Luxury spirits could be ‘Achilles heel’ of France

Whether it’s domestic specialities or high-end exports, consumers are discovering there’s a lot more to France than Cognac. But producers have been warned not to rest on their luxury laurels.

French spirits have long had an association with high quality

*This article was first published in the June 2015 issue of The Spirits Business magazine

“Do people look for specific French spirits, or are French origins a good reason to believe in high quality?” That’s the question batted back by Thibault Testot-Ferry, marketing director Diageo, Moët Hennessy Diageo France, who answers his own question by siding with the latter suggestion. “For me they are not the same thing, and I believe the real driver is the second one.”

A few years ago, if you were to ask consumers what French spirits they were accustomed with, chances are Cognac would have been the first word to roll off the tongue. Fast forward to the present day, and we’ve all been told consumers are “better educated” and “more discerning” drinkers – so has the world cottoned on that there’s more to France than Cognac?

As Spiros Malandrakis, senior alcoholic drinks analyst at Euromonitor, explains, France is not a trend setter when it comes to spirits. “France is more of a follower in terms of setting spirits trends,” he says. “France tends to look within France or become an example of luxury positioning for exports.”

The aperitif culture in France is one that has slowly been trickling its way into the rest of the world, as international markets embrace the old time tradition. But while the “aperitif moment” remains important to French consumers, aperitif spirits such as anise, vermouth and pastis are declining by about 2%, tells Mathieu Deslandes, marketing director for Pernod.

Taxation headache

“Pastis 51 is the third biggest spirit in France and anise is still very strong,” he says. “It is declining, but I think this is partly to do with the heavy taxation on anise due to the abv; we have to remember nearly 75% of the price of a bottle is tax.” Tax is an on-going headache for producers since France hiked its alcohol duty in 2012. Nonetheless, Deslandes certainly portrays a positive outlook for the category with innovative launches such as Pastis 51 Rosé, made with red fruits, which was released last year. Deslandes claims nearly 200,000 new consumers were driven to the category by 51 Rosé, giving hope that another new addition this year combining anise and mint, Glacial, will have a similar effect.

What has been interesting to see in France during the past year though, is the recognition of vodkas coming from the region. In February, figures released by the Federation of Wine and Spirits Exporters (FEVS) showed vodka has overtaken Cognac as the most exported French spirit by volume. The statistics reported 13.4 million cases of vodka were exported in 2014, compared to 12.8m cases of Cognac. Vodka’s new lead in export sales is partly attributed to Cognac’s demise in China following the Chinese government’s anti-corruption campaign.

“For me, the reason we’re seeing these figures is down to Cognac in China,” expresses François Le Grelle, CEO of Hine. “If we had not lost so much in sales or seen an increase in growth in China, then Cognac would have remained in first position. Vodka sales are increasing while Cognac is declining, so the fact it has overtaken is mathematically speaking a normal economic situation.”

Pastis 51 Rosé recruited approximately 200,000 new French consumers

French vodka success

However, credit where credit is due; ultra- and super-premium French vodkas such as Grey Goose and Cîroc are undoubtedly putting their stamp on the category on a global scale, enjoying sales growths of 3% and 18% in 2014 respectively, and bolstering exports. “Vodka has been one of the most exciting categories in the last 10 years,” enthuses Testot-Ferry. “Ultra- and super-premium vodkas are showing strong growth globally, and lots of these vodkas are made in France, like Cîroc and Grey Goose. This is driven by strong liquid credentials, versatility and accessibility.”

Within France, the category continues to demonstrate a strong performance. Vodka sales by value grew from £779.2m (€1.09bn) in 2009 to £1.1bn (€1.54bn) in 2014 and volumes rose from 28.8m cases to 29.6m over the same period (Euromonitor). Forecasted figures predict the rate of growth is set to accelerate over the next five years, with value reaching £1.4bn (€1.96bn) and volume hitting 34.1m by 2019.

Poliakov, owned by La Martiniquaise, is one brand that’s reaped the rewards in France, boasting a 10% sales growth last year. “Vodka is a dynamic sector in France,” says Anna Luc, marketing director for France, La Martiniquaise. “French people are big traditional Scotch and anise alcohol consumers, but the young adult generation is fond of vodka-based cocktails. For this reason, we can expect that our domestic market will grow by about 30% by 2020.”

