you need to do. You need to go with the architect, not official but someone who knows all the regulations, because you need to draw a map of your restaurant and location. This map needs to be provided to the authorities for approval, before you start the construction. Of course, you always spend a lot of money at the beginning, because you don’t know which office to go and which people you need to employ. But after opening the first French restaurant business in China, you have known a lot of things and established connections in China’s imported food and beverage industry. It’s quite clear and not difficult. There are a lot of constraints and rules, but once you know them, you just do it.
Matthieu David: When I interview entrepreneurs in China and share my experiences, I see a lot of regulations. But actually, they are pretty transparent. You ask questions and get the answers. If you follow the rules, they are actually pretty easy. It’s not the main difficulty to embark an entrepreneurship in China. The main difficulty is to sell and make it viable, more than regulation.
Charles Carrard: It is quite transparent, but it doesn’t mean it is easy. Because you have a lot of offices to go to, a lot of processes to go through. Of course, it’s a long pace, but you just do it one by one, step by step and try not to waste time on decorations. The most important thing is to get already all the connection around your French restaurant business in China before you sign the deal so that you can start having people working on the map. When you sign and have one month rent for free, you can already start your decoration. Because if you wait to sign and give all documents, by the time you get all approval and authorization, you already lose almost one month. Then you spend one month in decorating and pay one month for nothing.
Matthieu David: How much did it cost you to open the first French restaurant business in China fourteen years ago?
Charles Carrard: We spent less than 100,000 RMB on the first one, mainly on deposit and the painting, because we got the furniture, tables, and chairs from the previous owner for free. They were in a good condition. It was a good restaurant, a bit dirty, but we just painted it and made everything fresh was enough. The second one cost us not much as well, because it was in a similar condition. We spent 400,000 RMB for everything including rent, deposit, decoration, and also the kitchen appliances. The third one was pricier, because we destroyed everything to make the kitchen bigger.
Matthieu David: What about customers? How do you drive traffic to your French restaurant business in China? I heard that a French entrepreneur in China opened a restaurant. He was positive in cash flow and paid back his investment in just three months. Because it was his first restaurant and invited all his friends coming to the restaurant, it was not too difficult. In terms of sales and attracting people to your own French restaurant businesses in China, how do you do? Could you tell us more how to play word of mouth and Internet to attract people to your restaurant?
Charles Carrard: My first French restaurant business in China was more about mouth to ear. I ranked number one in Google Maps very fast, because it was new for the people at that time. It’s called a local business now, but at that time it was certainly new. I made a huge work on SEO for my first French restaurant business in China. There wasn’t Instagram at that time, but I used Facebook, TripAdvisor and Google Maps. They brought a lot of foreign customers. At that time, I was not aware and very good with Dianping, which is the number one application in China’s imported food and beverage industry. Step by step, we kept a good ranking in these foreign websites and attracted a lot of foreign visitors, either business people or tourists. We wanted more local Chinese customers, so we spent some money on Dianping to make special deals. Dianping has a lot of different places where you can spend money to attract people. We can either invite one of their KOLs, Key Opinion Leaders, who has a lot of followers on Dianping. He or she comes to try the food and writes good reviews. You can also create special deals. We were very popular on Valentine’s Day and Christmas in Suzhou and Shanghai. The restaurants were full. It was a very pricey average ticket, but had very good quality, so it was a big deal for customers to come. It is a good way to attract people. As you know, in China, you need to have a good ranking. So, you need help from your friends to come over first and give you a good ranking. That’s how it started.
Matthieu David: What costs are we talking about when you have to pay for KOLs on Dianping?
Charles Carrard: It is not very pricey. You don’t pay the money. You just need to spend money on food and it’s a global package with Dianping. It depends on what you want to spend. It ranges from 5,000 RMB to 26,000 RMB a month. You can access two KOLs regularly and have banners to be on the top of the page. Of course, it depends on the city and the area, because Dianping has a very powerful way to calculate according to the area. If you are in an area full of French restaurant businesses in China, competition is a bit tougher. If you’re the only one popping up when people search for French food and restaurants, it will be much cheaper. That’s why I always chose locations where you couldn’t find a lot of other French restaurants around. You have to track less French people or expats, but you’ll outstand more on any kind of digital platforms, because you’re the only one around.
