Cognac

With age statements and innovation grabbing attention worldwide, Cognac sales are booming. But can it keep up with global demand? Gavin D Smith reports 

On a cool evening in September the proverbially great and good of the cognac industry gathered in the magnificent grounds of the 17th century Château Chesnel, a few kilometres from the city of Cognac in west central France, which gives its name to the most prestigious brandy-producing region in the world.

They were there to dine and participate in an annual charity auction, known as La Part des Anges – the angels’ share – which raises money for The Order of Malta. All the principal cognac houses vie with each other to provide exclusive and even unique bottlings to go under the auctioneer’s gavel.

This year, a record sum of E136,000 was raised, helped in no small part by a bottle of Martell Cordon Bleu Centenary Edition, which was estimated to fetch around E3,500 but was finally sold for an eye-watering E21,000. The successful bidder was a Chinese national.

Although the amount of money in question was a surprise to all involved, the nationality of the successful bidder was not. Just as scotch whisky sales have soared in Asia during recent years, so cognac’s popularity in the continent has enjoyed dramatic growth.

Figures from the cognac trade body, The Bureau National Interprofessionel du Cognac (BNIC), show that overall volumes of cognac sold grew by 4.3% during 2011/12, with shipments standing at 471,678hl of alcohol, the equivalent of 168.5 million bottles. Of perhaps greater significance was a 13% rise in value of sales over the same period, with China’s thirst for cognac increasing by more than 20% to 25.3 million bottles.

Of the various categories of cognac, the most prestigious, XO (aged for a minimum of six years), showed a 22.9% value rise during 2011/12, which reflects the Asian markets’ fondness for older and rarer cognacs.

Inevitably, the four major cognac houses of Hennessy, Martell, Courvoisier and Remy Martin, which between them enjoy some 80% of global cognac sales, have the highest profiles in Asia, as they have greater financial resources to deploy there and often boast existing distribution networks.

Hennessy XO was introduced way back in 1872 and was actually shipped to Asia before it was sold in Paris. “Hennessy XO is the best-selling XO in Asia,” declares Jean-Michel Cochet, ambassadeur de la maison at Hennessy’s Cognac headquarters. “Asia is our biggest market in terms of value, though the US leads on a volume basis. Authenticity and the Hennessy name are vital in Asia.”

Last year Hennessy – part of LVMH (Louis Vuitton Moët Hennessy) – introduced Classivm exclusively in China, with a non-traditional bottle design and modern advertising campaign. “It is aimed at 25 to 35-year-olds,” says Cochet. “We are speaking to younger Chinese professionals. For them, Hennessy is probably their father’s drink, but they will eventually mature to variants such as XO.”

Meanwhile, the house of Delamain is a low-key, family-run operation with pre-revolutionary origins and a focus on upmarket cognacs. Indeed, this traditional establishment does not deign to produce anything with less than XO status and is located in Jarnac, at the heart of the designated Grande Champagne region of Cognac, which produces the finest examples of the genre.

Olivier Jadeau, export manager, Europe, says: “People in Asia are still looking for the big names and brands, but the market is maturing and opening up, and we are now doing some business there. Consumers there will get more curious about what else is available.”

Delamain is unusual among cognac producers in offering single cask bottlings from time to time, something more usually associated with scotch whisky, and a growing number of vintage releases are also being marketed by a variety of houses, with Delamain’s most recent offering being a 1977 vintage, of which just 511 bottles were released.

Despite being a mass-market operator, Courvoisier, owned by Beam, has also seen the potential in putting ages to cognacs, being the first major house to sell bottlings with age statements, namely a 12 year old and a 21 year old, while most of the major producers insist that blending an often complex and disparate variety of styles and ages of cognacs is the only way of ensuring ongoing consistency.

According to Jennifer Sernovick, head of trade marketing relations for Courvoisier: “The age statements were done partly to compete with single malt scotch whiskies – consumers understand age statements, when sometimes they are confused about different types of cognac.

“It definitely appeals to Asian consumers and this is an area we will continue to explore in future. Asians definitely have a cognac palate – they love the smoothness and voluptuousness of it. In China both men and women drink cognac, and they tend to drink it diluted and over ice.”

Flavour innovation

While on one hand Courvoisier produces cognacs with age statements and ‘high-end’ XO cognac variants with luxurious presentations aimed at the Asian market in particular, it has also innovated with younger cognacs intended principally for mixing and targeted at the US, and has gone further still with flavoured cognacs. These include Rose Courvoisier, which is specifically aimed at female consumers and comprises cognac and red wine from Grenache, plus Cognac Gold, a blend of Muscatel wine and cognac

Sernovick says: “There’s a real trend at present for mixing cognac and wine in the US, which is why we launched Courvoisier Rose and Courvoisier Gold there. Cognac is traditionally drunk by men, but there’s now a perception that it can be drunk in various ways. You can’t get everybody into making cocktails, it’s too complicated for many people to do at home, so we have Courvoisier Rose and Gold.”

