Singapore Sessions (12/11)

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Dec. 11 (Bloomberg) -- "Singapore Sessions” brings together executives with a range of perspectives and experiences to talk business in Asia. In this episode, William Lauder, Executive Chairman of Estee Lauder cosmetics and Andrea Illy, Chairman and CEO of Illy coffee, tell Bloomberg's Betty Liu about the potential and pitfalls of Asia's growing markets. They compare business models, talk customization and outline what's next for their companies. (Source: Bloomberg)

Selling big western brands in the east.

Selling cosmetics and coffee.

We will ask ceos of two household names.

I am betty liu.

This is "singapore sessions." ? "singapore sessions" rings together executives with the perspectives and experiences to talk business in south east asia.

Tonight two icons of international business, andrea illy of illy coffee.

And william lauder of the estee lauder companies.

Our guests have different strategies in asia.

We are very comfortable being tinier than in other markets of the world.

Our teams on the ground have a deep understanding of a motivates the consumer.

It allows us to continue to be successful there.

We select our partners prefer working with them.

We start a long-term relationship.

It is usually forever.

Both men know asia well.

Have come to different conclusions on how to do best do business there.

There is a customization for unique markets.

It was famously said if you do not like the espresso, drink the cappuccino.

Even without catering to individual markets, andrea has managed to achieve marketable -- remarkable success.

When you first started out in asia, what was the biggest lesson you learned?

We had to see asia in two different places.

In japan, we experienced a difficult path in penetrating the market.

The supply chain.

There are multi layers.

-- multi-layers.

In other countries, the most critical and important point has always been finding a local partner.

Asia is not overall a big coffee drinking society.

Age everything asia would be a small part of the business?

-- do youy ever think asia would be a small part of the business?

We always thought asia would become one of the largest coffee consuming populations of the world.

They have disposable income.

We are ready c korea and japan and taiwan and singapore -- see korea and japan and taiwan and singapore with well-developed economies.

We expect from mainline china to be the same.

Taste is different from change.

In many cultures, taste is ingrained.

Did you ever think of altering the taste of your coffee to adapt to asian consumers?

The mission is to do the best coffee in the world.

We have protected -- perfected this unique blend.

There's a slight adaptation in roasting the beans and grinding the beans.

You grab a long copy or short coffee or espresso or cappuccino.

Meditation is around the recipe and how it is prepared.

-- reparation is around the recipe and how it is prepared.

Is there a market or markets in asia that you would like to be in that you are not in yet?

No.

the strategy needs to be global.

Illy is present in 140 countries.

We are everywhere.

We would like to increase penetration in some countries like australia.

I think we can do a better job.

India will be something for the future.

The main places we want to be, we are there.

Now it is a question of nurturing the growing market.

What is the biggest change you have seen in the decade you have been operating?

The biggest change is you can clearly see.

It is not just happening in asia, but in the western world.

There are more asian foods and designs and culture.

The opposite is true as well.

In terms of brand awareness, people know the brand quite well . in the beginning when you were starting out, how did you get consumers to recognize your brand?

The point-of-sale activation is the number one -- you serve illy in a nice cafe and you put up signs and windows and cups on the table and the package on the espresso machines.

It is quite good public city.

Word-of-mouth is a great way to build a brand.

Illy is a luxury brand, a premium product.

In asia, there are other coffee companies that have done well.

Starbucks, for instance.

Nestle.

Do you hope to challenge them?

Is a different companies.

The first two you mentioned are retailers.

The operator owned shops.

The second one you mentioned is the biggest food company in the world and the biggest coffee in the world, owning 25% of the business.

I think it would be a little bit inadequate from our part to challenge this kind of been mentioned.

We would need to compromise on our exclusivity.

William lauder has a different take on selling his brands in asia.

He is athe son of the legend lauder.

His company derives 21% of the sales from the agent is difficult region.

They have been doing business there for decades.

Tell us about estee lauder's history in asia and how it has changed the market lace.

-- place.

We have been in asia for a long time.

Well over 40 years.

It has been one of the best marketplaces.

A good example of how emerging markets go from being emerging to being well-established -- back when we first started, japan was the second largest economy in the world and our second-largest business in the world.

What are the changes you have seen with estee lauder in asia?

First you saw the rise of japan.

Then came korea.