Matthieu David: In the French restaurant businesses in China, Italian food is very associated to pizza and pasta. You have a strong identity with Japanese food and sushi. But the difficulty of French food is that there is no strong identity through a dish. How did you market your restaurants online where you need to build a brand identity in China as a French restaurant? How did you make it noticeable?
Charles Carrard: Two things. First, hire a good photographer. You need to have a nice plate. I had a fight with one of my managers, because he didn’t want to spend time on making nice plates. I told him to feed customers the enjoyment of experience before the plate arrives on their tables. Secondly, I did some researches on Dianping about the best or favorite French dishes from all the consumers. Actually, for us, because we are French, maybe we think French restaurants don’t have any identity, but in China, when you go to a French restaurant, customers want snails, goose liver, and beef steak. That’s the key items. Oyster is a plus, especially in summer, but these are the key products you need to have on your menu to show people who will judge you as a French restaurant businesses in China.
Matthieu David: Now let’s switch to the wine industry. Paradox Asia focuses on selling to supermarkets, hypermarkets like Carrefour. Precisely, those FMCG retailers in China are not doing very well now. They are challenged by Alibaba and Hema. You have seen the challenges facing those very massive FMCG retailers in China with a big space like Carrefour after the raise of e-commerce platforms. What did you see happening in the industry?
Charles Carrard: It was a very tough time, because for more than 10 years, all the FMCG retailers in China, including super and hyper markets, were growing in a really fast pace of double digits. Everybody wanted more wine, so you had to shelf with no strategy. Carrefour, for example, wanted more wine than Auchan, so it was a run for the more the better. About two years ago in 2017, exactly when Ele.me Meituan, Alibaba and everybody arrived in the digital industry, these big FMCG retailers in China didn’t see it coming. They didn’t have powerful digital O2O strategy in China to keep their customers. They didn’t realize that Chinese consumers had another real-off experience with purchasing everyday products from FMCG retailers in China. For two years, it has been very tough, but not only for wine. For wine, we had a different O2O strategy in China, because we had to sell in what FMCG retailers in China used to purchase from me. The sales and sell-out were not declining, but the sell-in was, because for the past 10 years, every FMCG retailer in China in China had too many inventories. When you don’t make money, as a FMCG retailer in China, you would stop making orders. That’s one of the reasons why a lot of the people stopped working with FMCG retailers in China, because they didn’t have wine on shelves anymore for their staff to sell. But Paradox Asia was focusing only on the FMCG retailers in China. We were and still are the number one in China for retail. They still had a lot of wine on shelves and were able to have staff selling wine. So, it has been a very tough time for one and a half year, losing a lot of money, because you don’t get orders, but still need to pay for staff, promotion, and the commissions. So, you needed a lot of cash flow. That’s why, for companies like Paradox, it was very hard, but now every FMCG retailer in China has such bottom down. It took Carrefour, Auchan, Wal-Mart, all of these worldwide companies and clever people about one and a half year to adapt to this new market, what we call O2O, Offline to Online or Online to Offline. Now, they all have partnered with Alibaba or Tencent. Carrefour and Wal-Mart is with Tencent, while JD and Auchan is with Alibaba.
Traditional FMCG retailers in China need Internet players, but at the same time, Hema is opening more and more physical stores, because doing 100% online is not working either and they need to learn from traditional FMCG retailers in China. We are in the model of more O2O strategies in China and there’s future. It is the same in France, so in the future world of retail, there will be smaller stores more adapted to their locations. With the big data, everybody knows exactly what consumers around the area are willing to buy. For Carrefour and Auchan, it was very hard and still not easy. But if you look at the Kantar figures in China, FMCG retailers in China are still growing. Besides, everybody is saying that retail is dead. Retail is not dead. The new retail is here. Carrefour, Auchan and Walmart all have created new concepts of purchasing of new experience with take-away or delivery within one hour. Now, everything is changing. Take wine as an example, the key is to be still able to be on the online, or to use O2O strategy in China like Sam’s Club.
Matthieu David: Would you mind sharing a bit more about Sam’s Club?
