This article was initially published in the December/January issue of Global Drinks Intel magazine. For details on how to subscribe, click here.
A prolonged spate of terrible weather coupled with domestic obstacles made 2022 a challenging year for Armagnac producers. Signs of recovery beyond their home market, however, bode well for the future, as Joe Bates discovers.
As the disruptions and frustrations of the Covid era start to fade, the road ahead for the Armagnac category is one of steady, if unspectacular, growth. Over the next four years, according to IWSR Drinks Market Analysis, the Gascony-based brandy is forecast to experience a CAGR of just 2% – half the growth rate expected for Cognac, its larger, wealthier neighbour.
The ongoing war in Ukraine and its impact on Russia’s economy is hampering the ambitions of France’s most ancient eaux-de-vie. IWSR research director Jose Luis Hermoso explains: “Armagnac volumes are not expected to return to pre-pandemic levels in the next five years, as current events in Russia, historically a top three export market for Armagnac, will offset growth expected in other markets.
“The largest markets for Armagnac are France, the UK, Russia and the US, as well as Global Travel Retail,” Hermoso adds. “All these markets, except for Russia, are forecast to gain volumes over the next five years. Of these, GTR is expected to gain the most over the same period.”
Less established markets on the rise
With its reputation for small, independent producers, strong craft credentials and outstanding value for money compared to other aged spirits, Armagnac is also making gains in non-traditional markets. In 2021, Russia and the US, the spirit’s second- and third-largest export markets, respectively, both suffered marked declines. In contrast, territories outside the top five markets delivered a combined volume uplift of 18.2%, helping the overall category to hold steady at 191,400 nine-litre cases.
According to the export business developer at Janneau Armagnac owner Spirit France Diffusion, William Ploquin-Maurell, Central and Eastern Europe were two of the key drivers of the 20% value rise for Janneau in the 12 months to the end of June. “We're seeing the brand grow in its key markets but also in new markets, which is an excellent indicator of the development of the Armagnac category,” says Ploquin-Maurell. “Consumers are more interested in the category and are doing more research; Cognac lovers are asking more about the brandy category and in Central and Eastern European countries, brandy lovers are numerous.”
Pre-pandemic, China was a promising export target for producers, albeit a market escaping the shadow of Cognac is difficult. The country’s continuing zero-Covid policy is also hindering Armagnac's chances of carving out a larger presence.
“The impact of the zero-Covid policy is significant for ... products like wine and spirits [that are] associated with moments of sharing and celebration,” says Ploquin-Maurell. “Sales were slowly recovering at the end of the year, but we know that the health crisis is not over yet.”
Domestic problems mount as sales dip
France remains crucial for Armagnac's long-term health, given the country accounts for almost 50% to total sales by volume. In 2021, however, domestic volumes were down by 2%, according to the IWSR, with sales struggling in the off-premise, while the hospitality sector was still badly affected by Covid restrictions.
Last year, rising costs and the supply chain crisis worsened the situation for producers, many of whom are family-owned and have limited resources. Marc Torterat, the marketing director of Marussia Beverages, which owns Clos Martin Armagnac, admits that inflation has forced the company to raise its prices. “The inflation of dry goods has been very critical for capsules and bottles, for instance,” he says. “The level of price increase, combined with a weak price elasticity, has led to a minor impact on our sales.”
Climate change also made 2022 a hard year for this artisanal industry that comprises hundreds of small producers. “To be honest, it’s been a very rough year, following a previously horrible one,” admits Léa Rispard-Bornemann, sales assistant at Armagnac Baron de Lustrac, a leading negociant that ages and bottles Armagnacs for other distillers. “For several years now, we’ve had warm winters, late frosts, summer (sometimes even autumn) heatwaves, hailstorms and droughts. Many houses have lost a lot of their production.
“Armagnac is a very small production area. The quantities are already very limited as it is, even in a good year,” she adds. "If this wasn't bad enough, they also have to cope with rising energy prices. Energy is needed in great amounts for the distillation process. We truly fear a shortage of this vintage in the coming years.”
Denis Lesgourgues, general director of Château de Laubade, a leading Bas-Armagnac house established in 1870, says the company lost about 35% of its crop due to the bad weather conditions last year and that the annual distillation period was the fastest and earliest on record, starting in early October. To mitigate the problem of frosts, he says the company is pruning its vines later.
