Cognac - striving for a comeback

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For so long in the doldrums, new product launches and diversification may finally be paying off for the angst ridden Cognac category. Cyril Louvier analyses the latest figures from the BNIC to report on Cognac's changing fortunes over 2000.

After registering a major decrease in sales on a number of its key export markets during the late 1990s, Cognac has started to recover some ground. However if you look at the global picture, its consumption has increased in certain countries while continuing to regress elsewhere. In response to a doubtful future, Cognac producers have taken to diversifying their portfolios, coming up with novel alternatives to well-established alcoholic beverages, as well as finer versions of traditional Cognac. If most of these innovations haven't as yet translated into dividends, they are at least rekindling interest in Cognac and are revamping its image.

Martell Cognac poster 1922

Uncertainty close to home, growth abroad

After several grim years, Cognac's overall plummeting sales finally stabilised in 1999, and even registered some welcomed growth in 2000. Benefiting last year from the economic recovery of certain markets, sales of Cognac recorded an increase in volume of 3.1%, representing 138.6m bottles, up from 134.4m in 1999. This encouraging news can be attributed to sales in North America and parts of Asia.

Over the past five years, the United States, which is Cognac's leading client, has registered an average growth in volume of 10% per annum. Last year, sales to the US hit an all time high of 39.3m bottles (up 9.92%) reaping in FF2.9 billion ($392m) (+23.8%). VS brands make up 70% of US sales, as young Cognac is commonly used to make long drinks. However, sales of XOs are on the increase, popular with cigar smoking Hispanics and Afro-Americans.

Blended Cognac brands are also growing in popularity led by tropical fruit mixture, Alizé from the stable of L & L Cognac and Kobrand. This successful forerunner has inspired the creation of an array of Cognac alcopops, either mixed with fruit juice such as Remy Red (Remy Martin) or fizzy drinks along the lines of Bisquit-Surfer (Renault Bisquit).

Today they are making efforts to promote Cognac as an aperitif or a suitable base for long drinks

Cognac imports are being renewed further afield in Asia (Hong-Kong, Singapore, Malaysia, South Korea, and China), where premium quality products remain highly appreciated. However it's unlikely that Cognac will recover its pre-1997 sales figures, as Asians have discovered other alcoholic beverages since then. But operators are confident that the gift market can be further developed along with food pairing.

Japan is the region's exception, registering a 5.4% decrease in sales in 2000. It would appear that Cognac, once well regarded, has become a negative reminder of the bubble economy. Although the archipelago remains Cognac's 2nd market in value at FF820m ($110.9m) and 5th market in volume (6.5m bottles), Japanese consumption of Cognac is four times less than it was a decade ago. In response to the drink's lost aura, some marketers have taken to democratising its image, by rolling out alcopops and by offering by the glass samples of Cognac in bars to initiate younger drinkers.

Absorbing just over 50% of all Cognac sales, the European market represented 71.4m bottles in 2000, 90.2% of which were sold within the European Community. The loss of duty free status within the EC mid 1999, resulted in a reduction in sales within this zone, but less than certain predictions.

In 2000, duty free stores within the EC sold 5.9m bottles of Cognac, down from 6.4m in 1999 and 7.3m in 1998. This represents a decrease in value of 12.4% and 7% respectively. Last year, overall sales within the EC decreased by 9.42% in volume and by 7.45% in value, indicating that at least some consumers have taken to purchasing Cognac via other outlets. In addition, the Scandinavian markets have partly circumvented duty free limitations by including non-European Community stopovers amongst their ferry-liners' ports of call, hence the increase in volumes sold in Norway (+18.7%) in 2000.

Diversification on the domestic front

France, which is Cognac's third biggest client in volume (8.3m bottles in 2000), registered a decrease of 9.5% in 2000, after a five-year period of relative stability. Cognac producers have long neglected the less lucrative domestic market. However today they are making efforts to promote Cognac as an aperitif or a suitable base for long drinks.

In addition, arrays of top end offerings, marketed along the lines of premium wine or pure malt whiskies are being launched in France. The former range from products promoting a grape variety, in this case Folle Blanche, or a specific terroir, estate bottling, and lengthy ageing. The latter provide information about how they have been elaborated and are commercialised in transparent bottles and canisters. However, despite newfound interest in local demand, the leading operators are still reserving their better creations for the duty free market. Pale Cognacs, which are in a completely different register as they are in competition with whisky and white spirits, are also testing domestic waters, but they haven't as yet caught the imagination of French drinkers.

The rich array of new and improved products that have been released at home and abroad since 1999, indicate that Cognac producers are wagering on a global market revival. But the question remains as to whether these recent marketing innovations will stimulate sales to the same extent new packaging did a couple of decades ago.

Statistics source: The Bureau National Interprofessionnel du Cognac

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