My first and enduring memory of Courvoisier – beyond the sight of the dramatic façade of the Cognac house’s château dominating the small town of Jarnac – is of a tasting. Then cellar master Jean-Marc Olivier (he left the role nearly 15 years ago, so this is ancient history) set out a formidable array of bottles on the table – not just Courvoisier’s full range, but the equivalent products from its three leading rivals: Hennessy, Martell and Rémy Martin.
It takes a bit of confidence in the quality of your Cognac to do that (for what it’s worth, Courvoisier came out of the comparison pretty well), and I’ve always been grateful to the house for hosting such an educational – revelatory, even – exploration of the differing styles of Cognac’s “big four”.
Roughly 20 years later, Courvoisier is at the centre of probably the biggest drinks acquisition of 2023, after being snapped up by Campari Group for $1.2bn, possibly rising to $1.32bn depending on future performance.
We’ve known for a while that the Italian company might be in the market for a so-called “transformative” acquisition; as so often, this is not the deal that most observers had predicted. That’s fairly typical, particularly when we’re talking about the soon-to-depart Bob Kunze-Concewitz, a CEO with his own distinctive way of doing things.
Campari’s recent M&A history has almost become a cliché: taking “unloved” brands, dusting them off, relaunching them, improving their routes-to-market; reaping the rewards (see Wild Turkey; see Appleton Estate; see Grand Marnier; if you go back a little further, see Aperol).
Some would argue Courvoisier is different: it’s one of that Cognac “big four”, it’s a million-case-selling brand; it’s costing north of $1bn. But I’m not so sure about that because Courvoisier’s recent history, in the context of the Cognac category, is pretty troubled.
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As I recall, when I tasted through those Cognacs with Olivier, Courvoisier had about 30% of its sales in the US. While Hennessy was huge in that market, and Rémy and Martell were targeting China (this predates the boom/bust years there), Courvoisier’s footprint was more balanced, with the obvious caveat it wasn’t really huge anywhere, save perhaps the UK.
Courvoisier’s share figure – a paltry 5% – might encourage some to talk a “big three” being the Cognac reality.
I haven’t monitored the brand’s fortunes in huge detail during the intervening years, so I was rather shocked to see that the US now accounts for 60% of Courvoisier’s net sales (ahead of the UK at 16% and China at 9%). And I was flabbergasted to discover that, in terms of volumes, 81% (or 85% if we include the US-only Salignac brand) is VS.
What appears to have happened – and I can only imagine that this was a strategic decision – is that Beam Suntory has gone after the US market for the past five years or so, which means prioritising VS there. If that’s right, it seems rather odd, given the extent to which the behemoth that is Hennessy utterly dominates both market and price segment.
That has built volumes – but at a (low) price. By value, Hennessy’s global category share now stands at 41%, ahead of Martell at 26% and Rémy Martin at 16%. Courvoisier’s share figure – a paltry 5% – might encourage some to talk of relegation, and a “big three” being the Cognac reality.
Nobody in Cognac is having a particularly good time of it at the moment but Courvoisier has suffered more than most. Year-to-date sales to 31 October stood at $148m, down 33% on the equivalent period in 2022; and 2022 wasn’t exactly a red-letter year for the brand, with global volumes falling by almost one-fifth in the 12 months as a whole.
Quizzed on the state of play in the US by analysts, Kunze-Concewitz was characteristically forthright. “We’re pretty bullish on the long term,” he said. “If we weren’t, we wouldn’t have spent $1.2bn on a Cognac acquisition.”
In common with the rest of the industry, the Campari CEO talked a good game about post-pandemic normalisation in the US and inventory destocking at a wholesaler level. In other words, a downturn not rooted in a significant lack of demand but in short-term market and supply chain fluctuations.
There has to be truth in that but it’s equally true that younger consumers are showing a lot more interest in snazzy, celebrity-backed and beautifully packaged agave spirits than they are in the rather more conservative Cognac category at the moment. We’ll see what happens during 2024 on that score.
But that doesn’t make Courvoisier a bad acquisition; in fact, it’s not so different from Wild Turkey or Appleton. A brand that has failed to live up to its undoubted attributes, from that Jarnac château to its glamorous history (Napoleon!), and that has been allowed to drift – never building any significant presence in Asia and mistakenly (my view) pursuing a volume-led strategy in the US.
Kunze-Concewitz, for understandable reasons, is rather more diplomatic on the subject, saying: “The brand has been well-invested but we think that the quality of the investment could have been different and its application to the markets could have been different as well.” You don’t have to read between the lines too closely to get his drift.
Turning Courvoisier around will, the company says, involve focusing back on the fundamentals and, in the words of Kunze-Concewitz, making the most of its “incredible latent equity”. Can’t argue with that.
To do this, Campari has some decent experience and expertise on which to draw. Involved in various capacities with the business are: Jean-Marie Laborde, who spent ten years as CEO of Rémy Cointreau; Christophe Navarre, ex-CEO of Moët Hennessy; and Patrick Piana, former CEO of Rémy Martin. Between them, they should have some idea of what to do.
One other plus as they look to turn things around – Courvoisier’s stock is apparently in pretty decent shape, with a value of $365m. That will be important as the company looks to build the brand’s luxury credentials in the future, particularly in Asia (and Campari’s recent tie-up with Wuliangye Group will no doubt help with that, too).
It may not have been a particularly enjoyable 18 months or so for Cognac but the Campari deal is a vote of confidence in the category – and particularly good news for one of the industry’s great underperforming brands.
In announcing the Courvoisier acquisition on an analyst call, Kunze-Concewitz said Christmas had “come early for Campari this year”. I reckon it’s Courvoisier that should really be doing all the celebrating.