The Japanese were genuinely astonished at the duty-free prices. Because of a policy of protectionism, Japan levied a 220-percent tax on imported premium cognac and whisky. In Tokyo a bottle of whisky that retailed at $25 cost only $6 in the duty-free shop. A $50 bottle of cognac in Tokyo cost a mere $10 duty free.
Within a year, the trickle of Japanese tourists turned into a stream, then a river. “Business is booming along here,” Feeney wrote to Jean Gentzbourger in Paris on March 23, 1966. In less than a year, the crisis that almost bank-rupted
them was beginning to ease. The profits from duty-free sales enabled Miller to pay off the debts in the car business. More important, Feeney was succeeding again in business. There were parties at the house he rented for his family at Aina Haina Beach, a twenty-minute drive from Honolulu. He was thrilled with his three daughters, Juliette, Caroleen, and Leslie. “Kids are goodâmake some!” he wrote in another letter to Gentzbourger, in which he joked that Danielle was getting so dark “we may have racial problems if she doesn't stay out of the sun a bit.”
Things looked so promising that Feeney and his co-owners felt confident enough to bid $1 million to renew the exclusive duty-free concession in 1967 for another three years. It made headlines in the Honolulu newspapers. It seemed an outrageous amount to undertake to pay for a tiny airport concession. But the owners knew what they were doing. Japan's postwar recovery was so successful that by 1968, it was the second-largest free-market economy in the world. The exodus of free-spending Japanese tourists was only getting under way.
In January 1968, Feeney and his young family went back to Europe and set up home again in Paris. Alan Parker went to Hawaii to run the operation as general manager, with Joe Lyons, the top car honcho in Europe, as sales manager. Like Feeney before him, Parker was astonished at what he found. “The original shop in Hawaii when I arrived was no wider than a desk,” said Parker. “I can remember the pressure buildingâit grew so quickly, there were times the counter was being forced over on the salesgirls. The crush was incredible to buy items that were either not available in Japan or cost ten times the price. The first Japanese tour groups were company-sponsored trips, and that's really what took off the business. We were in the right place at the right time, and we were very lucky. The smart thing . . . was we realized that Japan had to explode from the point of overseas tourism.” They expanded the airport store to 400 square feet and stocked it, according to a contemporary article in the
Honolulu Star-Bulletin,
“with alligator handbags, watches, jewelry, leather goods, pen and pencil sets and diamonds in addition to liquor, cigarettes and perfume.”
Feeney commuted to Honolulu to work out with Parker and Lyons more ways of capitalizing on the Japanese tourism wave. In 1969, they established an 8,000-square-foot downtown duty-free store. There was nothing in the terms of the concession to prevent them from expanding out of the airport. They located their new store in the Waikiki Business Plaza atop Japan
Airlines' headquarters. Vacationers could stroll in, pick what they wanted, and have their purchases delivered to their planes. The tourists by then had even more money to spend. In 1968, the Japanese government had raised the foreign exchange allowance per person to $500 and further relaxed travel restrictions. By 1969, four out of every five Japanese travelers were tourists, with shopping rather than recreation their main priority.
The owners became skillful at enticing the Japanese into their downtown duty-free store, which eventually became as big as an aircraft hanger. They paid travel agents to bring tourists there even before they checked into their hotels. They ensured that the local guides, the bus drivers, and the taxi drivers were well looked after by providing a waiting room with refreshments and a television, so they were not in a hurry to get away after delivering their charges to the mercy of the salesgirls. As customer relations manager, Maurice Karamatsu, a Japanese speaker from Hawaii, greeted tour guides at the airport and befriended the drivers who brought the groups to the downtown store. He had gifts for everyone. When escorting Japanese into the store, Karamatsu always said, “Now you will be going into little Tokyoâexcept much cheaper!” The customers were given a card so that they could claim special gifts on second or third visits. In Honolulu, they averaged more than two shopping visits per Japanese.
Word got back to Feeney's Cornell friends about his success in Hawaii, which was known also as the Sandwich Islands. The name was given to Hawaii in 1778 by Captain James Cook of the British navy, in honor of his patron, the Earl of Sandwich. They sent him a mock newspaper. The headline read: “The Sandwich Man Makes It Big in The Sandwich Islands.”
