The Millionaires' Club 2016: Slow boat to China

Holly Motion finds Pernod Ricard’s Charles-Armand de Belenet in high spirits about the long-term future for cognac in China


It’s been the talking point of the spirits category over the past few years and decimated sales for some of the biggest brands. The anti-extravagance measures in China have hit cognac especially hard and, while global cognac sales are showing signs of recovery and some producers are heralding the start of strong growth, others are being more cautious.

Out of the four million-case cognac brands in the Millionaires’ Club, Martell felt the clampdown most in volume terms. The Pernod Ricard brand dropped 27% from 2.6m to 1.9m last year and was in danger of falling to third best selling cognac brand, behind Rémy Martin, if things got any worse.

Thankfully for Pernod they didn’t. Sales grew by 16% and volumes are back above the 2m case mark. According to Charles-Armand de Belenet, Martell, Mumm and Perrier Jouët marketing director, both Asia and Europe are now starting to look more positive for the brand.

“We are optimistic about the global cognac market,” he says. “The slowing economy had an effect on some of the more mature markets for cognac last year, such as China and Europe, but confidence in the category is starting to improve again, driven by solid investment in brand activity and premiumisation from key players such as Martell.”

Martell cognac achieved an overall 7% sales increase and managed to grow 4% in China, it was reported at Pernod Ricard’s half-year results in February 2016. The company says this was driven by Martell Noblige and XO and favoured by an earlier Chinese New Year – February 8 this year as opposed to February 19 last year.

It was the brand’s 300th birthday last year, accompanied by the usual celebrations and product launches that accompany such events. A sales decline in this year would have been hard to swallow. “Throughout 2015, Martell showed very good results in value and volume.”

Looking to the future, De Belenet says that, overall, the underlying market trends are still about decline, with overall spirits trends similar to 2014/15.

But he’s quick to add: “Cognac is more resilient than scotch and has a special place in the hearts of the Chinese. Although the market has been affected by the slowing economy, we are confident in long-term opportunities.”

The reason for this confidence? De Belenet says: “We strongly believe in China’s potential for growth in the long term due to the very low penetration of the category and the strong appeal of Martell. Imported spirits currently represent less than 1% of the Chinese market so there remains a lot of opportunity.”

De Belenet adds that there has been strong development when it comes to the number of Chinese travelling abroad. “The [management consulting firm] Boston Consulting Group forecast 11% growth in Chinese tourists between 2012 and 2030. Travel retail is now seen as the ‘sixth continent’ and is a key market for Martell.