Charles Carrard: Sam’s Club is a club, so people need to pay to be able to shop. First, it’s the mix of metro, which in that you don’t have warehouse or the inventory inside the store. It offers very premium products, short assortment and very few discounts, because it already has very low price all the year along. This is a big difference with FMCG retailers in China, we always do that, “buy one get one free.” That’s why Sam’s Club, which belongs to Walmart, is booming in China. They now have 24 stores and plan to open 10 stores every year. I can give you one figure that one store in Shenzhen, which is the biggest one in China for wine and spirits, has a turnover of 100 million US dollar per year.
The image is very high, especially now in all the classified rolls of wine, Bordeaux for example. Sam’s Club is the one giving the price of the market, because it has the cheapest one, in terms of legal importation. Of course, you can always find cheaper ones in black market. The facial retail price it has is the cheapest for wine and the best selection probably in terms of value for money.
Matthieu David: Do you feel that because people bought the membership card, they feel they have to go to the club again? Do you think it is an economic choice for them?
Charles Carrard: The fact is that when they buy the card, it is already a way to show that they have money. People who shop in Sam’s Club are just very proud to tell their friends, “I go to Sam’s Club, because I have money.” Because when I say it’s a good value for money, the products are not cheap. It only has premium products. For the premium qualities, it has a value for money. But you can’t find a 20-RMB wine over there, but a wine that is maybe 200 RMB, which you might find it everywhere else 250 or 300 RMB. But it has only premium items with good quality. It focuses on the quality at a reasonable price.
Matthieu David: Similar to duty-free shops, people go to duty-free shops not because the products are cheap, but their premium products are cheaper without taxes.
What O2O strategy in China works the best for you? You said that FMCG retailers in China need to be localized and adapted. Are you talking about convenience stores or supermarkets? As far as I understand, bigger places like hypermarkets will take people 2 or 3 hours to drive to this place, which is not working.
Charles Carrard: The main issue in China is that supermarkets here have the same size of hypermarkets in France, because they are quite big. When you talk about hypermarkets, some in China, especially Auchan, are very big and have no rules. There is a trend for FMCG retailers in China, the smaller and more specialized the better. That’s why even Auchan, a big hypermarket itself, has a lot of small shops that give customers a different experience. People can go directly to the shops and buy what they want like pet food, flowers and travel without being inside a big place. The trend is a smaller format, but it is not only convenience stores like the traditional ones Family Mart or Lawson. But Carrefour was the first one in China to launch Easy Carrefour, which is bigger than a convenience store, but much smaller than a super market, selling fresh veggies and fruits. It was the first one. For some reasons, it didn’t open a lot. In the same way, Yonghui, a very big company from Fuzhou, opened hundreds of these stores. That’s booming, because people also want to find fresh products from convenience stores. It isn’t mainly profitable, because a lot of convenience stores have also to locate in very expensive areas.
I wouldn’t agree that hypermarkets are dead in China. It’s not when you have people in your stores, you start to make money. Of course, if you have nobody, it is not a good sign, but you can have some O2O strategies in China as Auchan. It owns the wall and the land and it opens always in places quite remote from the city center, because it gets help from the local government. In terms of investments, it has 30 years in front of them with a lot of financial help. That’s a lot easier to make a lot of profits and margins and build more things. I think it depends on the location. Once more, you need to adapt to where you are. A supermarket maybe working here but not there. A hypermarket will work here and not there. It’s not one rule for all. You need to adapt between convenience store, supermarket, hyper market or kind of the middle one, depending on which area you are in China, which brand you are, and what products you propose.
Matthieu David: You mentioned one article in an interview that nobody is making money on selling wine online. Is it still the case and why? Why the economic don’t work with O2O strategy in China? Is it because of the cost of delivery, the cost of acquiring clients, or the packages?
Charles Carrard: One of the best examples is Yesmy wine. Six years ago, it arrived with a lot of money and it was the biggest player for wine with O2O strategy in China. When they started with the money, they could acquire a lot of customers. But customers came to them because it used it emplacements to offer very cheap prices. But every two years, there is a new commerce, with a large money. All customers of Yesmy Wine went to other FMCG retailers in China two years later. In China, people want new things all the time. It is very hard to keep customers to buy your products, if you don’t keep motivation or the fun or build the relationship. Every two years, when there is someone with good wine with cheaper price, customers leave as well.
The second challenge is human resources costs, structure costs, and every cost, because when you grow up, you need more people for marketing, finance, and logistics. The mistake of a lot of online FMCG retailers in China is that in second, third, fourth tier cities, people don’t know much about China’s imported food and beverage industry. They still need to go see the bottles, touch the label, trust someone in front of them, ask questions, and be sure that the wine is genuine. If they are not happy, they can come back to the store and complain about the wine.
