Having seen a healthy 7.2% rise in shipments in 2006, the global Cognac market is set for continued growth over the coming four years, according to a new report from just-drinks, with continued progress in key major markets such as the UK, the US and China and an increasing contribution from new and emerging markets such as South Africa and Mexico. Ben Cooper reports.

Producers of France's premier brandy have had more than good reason to be cheerful of late, with data from the Bureau National Interprofessionnel du Cognac (BNIC) showing growth across all regions and categories in 2006. What is more, according to a new report published by just-drinks, the growth is set to continue.

Following a 7.2% rise in total Cognac shipments in 2006 to 12.6m cases, the just-drinks Global Market Review of Brandy and Cognac - Forecasts to 2011 report predicts that Cognac will continue to show growth across a raft of key international markets over the coming four years.

For example, shipments to the UK are forecast to rise from 843,500 cases in 2006 to 1.1m cases in 2011. Moreover, the report suggests, suppliers to this traditionally price-competitive market are intent on reducing the emphasis on discounting and price-led activity in the UK. The report points out that major brands, such as Martell and Courvoisier, are putting more energy and investment into the VSOP category in a market which has been historically dominated by VS Cognacs.

Meanwhile, the picture appears even more rosy in the US. "If there is one reason for optimism in the Cognac industry it is centred around the performance of the US market," the report states.

Shipments to the US are forecast to rise from 3.85m cases in 2006 to 4.35m cases in 2011, and the Cognac market there is also seeing growing premiumisation. Cognac companies have also benefited in the US from successfully appealing to ethnic groups, notably African-Americans. The report suggests that continued segmenting of the market, targeting certain products at particular ethnic markets, will continue to pay dividends going forward.

Cognac's growth in coming years will also continue to be boosted by growth in China, the report forecasts. Sales in China are set to rise from 1.14m cases in 2006 to 3.3m cases in 2011, according to the report.

Following a 40% rise in sales in 2006, China overtook the UK to become Cognac's second largest port of call, the report points out. "Aside from the US, China is the other place that really matters. The growth of the Cognac market has been staggering, and the Cognac volumes in China are becoming interesting," says Cyril Camus, president of Camus Cognac. "It has certainly reached the tipping point in China today."

However, while the report points out that an earlier boom in the Chinese market in the 1990s came to an abrupt end when the Government cracked down on 'conspicuous consumption', particularly by party officials, the report suggests that the character of the growth is different today, with much broader-based consumption. Whereas in the early '90s much of the consumption was driven by corporate entertainment, and mostly confined to the southern provinces, the report says that today consumption in China today is being driven by an emerging middle class, suggesting a more stable business and growth pattern.

However, while the report forecasts continued strong growth in China, it does not hold out too much hope of a major recovery in Cognac's erstwhile Asian stronghold of Japan. Cognac consumption in Japan has declined in recent years, and while the data suggests some stabilisation in the decline towards 2009 and 2010, the report is equivocal about the prospects for any significant change in Cognac's fortunes in Japan.

In addition to growth in key major markets such as the US, the UK and China, the report also points to progress for Cognac in smaller markets, and it is this broader-based growth pattern which is giving further cause for optimism.

"Asia is still the primary driver of growth, at least Martell's growth," says Martell marketing director Eric Benoist. "But what is also interesting is that we are seeing lots of new markets or smaller markets that are also driving growth. I'm thinking especially of Eastern Europe, but also South Africa and Mexico. These markets were hardly on our radar screen until recently. They are starting to deliver very robust growth."

Christian Liabastre, Rémy Cointreau's director of strategy and Rémy Martin brand manager, adds: "We are in a very positive cycle. Part of that is due to the positive health of the global economy. Unless there is some horrible occurrence that disrupts the worldwide economy we have potentially some strong years of growth for Cognac, and this is not true only in the Cognac category, this is basically true for every spirit category. This is particularly true in the US, but this is true everywhere - more and more you have a very high growth rate for the top premium part of the business. This is very good news for the category and for us."