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As Cognac’s Boom Continues, Producers Look To Bolster Supply

October 3, 2018

Cognac is enjoying a renaissance. Last year global volumes increased by a robust 5.5% to 15.4 million cases, with the U.S. at the forefront, accounting for nearly 40% of total consumption. After crossing the 6-million-case mark on 9.7% growth in 2017, Cognac has now expanded its U.S. volume by nearly 2 million cases in just the past three years. With demand skyrocketing—particularly for the VS segment—keeping adequate supply in the pipeline is now the major concern.

Hennessy continues to drive the market in the U.S., averaging an annual increase of 12.9% over the past five years. In 2017, the brand increased 7.4% to just under 4 million cases, and might have risen higher if not for its supply constraints. Still, Hennessy is now nearly twice as large as it was in 2012, when it depleted 2.16 million cases. “Hennessy has plans for growth across all our qualities in the coming years; however, we do need to continue to manage our growth and supply carefully,” says Giles Woodyer, senior vice president for Hennessy at Moët Hennessy USA. “We’re continuously improving and building our supply development efforts including expanded relationships with growers, new plantations, and strategic investments such as our recent considerable investment in our packaging and logistics site, Pont Neuf, which opened last year.” This new 280,000-square-foot Pont Neuf facility will allow Hennessy to produce around 10 million cases annually by 2020, up from 7 million cases currently.

Number-two brand Rémy Martin also had a strong year in 2017, growing 10% to 905,000 cases. The Rémy Martin VSOP expression has been especially solid in the U.S. market, rising 16% last year to nearly 600,000 cases. In the first half of this year, Rémy Martin VSOP’s volume climbed 12% in control states. In June, parent company Rémy Cointreau shuffled its executive lineup, with former Rémy Americas CEO Philippe Farnier replacing Eric Vallat as CEO of the House of Rémy Martin. In turn, Farnier was succeeded at the helm of the French group’s U.S. business by Ian McLernon, who formerly led the global travel retail division.

Third-ranked Courvoisier, part of the Beam Suntory portfolio, has underperformed the market, but after declining in 2015, it has enjoyed increasing depletions the past two years and could cross the half-million-case mark by year-end. Portfoliomate Salignac, positioned at Cognac’s entry-level pricing tier, has risen sharply the past two years, with its U.S. volume expanding by two-thirds in that period.

Martell has likewise been on a tear, and more than doubled in size from 2013-2017. In the year through June, the Pernod Ricard-owned brand was up 55% in Nielsen channels, with the launches of Martell Blue Swift—finished in Bourbon barrels—and Martell VS Single Distillery, alongside price increases, helping to propel sales.

Bacardi, meanwhile, has an emerging player in d’Ussé. Last year, the brand leapfrogged Martell and Salignac to become the number-four Cognac in the U.S. at 170,000 cases, up 98.1%. Bacardi has been emphasizing mixability, with marketing programs including the d’Ussé Re-Mixer series, an interactive cocktail event demonstrating the parallels between reworking a classic cocktail and remixing a classic song. It’s also promoting the brand with a U.S. tour by Michel Casavecchia, cellar master of Chateau de Cognac and creator of both d’Ussé VSOP and XO.—Mary E. Keefe

U.S. – Top Six Cognac Brands
(thousands of 9-liter cases)
Rank Brand Importer 2016 2017 Percent
Change1
1 Hennessy Moët Hennessy USA 3,691 3,963 7.4%
2 Rémy Martin Rémy Cointreau USA 823 905 10.0%
3 Courvoisier Beam Suntory 470 490 4.3%
4 d’Ussé Bacardi USA 86 170 98.1%
5 Salignac Beam Suntory 112 149 33.4%
6 Martell Pernod Ricard USA 105 134 27.6%
Total Top Six2 5,287 5,811 9.9%
Total Cognac 5,469 6,002 9.7%
1 Based on unrounded data
2 Addition of columns may not agree due to rounding

Source: IMPACT DATABANK

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