Now you have china.

Those three markets are very influential.

They have very compassionate consumers.

Now we see the south east asian markets.

The populations are not quite as big.

What is next?

You say be a nonemergent.

That is a very energetic dynamic, -- country.

-- you see vietnam emerging.

That is a very energetic and dynamic country.

What is the biggest challenge in asia?

It is a spreadout market here in each market has a different dynamic to it.

There's no one way of doing business in asia.

The eastern and coastal cities are more sophisticated and it is different from the tier 2 and 3 cities.

What is the hardest market to get into?

China.

It is a very highly regulated market, but a very lucrative and attractive market.

And singapore, the regulatory environment is a little bit less.

Do think you have done well because you are a premium project and asian consumers, women, like to be more aspirational?

They like their luxury products?

The asian consumer is a very demanding consumer.

When she finds something she likes, she goes for it.

It has largely been driven by asia.

The asian consumers passionate about what she likes.

What is the biggest lesson you have learned through the years?

There are a number of things that we really love and enjoy and have to continue.

The asian consumer is very focused on treatment.

Creams, lotions, serums.

Asian women have a very disciplined regiment on how to care for their skin.

They spend a great deal of time on it.

Coming up, we bring in andrea illy and william lauder to bring and their views on how to best compete in asia.

The internet is growing fast in asia.

Google has expanded quickly with tremendous revenue growth.

We haven't had to do much to our products to make them different.

What we have done is make sure we have the right language support and reflect the fact that the mobile revolution is stronger in asia than anywhere else.

All of southeast asia is pretty exciting.

Obviously, china, but lots of things happening in indonesia and taiwan and so forth.

? andrea illy andw sell very -- and william lauder still very different products.

--andrea illy and william lauder still very different products.

We sat there recently for this "singapore sessions." what is the most important into you when you're building your brand in asia?

It is to get the recognition of the quality of the taste.

We really speak to the nose of people.

It is like selling a perfume.

Coffee used to be a commodity.

People were not so use to be able to distinguish the flavors.

In order to get recognition, we have to educate the nose and the palate of the consumers.

Before that, we need to educate the professionals for the preparation.

This is why education is number one.

William, you do not have much of the problem with your products in terms of educating asian consumers about what you are about.

We want to make sure our consumers understand what our brands are and how to use it.

There's more similarity in makeup products that one might think on the surface.

It is part of a ritual.

A morning ritual.

Yep.

The similarities are around the experience.

A lot of ceos talk about how they want to be in asia and expand and grow.

It really isn't all that easy.

You have met your own challenges.

Tommy -- tell me what has been some of the biggest challenges in what you have learned.

The biggest challenge is a cultural -- there are different cultures from the language and values and spirituality and taste.

We need to have the patience for the consumer to adapt and open themselves to the western experience.

Do you feel pressure to localize your products?

No.

there is no request about that.

The quest is to get the authentic italian experience.

You mentioned earlier about one of your local -- that beesley launched.

-- recently launched.

Did you do that reluctantly?

Not at all.

It is really our first effort to create a brand from scratch aimed at the asian consumer that has a very asian sensibility as opposed to other brands that have a global sensibility.

Both of you have something in common such as both of your last names are your brands essentially.

Your grandparents started the company.

What is the biggest question you get when running your business being that you are from a family company?

When you're in the family business and your name is on the door, the first is the obligation to both lead those people who are part of your company and understanding of caring the deed of what the brand stands for.

You have to work twice as hard.

D.phil.

That way as well?

-- do you agree with that as well?

Very much.

When my grandfather founded the company, you had one dream -- serve the best coffee in the entire world.

We are still working toward that dream.

With the technology and the market following this -- it was fascinating what you said before.

"my grandfather was to bring the best coffee in the world.

My grandmother said the same thing about a make a product.

-- make-up porduct.

I became a chemist to take over the position.

As a matter of fact, it makes perfect sense.

I can describe what is happening in the bean during the roasting and the cultivation and the packaging.

That is quite a commitment.

I be done any work in understanding what goes on the palate of the consumer -- have you done any work in understanding what goes on the palate of the consumer?

Including understanding thoroughly whether there is a different genomics in the taste and the recognition in asia.

There is a super taste of people who are intolerable.

It is smaller than others.

If there are more super taste in asia, this would be a problem.