One day in 1965, when things were still financially precarious for Feeney and Miller, a tall, dignified Frenchman came through the Overseas Waiting Lobby in Honolulu airport and strolled over to the DFS shop. Michel Camus, president of the Camus cognac company, was on his way to Asia to promote his brandy, then little known around the world. “Why is there no Camus on display?” he asked. On hearing the reasonâthe difficulty of getting credit because of their cash-flow problemsâhe invited Chuck Feeney to come and see him in Paris.
Michel Camus and Chuck Feeney had done business before. Some years earlier, when selling booze to the U.S. Navy in the Mediterranean, Feeney had asked Jean Gentzbourger to find an inexpensive brandy to include in their portfolio. The Frenchman had gone to the International Food and
Wine Fair in Paris and found a stand marked “Camus” manned by a gentleman who reminded him of Charles de Gaulle. Michel Camus invited Gentzbourger to visit his cellars near the town of Cognac in western France, and he sold him fifty cases of cognac at a bargain price. Feeney and Miller became clients. The president of the French company even created a “Camus Celebration” bottle for Feeney in 1963.
When Michel Camus turned up in Hawaii in 1965, Duty Free Shoppers was having trouble getting credit from most suppliers. “If you were a booming success they would give you credit, but if you were just starting out, they wouldn't,” said Feeney. The duty-free business was seen by most luxury goods manufacturers as a rather shady operation, run by hustlers in small, cramped shops. The elite sellers felt their brands would be diminished by association with a “discount” store. “Duty free in those days was like tax dodgers,” explained Jean Gentzbourger, who had joined Camus as export sales manager. “People didn't understand it, they said there must be something wrong with it.”
Distributors also hated duty free because the store owners always tried to go directly to the makers and get factory prices, thus cutting them outâwhich was another disincentive to extending credit. Suppliers of liquor were exceptionally hard-nosed with DFS. Normally they would extend retailers sixty-day credit for spirits. They gave Duty Free Shoppers only fifteen- to thirty-day credit and sometimes asked for payment in advance. When he needed 1,000 cases of liquor at $20 a case, Feeney might have to find $20,000 cash, and that was before any of it was sold.
The established cognac makers, Hennessy and Martel, were “very snobbish with us” because DFS was so small, recalled Bob Miller, and Chanel would only allow its perfume to be sold in the grandest shops. Alan Parker was once brusquely turned away from the office of Patek Philippe, the prestigious Geneva watchmaker, as “we weren't a place that could sell watches of their quality.” Feeney recalled that the watch companies were “very tough operators,” and the major watchmakers wouldn't deal with themâthough when he found out that the head of Rolex had an Irish wife, he got chatting to him after a business function, made the ethnic connection, and got permission to sell Rolex.
This credit dilemma prompted Feeney to fly to Paris for a meeting with Michel Camus. He told him about their struggle to get merchandise on account and their efforts to wind down the car business, but he talked up the
prospects of retail success for DFS in Honolulu and Hong Kong. He said he needed to buy directly from the cognac maker, and he needed generous credit. In return, DFS would promote Camus and give it a much-needed distribution network in the Pacific and the Far East, where the Japanese were beginning to travel around and spend in large numbers.
Michel Camus had little to lose. The Camus family had once thrived exporting brandy to Saint Petersburg, where it was the official cognac at the court of the last tsar of Russia. That ended with the revolution, and Camus switched to bartering cognac for vodka from the Soviet Union, but it was not a lucrative business. By the mid-1960s, he had sizable stocks of cognac but was almost bankrupt, and Camus was ranked a lowly twentieth in world cognac sales.
The sophisticated and charming Cognaçais took a great liking to the blue-eyed former GI from New Jersey. Both were underdogs, Michel Camus in the world of cognac wholesalers and Feeney in the liquor retail trade. Camus offered Feeney direct sales and credit of 120 days, a concession unheard of in the “juice” trade. They could now acquire Camus at $2 a bottle compared with $6 for Courvoisier, and sell both for $9.95 a bottle.