The O2O strategy in China is working well for international brands at a very low price, such as Richards or DeBeer, where nobody is making any money anymore, because you can find it at 38 RMB online. But as long as you are not an international brand and not in Tier 1 cities, it is very hard to make money. Maybe one of the best business for them was Waigeo, it had a different business model, only B2B. You need to register to see the price and you cannot buy wine bottles, so it’s a different business. But the thing about the end, it’s working for big cities. As long as you go a bit further, it’s very hard.
The third part, two years ago, people like JD or Tmall started to import directly from France and Italy, because they want to cut the cost of the importer. But it’s not the same job as being in charge of logistics and selling too. Now they don’t want to import directly from the country of origins anymore, because when they have a big database of customers, they can deliver the wine. But for some reasons, you don’t have enough inventory, because importing from France took too long. What will you tell your customers? When you have a local importer, you have a smaller margin or a bit higher final price, but you can ask someone to pay for the loss. At the end, even Sam’s Club or a lot of big FMCG retailers in China, which used to import directly, work with local importers who had enough customers to order big quantities, because they can split the loss with different players.
Matthieu David: Why don’t big FMCG retailers in China like Carrefour import directly?
Charles Carrard: They do, but not 100%, because you have nobody coming into the store. Now the O2O strategy in China for hyper and supermarkets is to have a lot of promoters paid by the suppliers. It’s a free human resource for these FMCG retailers in China. Back when you don’t have importers, you have only your old wine and need people to put the wine on the shelves and do a lot of work in the stores. Who is going to pay for these people? Carrefour? No way. They are listed companies and need to have profits. With the cost of human resource now in China, they prefer the consumers to spend more money. Because when you have promoters, the price of the product is higher. At the end, the consumers are paying the service of having people cleaning shelves, sorting inventory in the area, and advising you. At the end, the consumers are happy to have this advice.
That’s why the O2O strategy in China of retail is quantities. In UK, France or the whole Europe, you only have one guy for the whole area, so you train the best to take care of the sales area. In China, when you go to buy wine, there are six people trying to sell that wine. But at the end, you have a clean sales area. You always have the wine on the shelves. You can ask for advice. You can sometimes even bargain to have a better deal. You can ask them to open a wine to let you try, so it’s an experience that consumers are asking for.
Matthieu David: Which part in the value chain of selling wine in China can the make most money? Is it as a retailer, an importer or as a distributor? There are a lot of layers in wine industry. Where is the margin? Where is the split of margin? Do you have some economics and numbers?
Charles Carrard: Not a lot of people make money on wine now in China, even for traditional FMCG retailers in China or importers. What’s for sure is that you have a lot of companies. The one making the most profits is the final distributor. For example, you spend 1 Euro getting Spanish wine, Taylor wine arriving in China with an importer at a lending price about 12 RMB. At the end, it will be 100 Euro on a shelf with a nice packaging. Probably the packaging will cost 4 Euro, so the wine goes up to 5 Euro. You had a big promotion of buying one get free or half price. At the end, consumers will really pay 30 euro. That’s your price. 50% goes to the FMCG retailers in China and 50% goes to the final distributor. The margin will be for the final distributor, because a FMCG retailer in China actually have many other fixed costs at stores.
With O2O strategies in China, it is easier because you have less middlemen, but then the margin is much smaller. All companies like Miss Vicky Wine, Ruby Red offer very cheap prices, compared to a lot of people in China, because they believe they achieve a comfortable profit by making volumes. These companies are actually very small companies with maybe 4 to 10 people in one small office. There’s a warehouse next to the office. It’s enough to build O2O strategies in China. You don’t need much. But you cannot grow very fast as well. That’s why these kinds of companies like Ruby Red is different. Ruby Red also has on trades, trainings, shops, and a lot of different scopes as well. But some other companies specialize only in wine. They are harder to grow, because when you have your base of consumers, it has already taken all your resources for logistic, finance, building the website, WeChat and all that stuff. If you go higher, you need to hire more people. Then when it is big enough, you don’t make margins anymore, because these people make maybe 10%, 15%, 20% margin maximum, which is not a lot.
