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After A Decade-Long Boom, Cognac Makers Focus On Value Over Volume

November 21, 2022

Cognac made significant gains in the U.S. market over the past decade, so much so that volume in 2020 was more than double that registered in 2010, according to Impact Databank. For most of those 10 years the growth was dynamic—averaging 9.5% per year—but the decade was capped with a nearly 25% depletions jump to 8.45 million cases in 2020. Growth advanced 4.5% to 8.8 million cases last year, a new record, and more increases are projected through 2025.

This year, though, as consumers returned to the on-premise en masse, the category has seen its retail volumes slip from the massive boom of the past two years, and is uncertain of reaching another U.S. record. Each of the leading brands is down in NABCA channels year-to-date, except for Bacardi’s D’usse, which is now the third-ranked player after Hennessy and Remy Martin. After more than doubling in size to 870,000 cases over the past two years, D’usse is up 27% in control states this year.

Lately, D’usse has become the subject of a legal dispute between Bacardi and its partner on the brand, Jay-Z, who, despite all the growth, has accused the drinks giant of mismanaging the business in order to acquire his share at a reduced price. Bacardi responded in court papers claiming that its Empire Investments affiliate struck a “handshake deal” with Jay-Z’s SCLiquor LLC to purchase Jay-Z’s 50% share in the brand. Bacardi says the rapper and business mogul “abruptly reneged on its agreement and doubled its demanded valuation.” Meanwhile, D’usse continues to soar in the market.

Elsewhere among the leading players, Pernod Ricard has made strides with its Martell brand in the U.S., which rebounded strongly to 230,000 cases last year after sustaining a hit in 2020 from the pandemic. “We’re continuing to see consumers enjoy spirits at home, which has supported the growth of the brand—especially Martell Blue Swift and Cordon Bleu,” says Charlotte Raux, Martell senior brand manager at Pernod Ricard USA. “That said, the on-premise has roared back—from bars and restaurants to lounges and clubs—and we’re seeing an increase in demand across the board.”

Cognac powerhouse Hennessy has had its share of supply issues, with some restaurateurs and retailers reporting out-of-stock situations for the brand. Hennessy’s growth stalled in 2021 at least in part due to supply chain struggles, but the brand continues to dominate the Cognac sector in the U.S. with volume at 5.1 million cases. This year, Hennessy has continued to focus on the value side, raising prices “to offset the effects of the logistical disruptions in the United States,” according to owner Moët Hennessy.

Second-ranked Remy Martin added almost a half-million cases in 2020 to near the 1.5-million-case mark before receding slightly last year. Parent group Remy Cointreau saw its Cognac division jump 22% to €638 million ($663m) in the six months through September, with the U.S. up double-digits. Still, the company warned, “As life ‘returns to normal’ in most regions, overall consumption from H2 on is likely to settle in at ‘new normal’ levels that are well above those observed in 2019/20. At the same time, growth should be tempered by high bases of comparison.”

At Beam Suntory, the Courvoisier label has shown impressive growth in recent years, depleting just under 800,000 cases in the U.S. last year. “Just like many industries, Cognac has faced headwinds in the last year due to inflation, though we remain optimistic with category resilience when it comes to consumers seeking premium brands and experiences,” says Susan Gibbons, senior marketing director for Courvoisier.

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