The Cognac and brandy brands to watch in 2014

Sales of Cognac may be slowing down as China tightens its coffers, but that doesn’t stop us predicting great things for the category in 2014.

Which Cognac and brandy brands have it going on in 2014

Asked where Cognac has got to in 2013, Jean-Denis Voin, head of marketing at Cognacs Camus, says: “I think we are at the end of a very dynamic growth cycle that started after the financial crisis in 2010.”

What has brought this three-year surge to a halt, especially at the top end, is down to China and the government crackdown on banqueting and extravagant gift giving which has hit every luxury category from Swiss watches to super-premium Scotch. “We thought it wasn’t going to last,” says Voin, “but it has.”

Cognac sales during September’s Mid-Autumn Festival in China were down on last year, but not drastically so, and all eyes will now be on next month’s Chinese New Year which is traditionally the peak gift-giving period. Brands that have managed to spread out from the spirit’s heartland in southern China, and have widened their consumption occasions, are obviously better placed.

As The Spirits Business reported in May: “Retail could be the next big opportunity in a country where home entertainment is still a relatively rare concept. As the wealthy Chinese inherit the Western habits of shopping and dinner parties as leisure pursuits, Cognac is a likely beneficiary.”

Status symbol

China is easily the spirit’s biggest market by value, and by volume if you add Hong Kong and Singapore. If sales of XO and above have slowed, it will certainly ease pressure on aged stocks back in France, and allow Cognac houses to develop a healthier geographic spread. Like others, Voin believes the category has become too reliant on China. In Asia’s emerging markets such as Vietnam, Indonesia and Burma, Cognac producers are pursuing the same strategy they used in Japan and China where top brands are seen as an important social marker of success and wealth.

America remains the largest single market and shipments grew 3.1% in the year to March (BNIC). With its vibrant African-American fan base, VS dominates as ever, but there are signs the category is slowly moving up-market. Brands like Hine, which has no VS in its range, are doing well albeit from a small base. MD François Le Grelle believes the US market for VSOP and above is less erratic and consumers are more loyal.

Le Grelle reckons the recent boom in Cognac has actually lasted eight years with the exception of 2009. If China has come off the boil that could be a blessing in disguise as it will give the industry the chance to replenish stocks. “We have to rebuild our inventory because in this business you need an inventory to stay alive,” he says. As to stock levels among the big four Cognac houses – Hennessy,

Martell, Rémy and Courvoisier – that remains a closely guarded secret. More than clever marketing, it will be this that dictates the winners in 2014 and beyond. The other market on everyone’s lips is Russia – described as “VSOP and above” by La Grelle. Status and packaging matter to wealthy Russians but so does quality of liquid and authenticity of brand story. Those relying too heavily on style will be found out.

Click through the following pages to discover the three Cognac brands to watch in 2014.

Cognacs Camus

Having trebled turnover in the last five years, the world’s fifth biggest Cognac house and the largest independent left, has barely paused for breath. This year Camus will aim to build on its success in Russia and the US and plans to continue investing in markets closer to home.

Hine

Next year represents a fresh start for this prestigious Cognac house founded in 1763, having slipped back into French ownership in September after 10 years with the Trinidad & Tobago-based CL World Brands. As well as consolidating its key markets, MD François Le Grelle has his eye on Commonwealth countries in Africa.

Cognac Ferrand

With just 20% of its sales in Asia, Ferrand never really experienced the explosive growth of China, or the subsequent slowdown. Having just expanded its vineyard holdings by a fifth to 120 hectares, and with reasonable stocks of aged Cognac in its cellars, Ferrand should be well placed to grow its leading brands – Pierre Ferrand Ambre and 1840.