In aiming to attract a more urban-based and youthful demographic, notably in the US, Courvoisier mirrors the activities of its major competitors. While Courvoisier launched ‘C’ earlier this year, designed to be served chilled and with a clear ‘gangsta rap’ feel to it, cognac market leader Hennessy’s Black hit the shelves this summer.

Black is a lighter style of cognac intended for mixing, packaged in an opaque black bottle and with its dedicated theme tune, When I Step Into the Club, performed by DJ rapper Swizz Beatz.

Of course, the link between cognac in the US and the African-American rap movement is not new, having been established at least a decade ago, but the correlation clearly still has legs, and more than half of all cognac sales in the US are to African-Americans.

The latest cognac variant from Bacardi-owned Château de Cognac, which also produces the altogether more traditional Baron Otard range, is D’Ussé. The initial expression – endorsed by the rapper Jay-Z – is a VSOP.

Château de Cognac president Laurent Diter says: “It’s a totally different perspective to Baron Otard, which bottled a 1972 vintage earlier this year. D’Ussé was launched in the US in June and is targeting African-Americans. Apart from anything else, the bottle is nothing like that of Otard, featuring a prominent cross of Lorraine.”

Also on the less than traditional side of the Cognac coin is ABK6 Ice Cognac, introduced into the UK this summer by the house of ABK6, which, as its name suggests, is one of the newer and less conventional Cognac producers. Ice Cognac is a young VS (aged for two to four years) variant, intended to be drunk on the rocks, and complete with a white, ice-effect bottle.

Cognac sales in the US during 2011/12 rose by a modest 2%, and the bulk of cognac consumed in the States is of VS status, which reduces values, though in terms of volume the US is the world’s leading cognac market, with sales of 49.3 million bottles during 2011/12.

Exploiting travel retail

While the cognac industry has been slower than scotch whisky producers when it comes to exploiting the travel retail sector with exclusive offerings, there is a growing momentum for such bottlings, and this summer heavyweight brand Martell – owned by Pernod Ricard – launched its Martell Millésime 1968 Cognac through travel retail outlets in the Far East.

A Grande Champagne, single vintage bottling, Millésime 1968 is packaged in the sort of opulent wood and leather style, complete with individual bottle number, associated with the sector. It has been aged for more than 40 years in Martell’s oldest cellar – the Chais de la Coquille.

Given the impressive rate of volume and value growth in Asia and even the comparatively small rises in the US, leading to an overall 2011/12 year-on-year volume increase of 4.3%, there are understandable concerns about the cognac industry’s ability to service future demand without compromising quality.

Strict requirements

Unlike scotch whisky, which can source malting barley from anywhere in the world it chooses and may distil 24 hours a day and 365 days a year if it wishes to, cognac production is limited by strict legal requirements intended to preserve the product’s quality and relative exclusivity.

For example, only grapes grown in the designated Cognac region may be distilled into cognac, and the French government stipulates the amount of ground that may be planted with vines for this purpose – 72ha in 2011. Secondly, the distilling season is limited to a period from when the grape harvest ends (October) to March 31 the following year, and the capacity of the pot stills in which the second of the two distillations takes place may be no greater than 25hl.

Courvoisier’s Sernovick admits that “Supply may become an issue – can we supply enough cognac? Asia is the major market for VSOP [aged for a minimum of four years] and above, but we’re not forgetting the other markets. We are doing as much as we can to increase supply, but it’s not possible to expand much more. For one thing, the amount of cognac that can be made each year is dependent on the climate for the grape harvest.

“Overall I really hope you won’t see a reduction in quality of cognacs, and you can’t fool a cognac consumer for long. From our point of view, we would always prefer to allocate stocks rather than compromise quality in any way.”

When it comes to protecting the integrity of the product, and in particular the older cognacs that produce so much revenue in Asia, David Boileau, cognac ambassador for the trade body BNIC, notes that: “From 2018, the XO category will increase from a minimum age of six to 10 years. With high demand for cognac some producers might be tempted to opt for the bottom end of the age range, though at present nobody is maturing it for less than 10 years, anyway.”

He adds: “It is difficult for the people of the region to plan 10/20 years ahead and always difficult to get it right.”

It is true that the cognac industry has known hard times in the not-too-distant past, and one source declares: “People are well aware that there might not be continued growth in demand for cognac. There is optimism tinged with caution.”

However, given that Diageo is about to invest more than £1 billion in a second ‘super-distillery’ for scotch and in increasing capacity at many existing plants, with yet another vast new distillery also being mooted, maybe it is time for the regulators of cognac – with an annual turnover now worth more than E2.2 billion – to accept that the good times may be here for several decades to come, and act accordingly.