BROWN SPIRITS REPORT: COGNAC REVIEW A challenging market in recovery
The Cognac industry has been challenged at the premium end in recent years, with China’s crackdown on gift giving, the Asian economic slowdown and other factors – although there are signs that the sector is now recovering. Doug Newhouse reports.
L
ast year’s DF&TR Cognac sales appear to have performed better – if not dynamically –
compared to recent trading years, with Cognac destocking in China mostly consigned to memory, as the pipeline once again begins to restock – albeit with much less super premium Cognac than before. As has been noted by many
commentators, there is a new reality in the Chinese market, as some producers adapt to the growing VSOP market. There is also evidence that the
premium Extra segment is beginning to contribute in China again – albeit thanks to individuals purchasing for self-consumption – not ‘gift giving’. Needless to say, Cognac was not
alone in its decline at the top end of the market in China, with premium Scotch also recording annual sales declines between 2013 and 2015, according to industry experts, the International Wine & Spirits Record (IWSR). All of which is very relevant to the
duty free business where Cognac sales to Chinese travellers were once extremely lucrative at the higher end. In its last major travel retail report,
IWSR says DF&TR sales of Cognac were both up and down in 2015, with Asia-Pacific and Europe both suffering, while there was ‘marginal growth’ seen across the Americas. The respected drinks publication
added that amongst the five Cognac brands in the 2015 Top 100 travel retail spirits league, two (Hennessy and Martell) posted overall growth, while Courvoisier, Rémy Martin and Camus all apparently registered volume declines. IWSR has kindly allowed TRBusiness
to make reference to some its DF&TR top line numbers for 2015, which clearly show Hennessy Cognac way out in front with 556,000 cases (9-litre equivalent), ahead of Martell with 363,000, Courvoisier 212,000, Rémy Martin 204,000,
MAY 2017
Cognac on display with Aelia Duty Free at Rome Fiumicino Airport, March 2017.
Camus 80,000, Otard 32,000, Meukow 26,000, Braastad 25,000, Larsen 18,000, Renault 21,000 and others circa 81,000 cases. Within these numbers it is notable
that the Hennessy brand (all varieties) ranked an impressive number eight in the IWSR 2015 rankings, while Martell jumped from its 20th ranking in 2014 to tenth in 2015.
Rémy Martin excels Of course, Cognac was not alone with its challenges in 2015. IWSR reported late last year that while Scotch whisky brands still dominated its Top 100 travel retail brand league table in 2015 with 27 placings – 50% also experienced sales declines last year. Having said this, it is important to
make the distinction between volume and value when assessing the health – or otherwise – of the Cognac (or Scotch) industry. A disproportionately high
percentage of sales for certain brands obviously still rank in the premium sector, providing good returns for DF&TR operators, even if the dynamics have lost a little shine in recent years. Some large producers are also
reporting much better trading conditions in 2016. For example, last January the
Rémy-Cointreau Group reported that the House of Rémy Martin returned ‘an excellent performance’
over the nine months, with organic growth of 11.2%. This was bolstered by sales in its
higher range categories, including its Louis XIII Le Mathusalem, the L’Odyssée d’un Roi project, the opening of a Louis XIII store in Beijing and the launch of its new Rémy Martin XO. Similarly, the LVMH Group
reported that Hennessy – its flagship Cognac house – enjoyed an excellent year, with 10% overall volume growth. The US domestic market also
did well, while ‘China saw better momentum’ after a tough 2015 due to destocking by distributors. Meanwhile, the Bureau National
Interprofessionnel du Cognac (BNIC/ Cognac association) has published its 2016 Cognac ‘shipments ranking’ (not sales) by market for all qualities (in millions of bottles/all qualities): USA 74.1m (+13.5%); Singapore 24.8m (+1.9%); China 19.4m (+5.9%); UK 10.2m (+1.1%); Germany 5.2m (+9.0%); France 4.1m (-2.6%); Netherlands 3.1m (-9.2%); Hong Kong 2.7m (-20.8%); South Africa 2.2m (+18.8%); and Finland 2/0m (+5.7%). «
Some large producers are reporting much better trading conditions in 2016, but the Cognac market still has its pressure points in Asia.
TRBusiness TRBUSINESS 163
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