Matthieu David: Which platform would you suggest to someone who would like to be in direct contact with customers? Is it WeChat or opening a Tmall?
Charles Carrard: WeChat first, because WeChat is cheap, easy, and fast. There are a lot of people who can help you set up some data-tracking for a very low price. Tmall is very powerful of course, but because there is a lot competition. You need to go through a TP, which takes commission, and fight with a lot of people. First, go step by step with WeChat. Use your network, people who you trust to understand the purchasing habit of your consumers, what kind of products, price, and promotion they like. When you have a better understanding, go on Tmall. TMall requires more money, staff and time.
Matthieu David: What’s your experience of driving traffic on WeChat to get sales? I have heard it is about a lot of word-of-mouth, less SEO or SEM. You need to spend a sizeable amount of money on this to be able to put a message in the moment. What’s your feedbacks on getting traffic?
Charles Carrard: You have two ways. First, you need to be a part of a lot of groups. You need to find a right title, which is relevant for a group you are in, to attract people’s eye.
Secondly, you have a time of the day of posting, because there are some data about WeChat reading at some moments. Monday morning is better than Wednesday afternoon. We need to find the right timing for posting.
Third, you have a lot of small tools on WeChat, where you can spend maybe 100 Euro to allow maybe 2,000 people to have a lucky draw and make a bit of money. They need to scroll down the article. It doesn’t mean they will read the entire article, which you would never know, but you know that they have scrolled down to the bottom and clicked. It can make a bit of money, 5 or 10 RMB. It’s working specifically for surveys. I don’t use it for articles, because it’s not the point. When you make a survey and have a lot of filtering questions, you spend maybe 100 Euro. I had 5,000 answers last night in two days, so with all my filters, I could still use 1,500 answers at the end, which I thought was good for my studies. I threw away 3,500 answers, which I thought were not really from people I was looking for. I kept only 1,500 people in two days, which is a really good figure to make a study on some habits and marketing stuff.
Matthieu David: Within your existing clients?
Charles Carrard: No, it was from people who forward to a lot of people. When they have won a bit of money, they send it to their friends.
Matthieu David: You mentioned that O2O strategy in China can work for famous wines and brands. That comes to another topic, building a brand identity in China, which we have worked for several years. How do you build a brand identity in China? Do you have some tips to go faster or just to be patient? What’s your feedback?
Charles Carrard: That’s exactly my dilemma now, because I have 25 wineries, which are very strategic wineries for us. I need to build a brand identity in China for these wineries. At the same time, I have 30 other wineries, which are not strategic and more here to make volume wine. I have two feet, one in the branding and one in the volume. My boss has pressured me to have both images, and the volume is very difficult. I think one of the most important things to build a brand identity in China is not to be a dreamer of being exclusive. When I took this position six months ago, I had to look at the scope of what had been done before I arrived. I noticed a lot of my brands, even with one importer for exclusivity, for all product of the brand, for all of China. It took me 3-4 months not to touch everything. Now I cannot break everything for some brands. It takes more time, but some brands I already have distribution, becauseyou will become a brand when people can find you everywhere in China, no matter what products you have. It is what happened to Spanish wine masters as well. It was a very high rise of price in Spanish wines, so the Spanish wines went down, and now they are starting again. That’s why now the innovation in China’s wine industry is branded wines. People now want to have brands, because they are fed up off one-year expensive. They prefer to have something higher but constant, and they make more margins in the year. To build a build a brand identity in China, it takes a lot of time or money. So, I think there is no magic rule. Of course, we can be very lucky. I know a guy in Beaujolais and he was very lucky in Leon two years ago. The Sweden king went to a restaurant and he had his wine there. He took a picture of himself with his wine with CPD and now he’s the importer in China. He’s the biggest customer of Beaujolais worldwide, because they import more than 50,000 cases of his wine for a lot of consulate just, because that’s the wine the Sweden King was drinking. But beside luck or money, I think time, work & patience is the only successful path to build a brand identity in China.
Matthieu David: I have a question about innovation in China’s wine industry, not only digital with QR codes and so on, but also in the format. In Australia, 50% of wine are bagged in boxes. In France, maybe 20 – 70%. We have seen new formats of smaller bottles that people can consume two glasses of wine, instead of a full bottle, which you cannot finish within the night and cannot keep it for too long. What formats do you see as innovation in China’s wine industry?
