Cognac On Pace To Hit Major Milestones In U.S. Market This Year

Heading into the spirits market’s crucial holiday selling period, the high-flying Cognac category shows no signs of slowing down. Shipments of Cognac to the U.S., by far the global category’s largest market, crossed the 5-million-case mark on 13.5% growth last year, driven by the double-digit progress of Hennessy, Rémy Martin and Martell. Depletions rose even faster, advancing by nearly 15% to 4.7 million cases, according to Impact Databank. Over the past two years, Cognac depletions in the U.S. are up by nearly 1 million cases, while shipment value has leapt 54% to €942 million ($1.05b). With growth continuing in 2016, U.S. depletions could hit 5 million cases and value could cross €1 billion ($1.1b) by year-end.

Hennessy continues to dominate the category, accounting for 44% of worldwide volume and 66% of the U.S. Cognac market. With its global volume expanding by 55% since 2005, to 6 million cases, Hennessy has risen to become the world’s third most valuable spirits brand by retail sales, at $3.5 billion (trailing only Johnnie Walker and Smirnoff). “A significant portion of consumers drinking white spirits a few years ago have come over to Hennessy,” says Giles Woodyer, senior vice president, Hennessy at Moët Hennessy USA. Rémy Martin remains a distant second to Hennessy in the U.S., but it too has been on an impressive run. In the 12 months through June, Rémy Martin posted a 15% increase in U.S. depletions, and in the first half of this year the brand’s VSOP jumped 20% in IRI channels.

Martell, which neared 100,000 cases in the U.S. last year, is getting increased focus in the market. Brand-owner Pernod Ricard is looking to leverage robust trends in both Cognac and Bourbon with a new hybrid product, Blue Swift ($50), which was finished in Kentucky Bourbon barrels. Bacardi’s d’Ussé brand has also been making strides. Thus far in Bacardi’s fiscal year (beginning in April), d’Ussé’s revenues are up 20% compared with last year, led by its VSOP quality ($50). Meanwhile, senior brand manager Tyler Phillips tells SND that d’Ussé XO ($230), which continues to expand into new markets, is growing exponentially from a small base.

Beam Suntory’s Courvoisier brand sells about one-third of its volume in the U.S. market. “The Cognac category comprises about 4% of all spirits by dollar value in the U.S., according to Nielsen, but it’s growing at 19%, compared with total spirits category growth of 6%,” says Halley Kehoe, Beam Suntory’s marketing director, lifestyle brands. “The whiskey renaissance has inspired greater consumer interest in brown spirits, specifically among multicultural millennial males. They’re looking for premium brands that project success and sophistication, and so Cognac is well-positioned to recruit them.”

U.S. - Top Seven Cognac Brands (thousands of nine-liter cases)
Rank	Brand	Importer	2012	2013	2014	2015	Percent Change1 2014-2015
1	Hennessy	Moet Hennessy USA (LVMH)	2,230	2,330	2,610	3,080	18.0%
2	Remy Martin	Remy Cointreau USA	670	620	654	765	17.0
3	Courvoisier	Beam Suntory	415	410	446	448	0.6
4	Martell	Pernod Ricard USA	67	64	74	99	33.4
5	Salignac	Beam Suntory	90	104	98	90	-8.0
6	d'Usse	Bacardi USA	3	18	55	58	6.0
7	Ansac	Heaven Hill Brands	37	36	36	35	-3.5
Total Top Seven			3,512	3,582	3,973	4,576	15.2
Other Brands			117	100	88	81	-7.4
Total Cognac2			3,629	3,682	4,061	4,657	14.7%
1 based on unrounded data 2 addition of columns may not agree due to rounding Source: IMPACT DATABANK

News Briefs:

•French wine production is expected to be down sharply this year, with the country’s agriculture ministry projecting a 12% decline from 2015. Impacted by such conditions as spring frost, hailstorms and drought, the French wine harvest is projected to be around 42.2 million hectoliters, which would be the smallest since 2012—and, according to the ministry, one of the lowest outputs in the past 30 years. Champagne and the Loire Valley were hardest-hit by the adverse conditions, with production in both projected to be down by more than 30%. Charentes, the area in southwestern France where Cognac grapes are produced, was also severely impacted, with output down by more than 20%. Meanwhile, production in both Bordeaux and Beaujolais will likely see declines of as much as 20%.

Craft Brewing and Distilling News:

•Bloomington, Indiana-based Upland Brewing Co. is releasing a new seasonal entry, Latitude Adjustment. Billed as a tropical pale ale brewed with pineapple and coconut, Latitude Adjustment (6.2% abv) is made with crystal malt and Mosaic hops and is intended as a “winter escape” beer. Latitude Adjustment previously debuted as part of Upland’s Side Trail Series (it was then called Beard of Paradise) before moving into the seasonal rotation due to popular demand. It’s rolling out in early November in six-packs and on draught.

•Maryland craft brewer Heavy Seas has collaborated with California’s Stone Brewing to create a new Imperial Brown IPA under its Partner Ships series. Made with Centennial, Palisade, Citra, Chinook and Simcoe hops and brewed with Blackstrap molasses, the collaborative Imperial Brown IPA (9% abv) is launching in limited release in 22-ounce bottles and on draught. Brewed at Heavy Seas’ Baltimore brewery, the Partner Ships series has also included projects with Maine Beer, Troegs and Terrapin.

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