While Bourbon has led America’s brown spirits renaissance, Cognac has made its own mark on the category as demand for aged spirits has broadened its appeal. Last year, global Cognac volumes increased by 5.5% to 15.4 million 9-liter cases, according to Impact Databank, and the U.S. was at the forefront with nearly 40% of total consumption. After growing by nearly 10% last year to hit the 6-million-case mark, Cognac has now expanded its U.S. volume by nearly 2 million cases in the past three years.
Out in the market, retailers are seeing steady growth, albeit without quite the same excitement that whiskies have experienced. At Liquor World in Fayetteville, Arkansas, owner Kent Starr says Cognac sales have grown 8% this year, but still only comprise 4% of total store sales, trailing far behind American whiskey’s 30% share. Christine Elder, president and managing partner at Blanchards Wine & Spirits in West Roxbury, Massachusetts, finds the category to be in a similar situation. “Cognac is growing, but off a very small base,” she says. “It just hasn’t experienced the momentum that the whisk(e)y sector has, at least in our store.”
At Houston-based Spec’s Wines, Spirits and Finer Foods, president and owner Jon Rydman agrees that Bourbon has posed stiff competition for any rival category. “In my view, Bourbon has stopped the growth of Cognac at our stores,” Rydman says. “I’m not seeing the category getting any freshness—some brands that we once sold a tremendous amount of have fallen off completely. If it weren’t for Hennessy, the category wouldn’t be growing for us at all.”
Indeed, Hennessy is Cognac’s driving force, averaging an annual increase of 12.9% over the past five years in the U.S., according to Impact Databank. In 2017, the brand grew 7.4% to 3.96 million cases; it’s now nearly twice as large as it was in 2012, when it depleted 2.16 million cases. Hennessy accounted for 49.1% of all Cognac depletions in the U.S. market 20 years ago, and today it makes up 66% of the total.
Giles Woodyer, Hennessy’s senior vice president for the U.S., notes that the brand’s VS expression ($34 a 750-ml.) accounts for the majority of its growth, but that Hennessy XO ($200) is experiencing increased momentum, as is VSOP Privilège ($60), which is growing by double digits as consumers trade up from VS or migrate over from the whisk(e)y category. “We believe in taking consumers on a journey through our Cognac portfolio,” Woodyer says. “Part of that journey is education, which will remain a priority. And we’ll continue to develop custom tools and experiences to showcase Hennessy’s authenticity, mixability, and cultural connectivity.”
Hennessy is the top performer at Minneapolis-based retailer Haskell’s, where the VS expression ($32 a 750-ml.) sells best, particularly within the African-American community. “I’m not finding that our Cognac consumers are interested in exploring other brands,” says Haskell’s chairman and CEO Jack Farrell. Rydman sees the same situation at Spec’s. “Hennessy is the sweetest style of Cognac, so consumers who favor it don’t want to make the jump to other brands because the flavor profile will be very different,” he says, adding that a Hennessy drinker might be more inclined to move to a Bourbon than a drier brand of Cognac.
Hennessy owes much of its success to its strong relationship with loyal customers. “As a brand that celebrates cultural diversity, Hennessy has a deep and storied relationship with poly-cultural consumers,” Woodyer says. “We were founders of what would become the National Urban League; were the first spirits advertiser in leading African-American publications; and have a longstanding relationship with the Hispanic Federation, among many other endeavors and partnerships. We continue to celebrate these communities and organizations.” In October, Hennessy launched the fifth chapter of its Wild Rabbit campaign, titled “Major,” which celebrates Marshall “Major” Taylor, a pioneering cyclist who at the turn of the 20th century was one of the first African Americans to win a world championship.
Despite Hennessy’s hold on the category, competing Cognac brands have fared well in recent years. Second-ranked Rémy Martin was up 10% last year to 905,000 cases, according to Impact Databank, continuing on a steady climb that started in 2013. If that trend continues, Rémy may cross the 1 million-case mark in the U.S. over the next year. After declining in 2015, No.-3 brand Courvoisier has been trending upward over the past two years, increasing 4.3% in 2017 to 490,000 cases. The Beam Suntory-owned label is poised to cross the half-million-case mark by year-end. “Courvoisier has been able to gain share over the last year in a very competitive environment, but we know that we’ll need to continue sharpening our strategy and increasing our focus and investment to keep the momentum going,” says Stephanie Kang, director of Cognac for Beam Suntory. “We’ve found that consumers know Courvoisier and have a good impression of the brand, but don’t think of us often enough. So we’re focused on making sure consumers see the brand and have the opportunity to try it again.”
Courvoisier portfoliomate Salignac has also seen impressive gains, expanding 33.4% last year to 149,000 cases, according to Impact Databank. Following closely behind is Pernod Ricard-owned Martell, which grew by 27.6% last year to 134,000 cases. Martell is seeking to compete with other top players with a focus on appealing to younger, multicultural consumers. “We’ve had tremendous success working with our influencer network across the U.S., including a partnership with rap artist and record producer Quavo of the hip-hop trio Migos,” says brand director Brian Smith. “It’s a very consolidated category with only a handful of big competitors, but brands are targeting millennial consumers by tapping into urban cultural moments. The biggest challenge is breaking through in an authentic way that truly gives back to the communities we’re speaking to.”
