Cognac brands must ditch ‘generic’ branding to thrive

6th September, 2016 by Amy Hopkins - This article is over multiple pages: 1 2 3

At first glance, latest figures tell a rosy tale of redemption for Cognac, but producers need a fresh approach to tackle ongoing market challenges and complexities

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Global Cognac sales have significantly increased in the last 12 months

Speak to almost any Cognac producer and they will tell you that their industry has adjusted to a ‘new normal’ over the past 12 months.

Global sales have significantly increased as difficulties in China subside and the US market continues to go from strength to strength, with VS and VSOP expressions now driving growth. Luxury XO brands have failed to bounce back at the same rate, but Cognac houses with a full ladder of products certainly have reason for renewed optimism in 2016.

Data released by trade body the Bureau National Interprofessionnel du Cognac (BNIC) earlier this year confirmed the category’s recovery. Record shipments were witnessed in 2015, increasing 8.5% by volume to almost 168.9 million bottles and 21.3% by value to €2.6 billion (US$2.9bn).

“This dynamic was seen on all the famous Cognac markets – America, the Far East and Europe,” claims Ruslan Grigoryev, development director of Ladoga Group, maker of the Roullet Cognac brand. “Today, young VS continues to progress and the category is now more than half of total Cognac sales, with a skew towards the US market.”

Indeed, North America, spurred by demand in the US, proved once again to be the strongest market for Cognac, importing 65.3m bottles last year. Cognac’s performance in the long-beleaguered Chinese market bounced back to 2013 levels, growing 23.4% to 1.4m nine-litre cases, in turn bolstering overall sales in the Far East. Furthermore, China’s growing demand for VSOP variants has led to “significant improvement” for the sub-category, which now accounts for 40% of global Cognac exports.

However, volumes of older variety Cognac fell 4.7% due to lagging demand in China, traditionally a haven for luxury buying. The vicissitude of the category in China has been well documented since a government-backed austerity campaign launched in 2012. Sales of the ‘Big Four’ Cognac houses – Rémy Martin, Hennessy, Martell and Courvoisier – were all hit by destocking in the market, and while most have now heralded a return to growth, this progress is skewed towards VS and VSOP.

Nevertheless, value sales of XO expressions increased 8.1% last year. It is in this new environment of altered market dynamics that Cognac producers are attempting the tricky task of establishing stable growth strategies.

“For me, the situation in China just needed to settle down a bit and now we are seeing growth at a more affordable level,” says Jeanette Edwards, global director at Beam Suntory-owned Courvoisier. “China has always been a small part of our business because our strength lies in the US, UK and travel retail, which are more driven by VS and VSOP. But we certainly see an opportunity in Asia.”

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