Rum outlook

Rum is another fierce competitor in the French spirits world best looked at from two perspectives. On the one hand there are rums coming from the French West Indies (such as Saint James by La Martiniquaise) and represents more than 80% of the total rum category in France. The remaining 20% comprises imported variants, such as Havana Club and Bacardi. Last year, France guzzled 39.9m nine-litre cases of rum, so unsurprisingly it’s described more than once as an “imperative” market for the category. Plus consumers’ infatuation with the classic Mojito cocktail is only boosting its feat.

“Rum is no longer just a drink for young consumers,” explains Deslandes. “The category has managed to premiumise and diversify while introducing new drinking strategies. The Mojito cocktail is the most consumed cocktail in the country in the on-trade, and long-term investments from Havana Club, including how to make a Mojito cocktail, have seen the benefits year-on-year.”

Overall though, and much to domestic producers’ dismay, whisky still remains the most popular spirit in France, spearheaded by the country’s love of Scotch whisky. According to the Scotch Whisky Association (SWA) France is the biggest export market by volume for Scotch with 183m bottles exported last year – an increase of 3% compared to 178m in 2013 – and the second largest by value worth £445m in 2014, up 2% from £434m the preceding year.

Ballantine’s Brasil, which is steeped in lime peels while ageing, appeals to new generation of whisky drinkers

Dominant Scotch market

“Scotch has been popular for a very long time and its popularity continues to grow,” comments Rosemary Gallagher, head of communications, SWA. “This could partly be down to the ‘auld alliance’ between Scotland and France. French consumers also appreciate quality and consistency and enjoy a product with such a strong provenance as Scotch whisky. We have every confidence that Scotch will continue to perform strongly in France next year and for many decades to come.”

Blended Scotch whiskies represent the majority of Scotch sales in France shifting 116.8m nine-litre cases last year. Deslandes praises the success of blends for being accessible to new whisky drinkers. Innovation within the category, such as the launch of Ballantine’s Brasil in 2014 – a spirit drink made by ageing Scotch whisky in casks with lime peels – has also invited new recruits to the sector. “The dynamic of premiumisation and innovation of new brands has been of very big interest to consumers,” Deslandes says. “Ballantine’s Brasil meets the new generation who are not overly keen on consuming whisky. It gives the possibility for other brands to recruit the 25-35 age bracket.”

Nevertheless, single malt expressions are increasing their foothold, growing 9% to £141m last year according to the SWA. Diageo’s single malts portfolio is the “growing leader” of the French market claiming more than 33% of the off-trade sector through both “innovation” expressions such as Singleton and established brands, including Cardhu, Talisker and Lagavulin. Testot-Ferry notes: “We can see a real trade-up as consumers seem to try more and more malts.”

Single malt evolution

It’s a similar story for Bardinet’s Glen Moray single malt Scotch whisky. As Laure Habbouse, Bardinet exports brand manager, explains, the single malt is “booming” and successfully enticing “more educated consumers” to the category. “We noticed an evolution recently – single malts getting more accessible, democratising themselves with brands like Glen Moray, which is extremely approachable, or Monkey Shoulder which has its very own and special positioning,” she adds.

But Bourbon is also gaining traction in France, and sales have risen by more than a third in the last five years with expectations to grow by almost another 20% in the coming five. “When it comes to the French people’s fascination with whisky, we are seeing the first signs – and I expect to see many more – of the rise of Bourbon,” Malandrakis fervently shares. “It has already done so in most markets.”

Back to domestic production, and only time will tell whether vodka has the capability to maintain its export lead in France with its high-end offerings and further cement France’s reputation in the spirits world. Or perhaps the tables will turn again and a Cognac recovery will put the sector back on top. Though Malandrakis warns French spirits producers to learn from Cognac’s mistakes and not “put all their eggs in one basket” – the luxury basket.

He concludes with this piece of advice: “France’s luxury associations could become its Achilles heel. It’s great to be associated with luxury, but if you don’t diversify to other price points, at some point this is not going to be linear sustainable growth.”