“It’s a technique you see more and more of, that enables you to have new buds coming through, in case you have frost,” Lesgourgues explains. “We tried it with Ugni Blanc and Baco and it worked quite well.”
US consumers tap into vintage statements
Despite the recent sales setbacks, Armagnac producers remain convinced the US is still an export market with considerable potential, given the growing demand for aged whiskies and Bourbons; spirits that Armagnac shares many similarities with. One high-end Armagnac making a stir stateside is Bhakta Brandy, founded in 2020 by Raj Bhakta, the erstwhile creator of WhistlePig Rye Whiskey.
With rare stock (and a château) acquired from Maison Ryst Dupeyron, Bhakta debuted with Bhakta 50, a blend of vintages dating from 1868 to 1970 targeted at collectors and early adopters. Initially retailing at just US$200 per bottle, the brandy was finished in casks previously used on the Scottish island of Islay, meaning it can’t be labelled as Armagnac.
Head of communication Andrew Lohse reveals the brand is now available in 13 states and 2023 will see Bhakta rolled out into eight more: Texas, California, Connecticut, Michigan, Louisiana, Nevada, New Hampshire and Washington. A launch in London is also planned.
“While once overlooked, the perception of the Armagnac category in the US is growing extremely quickly - especially among connoisseurs in search of aged spirits with pedigree and history,” says Lohse. “Armagnac is the epitome of craft. To help increase awareness of the category, we’re focusing our education on the concept of vintages, which is already well-known to wine drinkers and beverage professionals.
“Our just-launched 'Single Vintage Collection' offers Bhakta Armagnac from a wide range of vintages between 1946 and 2002, curated from our historic stock that includes nearly every vintage back to 1868. Vintage is absolutely going to be the next big thing in spirits.”
Château de Laubade has also been making strong inroads into the US, according to Lesgourgues, thanks to an export drive over the last decade, becoming the market leader. “We’ve increased our market share in 2021 to reach a very solid 38%," he says. "We have an import company in New York, which is paying a lot of attention to our brand. We also have strong partnerships with retailers such as Total Wine & More and Binny's in Chicago."
Challenging perceptions with cocktail strategy
One of the longer-term challenges for Armagnac is how to appeal to younger [legal drinking age] LDA consumers. Leveraging Blanche and VS iterations in cocktails is one way to shake off Armagnac's old-fashioned image.
"Armagnac producers have been investing in the category's use as a base for cocktails with some success, especially in high-end, urban on-trade venues," notes the IWSR's Hermoso. "However, Armagnac's appeal with the younger LDA consumers as a sipping option or a bottle share remains limited. Its generally high price also remains a barrier to trial."
Unsurprisingly, Armagnac producers take a more optimistic view about their drink's suitability for mixing. "A lot of mixologists are using VS Clos Martin in cocktails." insists Marussia Beverages' Torterat. "Maxime Potfer, the bartender at Paris's Experimental Cocktail Club, created three signature cocktails for the house."
It is in the UK, though, that Clos Martin has enjoyed its greatest cocktail success. "We are on the cocktail menu at Swift bar in London's Soho. You should taste the typicity of our Armagnac VS in an Old Fashioned, in a Sour or with ginger ale," says Torterat. Armagnac Castarède, the oldest French Armagnac trading house, has been promoting Armagnac in cocktails for over 20 years, hiring the services of mixologist, Jerome Vallanet, founder of Forma Bar, also in Paris. More recently, he has created 15 cocktails using Castarede's Blanche and VS expressions.
"I like to use old Armagnacs and make more woody and punchy mixes," says Vallanet. "For the [summer] season and for an accessible, light side with sweetness, I opted for Blanche and VS mixes. [The cocktails are] lively and incisive, easy and quick to drink."
These concerted efforts to reinvent Armagnac as a cocktail ingredient at one end of the market, allied to the spirit's increasing popularity as a trendy brown spirit at the other, should hold it in good stead. Producers' lack of marketing muscle will remain an issue, though, making the promotional role of trade association the Bureau National Interprofessional de Armagnac a vital piece of the puzzle.
This article was initially published in the December/January issue of Global Drinks Intel magazine. For details on how to subscribe, click here.