The Camus connection was, however, to become much more important to the DFS owners as they struggled to clear their debts. With no reserves, DFS needed a major line of bank credit to capitalize the company and generate more cash to close down Cars International. Tony Pilaro tried to arrange credit through the Swiss banking system but was rebuffed when he approached Lombard Odier Bank on Rue de la Corraterie in Geneva and asked for a million dollars. “The guy looked at me as if I was crazy.” Pilaro eventually found a banker willing to take a risk with them. Allan C. Butler, who owned Butler's Bank in Nassau in the Bahamasâwhere Pilaro had spent some time workingâagreed to extend a credit line of $500,000 under a scheme worked out by Pilaro and Parker. DFS would set up an agency in the Bahamas to become exclusive worldwide distributors for Camus cognac. The agency would purchase large stocks from Michel Camus, which would be sold on to DFS and
other
duty-free companies in Asia, creating tax-free cash profits for the DFS owners in the Bahamas. Camus would get its distribution network; Feeney, Miller, Parker, and Pilaro could get cash to help extricate themselves from the car business; and the money flowing through Nassau would guarantee Allan Butler security for his bridging loan. In September 1965, they registered the distribution agency in
Nassau as Airport Chandlers Ltd., with the four shareholders as owners in proportion to their DFS equity.
It worked as intended. “Airport Chandlers placed the orders from Duty Free Shoppers to Camus, Camus billed Airport Chandlers, and Airport Chandlers billed DFS, and DFS paid Airport Chandlers, and Airport Chandlers paid Camus and sucked in the profits,” explained Gentzbourger. The Nassau agency was soon handling 90 percent of all Camus production.
For the scheme to work, DFS had to wean Japanese tourists off their traditional liquor-buying habits and persuade them that Camus cognac was top of the line. Motivated by bonuses worked out by Feeney, the sales staff in Hawaii started cajoling tourists to switch to Camus. “The Japanese guys would come and ask for two bottles of Johnny
Kuro
[black], which is what they called Johnny Walker Black Label,” said Bob Matousek, the always cheerful former car salesman whom Feeney had brought to Honolulu to run the airport shop when the downtown store was opened in Waikiki. “At the time they were allowed two bottles into the country, and Johnny Walker was a big gift to bring back to Japan. The girls would say, âOh no, no, aren't you aware of the new cognac, this is the latest thing,' and they would switch it to Camus. It reminded me of the car sales, switching the guy out of a Triumph to a Volvo because we made more money. But that was the name of the game, and it was very successful, it was phenomenal.”
By March 1966, Feeney was selling 1,600 bottles of Camus a month at the tiny Honolulu airport shop, and he wrote to Gentzbourger to tell him how the salesgirls “really pound the customers” to sell Camus and get their bonuses. He also noted that sales of Camus were nil in Hong Kong, and said he was going to go there for a few weeks “to stir things up a bit.”
The DFS sales people had fun pushing Camus everywhere they went. When in Japan on business trips, they made a point of asking for Camus cognac in nightclubs and would feign horror and surprise if none was available.
Feeney noticed, however, that when it came to brandy, the Japanese tourists liked to buy Courvoisier Napoléon in preference to any other brand. The Courvoisier label carried the trademark silhouette of the French emperor and boasted that it was the “Brandy of Napoléon,” a claim based on the fact that Napoléon Bonaparte had ordered several barrels of Courvoisier to be sent with him when he was exiled to St. Helena. In Asia, the name Napoléon signified legitimacy and virility. Courvoisier dominated the world markets and was the only brand imported into Japan
under license. It seemed to have the Napoléon market cornered. But there was a flaw in Courvoisier's marketing. The Japanese identified the brand with the word “Napoléon” rather than the name of the maker. No one had a patent on the word “Napoléon.” Feeney suggested to Michel Camus that he promote a Camus Napoléon cognac. Camus was reluctant to go head-to-head with Courvoisier, fearing that his Napoléon would be seen as a blatant imitation and would flop. Feeney suggested a progressive redesign of the label, adding the word “Napoléon” in small letters and over a period of time making the word Camus smaller and the word “Napoléon” bigger. Few noticed what they were doing. When buying brandy, the Japanese looking for the word “Napoléon” soon did not distinguish between Courvoisier and Camus.
The marketing of Camus became something of an obsession with Feeney. He once wrote to Michel Camus asking that a promotional photograph of two Camus bottles standing beside a book showing a cover of Napoléon be professionally redone, with better serigraphy and labeling, and with the cognac snifter in front of the bottle moved “to give a better visual effect.” For good measure, he attached his own sketch of how he thought the final advertisement should look. He detailed a list of other changes, such as “Move book slightly to left; move CAM NAP [Camus Napoléon] equal distance [as book] to left; move NAP EXTRA [Napoléon Extra] slightly to left to show full wording.”