In these challenging times for the beverage alcohol industry, cognac has been one of the most high-profile casualties. The figures from trade association the Bureau National Interprofessionnel du Cognac speak for themselves: in 2023, shipments fell by 22.2% to 165.3m bottles, with value dropping 15% to EUR3.35bn (US$3.67bn).
The NAFTA region – the US, Canada and Mexico – registered the steepest declines, with volume almost halving and value down by more than 40%. More positive double-digit increases in the Far East and the elevation of South Africa to become cognac’s fifth-largest market, thanks to a 24% volume hike, were insufficient to offset the losses. Europe, meanwhile, was mixed, with volumes down 5% and value essentially flat.
However, there are at least some positive signs. According to the BNIC, the situation “began to stabilise from the end of the autumn”, with a slight rise in shipments in December, particularly to the US – something echoed by the performance of the category’s biggest player, Moët Hennessy.
Sales from the company’s ‘cognac & spirits’ operations dropped 10% in 2023, thanks to what was described as “a mixed recovery in China” and “the post-Covid-19 normalisation of demand in the US”. But there was a “slight recovery” in the fourth quarter, when Moët Hennessy’s total sales rose by 4%.
Caution continues but US forecast to show ‘unsteady recovery’
The biggest single factor in the category’s declines last year was the performance of the US market, thanks to high levels of inventory and a cooling of consumer demand. Hine marketing & communication manager Thomas Vigouroux agrees that there has been an increase in exports to the US in the past three months, but adds: “The category is still cautious, and expects an unsteady recovery in 2024.”
Nonetheless, the company continues to invest in the market following the revamp of its namesake brand last year, backed by successful digital activations in the US around Father’s Day and the holiday season.
Camus global commercial director Anne Blois explains the situation further: “After the record shipments of 2021 and 2022, and the logistical disruptions that began to have an impact in the second half of the year, in 2023 most cognac brands had to adjust the stocks built up during the pandemic, especially in the US.
“But Camus remained stable last year. Our business in the US is relatively small compared to some of our peers (less than 5% of total sales), thus the massive drop for the cognac industry in this market had very little impact on our results.”
Performance in the US is also partly dependent on positioning. While Hennessy suffered because of its dependence on VS, others were less affected, as Cognac Frapin communications manager Thomas Soret explains: “We are dedicated to high-quality cognac with a long ageing, so we aren’t exposed to the cocktail or VS market that declined in the US. Our performance suffered less than the VS market. It seems that the US economy is recovering a bit, so we are confident.”
That’s true also for Delamain, the cognac house majority owned by Groupe Bollinger, since it only sells cognacs at XO level and above. Deputy MD & master blender Charles Braastad describes the company as “a little fish in a big sea”, dedicated to high-end distribution and gastronomy – although he admits: “People are a bit worried, so when you try to change distributor or importer, they say, ‘What is happening with cognac?’”
Changes and innovation as brand owners chase new – and old – markets
There have been changes in the run-up to the Delamain bicentenary celebrations this year. Braastad has taken over as cellar master from the retiring Dominique Touteau – who was in the job for 32 years – and has ceded the MD role to Eric Le Bouar, previously head of M&A at Groupe Bollinger.
Details of Delamain’s anniversary activities were still under wraps at the time of writing, but Braastad has signalled that the house’s high-end Pléiade range is to be simplified and pared back to a trio of expressions: one from the vineyards that Delamain manages at La Rambaudie; a single vintage from its cellars, and a single cask cognac.
Braastad is bullish about current trends, pointing to growing consumer curiosity around provenance, authenticity and the intricacies of production. For houses like Delamain and iterations like its flagship XO Pale & Dry, he says: “This is our time. There has never been a better moment.”
Change is in the air also at Frapin, where the house’s much-praised Multimillésime concept is being refreshed and relaunched this month as Trilogie Frapin with a 1,600-unit release of a blend of three vintages: 1986,1988 and 1990.
Frapin is currently looking for importers in the emerging markets of Asia and Africa – and the latter is also referenced by Hine, with commercial & heritage director Per Even Allaire highlighting the likes of Nigeria, Ghana, Tanzania and South Africa.
If 2023 was also “challenging” here, Allaire is quick to add: “We know it takes time and a lot of effort for a craft and luxury house of cognac, like Hine, to grow in such an environment. Nevertheless, we keep believing in the opportunities Africa offers and we keep investing.”
As the category looks to open up new markets and rekindle demand from San Francisco to Shanghai, innovation is an obvious tactic. Step forward products such as Gallicus Cognac & Amaro, a spirit drink that blends cognac with Italian amaro, which has been designed to be consumed neat, over ice or used in cocktails.
Gallicus Beverages co-founder & COO Jérôme Boiron says the expression is currently available in France and Italy, with “several development strategies” starting this year, including expansion across Europe, North America and South-East Asia.
Anti-dumping probe looms, but investment continues in China
If the US is one elephant in the room for cognac right now, then China is the other. Through the obvious difficulties of the Covid-19 pandemic – which marred the Lunar New Year celebrations in 2023 – and the current economic problems, cognac houses have continued to invest.
Frapin, for example, has been present on several Chinese social networks for around two years, while Camus opened a 600 sqm flagship store in late 2022 at China Duty Free Group’s Haikou Duty Free Mall in Hainan (above), in a lower ground floor location usually reserved for fashion and jewellery.
In the short term, however, problems persist, with Pernod Ricard CEO Alex Ricard describing trade in China as “quite cautious” when discussing Martell at the company’s H1 fiscal-2024 results announcement in February. The spectre of an anti-dumping investigation by the Chinese authorities into EU brandy (including cognac), announced in January, is worrying enough; weak consumer confidence and signs of down-trading only add to the concerns.
But Pernod, Martell and the rest of the industry are looking beyond short-term challenges. “Over time, we expect China to deliver high single-digit, low double-digit [sales gains],” Ricard told analysts.
“I’ve always said there’ll be better years and worse years […] the fundamentals are unchanged.”