Charles Carrard: I see up and down, because 10 years ago, we already imported a lot of small bottles and it didn’t work. Now, I can feel that the innovation in China’s wine industry for half and quarter is starting. It’s not huge, because wine is still associated with dinner or events with a lot of people around, but especially in first tier cities, people want to drink wine at home, maybe just for a couple, him and her together. It’s not a question of money, because the price of the half or quarter bottle is higher, compared with a full bottle. They don’t want to waste. They just want to have one or a half bottle for two, and be sure to finish it, instead of opening one bottle and not drinking it. That’s one innovation in China’s wine industry. It will be more and more, but still very small. Bagged in box for restaurants is still mainstream, because it keeps the wine in a good condition. It’s not breakable. It’s easy for the house to pour the wine. The innovation in China’s wine industry I see is more on the quality of the wine. People now, especially those in first tier cities, want to drink better wine. Six years ago, we launched a wine made with yeast from sake in Japan and China as well. It was a niche. We had only 2,000 customers in China who want to buy this, but it was very interesting because they wanted some innovation in China’s wine industry. Now we have a big trend in China, which is the Jura wine. Because Jura is not famous, 80% of the wine produced in Jura are consumed in Jura.
Only 20% is exported, along with 80% going to UK. We have 350 hectares of vines in Jura, which is the biggest one. This is our priority this year. It’s the first time that there’s so much work done on exporting Jura in China. Very surprisingly, a lot of players in China’s imported food and beverage industry are interested, because they cannot find Jura. Because the world wants to come to China for wine, they can find anything they want, but not Jura. Not a lot of companies in Jura are able to export. It opens me a lot of doors. Even in second or third tier cities like Chengdu, people will ask for Jura wine. I am not talking only about wine, but also Chardonnay, Pinot Wine and Sauvignon. People are very open-minded, not only in terms of the format. The big deal is more on how you process the wine. Are you organic? How do you do the wine? Whether it arrives in big or small bottles is not a big issue for me in the future. The innovation in China’s wine industry I see more in the future is who is behind the wine in terms of history and vine yards.
Matthieu David: Talking about history, could you share about the history of Boisset, which could have become like 250-million-euro business with wines in California, in Jura, in Hontalling and being so strong on Burgundy?
Charles Carrard: The guy, Jean Claude Boisset, was 18 years old in 1961 when he started to knock on everybody’s door, selling wine himself. 60 years later, he is number three in France, because Mr. Boisset has customers in mind first. Secondly, calculating finance. Year after years, he acquired a lot of wineries, which were not able to make a sustainable business plan. We are not a cheap company. We are quality company. My main issue in China is that people are looking for private labels with cheap price. I say I produce only quality wines and quality has a price. So, he said that the innovation in China’s wine industry, especially for the brand and the wine, is on quality, not on volume and not on being cheap. Because when you are cheap, you cannot invest in machinery, filtration, air con, and all the work you need to do on the vine yard. Only the quality allows you to have a good customer experience, then people are ready to pay more. With more money, you can make it better and better. 30 years ago, he decided to go to America with three people only. Step by step, he acquired some wineries in California. We have eight wineries in California and more than 23 in France. All are very independent. There is no big rule like some of my competitors. The only rule we have is to do something good and put your passion and heart in what you do.
Matthieu David: What do you think of the Chinese wines from Venetia and Mongolia? Is it also an innovation in China’s wine industry or just an anecdote that doesn’t need to talk about? Because they want to talk about Chinese wine, which is conquering the world and getting better and better.
Charles Carrard: It’s going to be very big, because people will do the wineries. They have enough patience to learn the growth. They have done amazing work on quality and sustainability. The one is really good and I think that big companies like Great Wall Wine or Dynasty will have to follow what has been done by small wineries, in terms of quality, because Chinese wine for sure is going to be big. It’s not an anecdote.
Matthieu David: Thanks Charles, thank you very much for your time. I hope you enjoyed it.
Charles Carrard: Thanks a lot, of course I did.
Matthieu David: Thanks for listening everyone.
Charles Carrard: See you. Bye.
China paradigm is a China business podcast sponsored by Daxue Consulting where we interview successful entrepreneurs about their businesses in China. You can access all available episodes from the China paradigm Youtube page.
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