French spirits exports plunge 20% in Q1

Exports of French spirits fell by a fifth in the first quarter of 2023 due to increasing inflation, the Fédération Française des Spiritueux (FFS) has revealed.

The FFS said 2022 was ‘shaping up favourably’. However, the war in Ukraine ended momentum as companies faced rising production costs, going as far as doubling, for materials such as glass.

Furthermore, the increase in inflation in recent months has been detrimental for spirits as consumers tightened their budgets, the FFS added.

Exports of French spirits ‘accelerated’ in 2022 with value growing faster than volume, the FFS noted. Value rose by 11.7% to €5.4 billion (US$5.9bn) and volume increased by 2.3% to 55.8 million cases.

While Cognac dropped by 3.7% last year, vodka rose by 6.7% and liqueurs increased by 14.1%.

The FFS said the increase for French spirits exports in 2022 was ‘short-lived’ due to global inflation.

The FFS also noted that the CHRD segment (on-trade) – coffee shops, hotels, restaurants and nightclubs – has returned to its ‘historic level of activity’, while consumption at home is in decline.

Spirits sales in the on-trade soared by 51.8% to 20.1m litres in 2022. Growth was driven by fruit liqueurs and cream liqueurs (up by 68.5%), and white spirits (up by 64.6%).

For the second year in a row, sales of spirits in supermarkets fell by volume to 263m litres (down by 5.08% vs 2021) and dropped by 4.38% in value to €5bn (US$5.5bn) in 2022.

The FFS noted that certain categories were particularly affected, including fruit brandies (down 20.57%), Cognac (down by 9.49%), Armagnac (down by 9.27%), whisky (down by 7.24%), rum (down by 5.24%) and aniseed (down by 4.88%).

Combined French wine and spirits exports reached a record high of €17.2bn (US$18.4bn) in 2022, up by 10.8% on the previous year, according to data from the Fédération des Exportateurs de Vins & Spiritueux de France in February.

Jean-Pierre Cointreau, president of the FSF, said: “While companies in the sector showed temperance by limiting requests for price increases at the height of the 2022 crisis, the commercial sequence of the start of the year was calamitous for our sector, which was effectively unable to pass on 18 months of production cost increases.

“We ask the government to make retailers [more] reasonable and to protect [producers] from new requests to lower prices which would penalise our operating accounts.”

Cash flow problems

By the end of 2022, the FFS noted that only 67% of French spirits firms saw a positive result, according to a CPME-FFS study carried out in April 2023.

The study found that 60% of companies are now facing a deterioration in their cash flow and turnover is down for 43% of firms.

While 98% of companies experienced a price hike from their suppliers, only 11% said they fully passed on the increase to their distributor customers.

Furthermore, the FFS said the spirits sector was committed to cutting its carbon footprint. Nearly 50% of companies said they were planning to invest in the reduction of their energy consumption in 2023.