Cognac shipments to Asia slowed down last month

Cognac shipments to Asia slowed down last month

When Cognac producers were beginning to realise the full impact of falling demand in China last year, Pernod Ricard's MD of finance, Gilles Bogaert, was asked when he thought the situation would return to normal. Bogaert said that a recovery would take time, adding that “there are still questions over pace”.

Ten months on and those questions persist.

Previous deadlines, such as the January/February Chinese New Year period cited by Remy Cointreau as “key”, have been and gone and the market remains firmly entrenched.

According to latest figures from the Bureau National Interprofessionnel du Cognac (BNIC), cited by Nomura, Cognac shipments in June to Asia fell by 38.1% after a May in which shipments dropped by 7.8%. This suggests a worsening situation, though last year's June proved a strong comparison, resulting in a slightly skewed figure.

So when can we expect a Cognac turnaround in China, something which both Pernod and Remy have assured is coming?

In a note today (16 July), Nomura analyst Ian Shackleton points out that Pernod has recently reneged on estimates that calender 2014 will see a bounce back, though remains confident that recovery will come in the “medium term”. Shackleton expects Pernod's China business to come back around the start of next year.

For Remy, the timetable looks similar. But, as analysts have said before, the outlook is more constrained because of its exposure to high-end Cognac. Shackleton reiterates his belief that even when the “normalisation” of spirits in China arrives, there's chance Chinese consumers will drop Cognac for other categories.

Remy releases its first-quarter results on Friday, which should provide more insight into China's Cognac market. Pernod releases its full-year results on 28 August, perhaps the more significant milestone in this chapter of the Chinese drinks market. By that date we should know if there is an end in sight, or if we have more waiting ahead. 

Expert analysis

Global Spirits Market: News and Events May 2014

Global Spirits Market: News and Events May 2014

Synopsis The report provides a review of the latest news and key events in the global spirits market during May 2014. Summary Using this report, marketers will effectively gain an insight into the more