You are looking at the difference between asian consumers.

We have done research in the area as well.

There are distinct differences that are somewhat physiology -- physiological and the thickness of skin.

Also, water.

Water is important, particularly the minerals you have inside.

Fortunately, does not affect too much in the taste of the product.

When we come back, our guests compare vision models and outline what is next for their companies in asia.

I think the taste of the way things are packaged can be different.

It appeals to the culture of that asian buyer, but you also need to be gentle when it comes to tasting.

No one wants to be pushed or feel like they're being taken advantage of.

The commercial conditions of the commercial channels -- how people purchase and what they're interested in, it is important to have a local partner to understand the culture.

? welcome back to "singapore sessions." we have been speaking with william lauder and andrea illy.

We asked them if they had questions with one another on how each could see remarkable success in asia.

Did you adapt your strategies from a business model to branding in terms of routes to market in order to be able to penetrate the asian markets to the same extent you were able to successfully do so and western countries?

Very much so.

This is an effort that goes back more than 10 years.

What we have to recognize is that we needed to make a real commitment to investing in the emerging asian market.

Most particularly, china.

It is the third-largest market for us in the world.

It will soon be the second.

Maybe when i am still alive or when my children are alive it will become the largest market in the world.

In order to do that within our organization, we said once you as a brand manager are committed to this and once we are committed to the company, you can no longer pull and push moneys in and out of china because of the strength of your business.

We wanted a consistent commitment to the investment in that marketplace.

At that moment, what a brand manager says the business in korea is not as good and i need this money -- no.

You're not allowed.

Stop.

That will of internal management policies made a huge difference in our chinese market.

There is a consistent commitment of investment.

This is the typical advantage of family business.

It is very interesting.

Absolutely correct.

We are a publicly traded company, but family controlled.

We think in decades long.

Long term for us is 10 years.

The public markets -- there is no definition of a long term.

It is three quarters.

We are investing for a long time.

And my coffee -- any time.

Will you be hiring?

Our business has grown tremendously.

2004, 65% of our global business was done in north america.

Today 65% instead outside north america.

Our business has grown from $5 billion to $10 billion.

We have doubled the size of our business.

The vast majority of that growth has come from asia and from europe and from latin america.

We have become a much more global company.

That forced us to think global.

How about you?

We are in the process of becoming a retailer.

Regionally, the business model of the coffee has been selling to professionals or the trade.

Because of their premiumness and the cultural bit of our product, we know to go as close to the consumer.

We do this through our point of sales both caffes and point of sales and e-commerce.

You want to communicate directly to the consumer.

Yes.

This is our main focus.

The overall hump company -- you need to hire and this is what we're doing.

Singapore is a very interesting city.

With your home business in terms of selling coffee to hotels and restaurants and consumers.

We even have a cafe over there.

Unfortunately, we have not been able to settle down our organization in singapore.

Two thirds of the coffee consumption is in the northern part.

We went to hong kong, very much to my disappointment.

We look forward.

We are waiting for the next location.

We are partnered with singapore.

We hope to do more.

What about you?

Singapore is interesting.

It was one of the earliest markets.

There were different distributorships.

They can operate themselves.

We have a sub regional headquarters in singapore.

Like you, we found there's so much business in the north of asia and we need to get closer to hong kong.

Many of our regional functions remain in singapore.

They're very capable.

Refining is becoming interesting.

All of the markets that surround singapore -- vietnam, thailand, galatia, indonesia, the philippines -- we manage all of those businesses.

It is out of singapore that we manage those businesses.

It is a very competitive place.

A lot of the tumors like to come to singapore to shop.

A lot more chinese consumers are coming to singapore to shop.

The consumer is expecting prices to be different than the home markets -- a lot of consumers like to come to singapore to shop.

A lot more chinese consumers are coming to singapore to shop.

The consumers expecting prices to be different than the home markets.

It is very interesting.

I look forward to developing in the australian market.

Maybe in the years to come.

[laughter] that is it for this edition of "singapore sessions." thank you to our guests for joining us and thank you for watching.

Visit singaporesessions.com to learn more about doing business in southeast asia.

You can join the conversation and follow me on twitter.

Until next time, i am betty liu.

Goodbye.

? ..

This text has been automatically generated. It may not be 100% accurate.

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