Innovate to Invigorate
At Haskell’s, Farrell says that Cognac should take some cues from Bourbon and focus on innovation to engage consumers. “When we offer special allotments of Bourbon, they sell out immediately—usually within an hour,” he says. “This kind of excitement isn’t happening around Cognac.”
Martell, for one, appears to be taking note of Bourbon’s constant stream of new products and expressions. The brand has been updating its product lineup over the past two years, beginning in 2016 with the release of Blue Swift ($50 a 750-ml.), a VSOP expression matured in French oak casks and finished in Kentucky Bourbon barrels. Smith notes that this expression is currently driving the majority of Martell’s growth. The brand introduced a new VS offering called VS Single Distillery ($30) in 2017, followed by Cordon Bleu Extra ($156), which launched this year as a trade-up from the base Cordon Bleu ($130). The innovations won’t stop there: Smith says that the brand will launch a new VSOP expression called VSOP Red Barrel ($40) in early 2019. He adds that Martell was up 44% in the 12 months ending in October and is picking up momentum, bolstered by new releases and a focus on more consistency in packaging.
Similar to Martell’s partnership with Quavo, Courvoisier launched its Honor Your Code campaign last year with hip-hop artist A$AP Rocky, drawing connections between the musician’s commitment to excellence and Courvoisier’s commitment to quality. The campaign has helped reinvigorate the brand among multicultural and millennial consumers, Beam Suntory’s Kang says. “This year, our primary focus has been on driving consumer connections to Courvoisier VS, our most popular and approachable marque,” she adds. “As we move into 2019, we’ll increase focus on our luxury marques, including XO and Initiale Extra. And in January we’ll be launching a limited-edition expression that undergoes a second maturation in Sherry casks.”
Guillaume Lamy, vice president of the Americas for Maison Ferrand’s Pierre Ferrand Cognac, notes the importance of offering a variety of expressions to appeal to a wide range of consumers. “We make Cognacs that are very different in taste, aging, and blending process,” he says. “We’re lucky to have a master blender and team in the cellars who are constantly pushing the boundaries.” Over the past couple of years, Pierre Ferrand has been growing at a steady pace of 12%, Lamy notes. Recent releases for the brand include the limited-edition Renegade Barrels No. 1 ($90), finished in Sauternes casks, and No. 2 ($90), finished in chestnut casks. The brand also updated its Reserve line to include Double Cask ($80), which undergoes a second maturation in Banyuls casks. “Competition is as tough as ever, with 90% of volume belonging to three houses,” Lamy says. “Many small guys like us are competing in that 10% segment. It’s challenging, but at the same time very rewarding, if the push for more market share is made with respect to other brands and consistency in the effort.”
At Illinois retail chain Binny’s Beverage Depot, Pierre Ferrand is among the top-selling Cognac brands, along with Hennessy, Martell, Courvoisier, and D’Ussé. “I think focusing on barrel finishing and cocktails is effective, as is targeting non-traditional Cognac drinkers,” says Binny’s specialty spirits buyer Brett Pontoni. “Growth for the category is incumbent upon continued availability of small producers, innovation to reflect changing tastes, and pricing strategy in line with growth brands in other categories.”
Growth Opportunities Abound
If the tremendous success of Bacardi’s D’Ussé is any indication, the Cognac category could very well become more diversified in the future. Launched in 2012, D’Ussé leapfrogged Martell and Salignac to become the No.-4 Cognac brand in the U.S. last year, surging 98.1% to 170,000 cases. Ned Duggan, vice president and brand managing director for D’Ussé, notes that the brand’s VSOP blend ($50 a 750-ml.) captured a substantial share of the U.S. market last year, and its XO ($230) is trending up as well.
Further shakeups may be on a horizon with Campari’s purchase of the Bisquit brand from South Africa’s Distell for about $62 million last December. Bisquit’s key markets include South Africa, Belgium, Switzerland, and global travel retail, but Campari is eyeing the U.S. market, as well as China, for expansion.
D’Ussé’s strategy is to bring a fresh, contemporary feel to Cognac by focusing on cocktails as a means of education. “In select cities around the U.S. we’ve launched the D’Ussé Re-Mixer series, an interactive cocktail event demonstrating the parallels between reworking a classic cocktail and remixing a classic song,” Duggan says. “Re-Mixer provides an in-depth look at our VSOP and XO blends, the Cognac category as a whole, and its role in cocktails, as well as the creative similarities between cocktails and music.” Duggan adds that through hands-on events and campaigns like Re-Mixer, D’Ussé is aiming to counteract the old-fashioned perception of Cognac. “By showing that D’Ussé is a versatile and approachable spirit for everyone, we’re proving this stereotype is no longer the case, and the reception has been very rewarding,” he says.
Pierre Ferrand has long embraced the modern mixology movement. “I’m proud to say we were part of the cocktail resurgence from day one: Back in 2004, when craft cocktail culture wasn’t on most bar managers’ radars, Milk & Honey in New York City was pouring Pierre Ferrand Ambre as their house Cognac,” Lamy says. “Right away, it was our job to understand the history of cocktails. Our studies and, most importantly, friendships with the cocktail world led to the release of 1840, a Cognac made in the style of pre-phylloxera products that were historically used in Juleps, Crustas, and punches.” The 1840 ($45 a 750-ml.), a higher-proof expression created specifically for cocktail-making, was released in 2011 and won Best New Product at Tales of the Cocktail that year. “It was a win for Ferrand, but to a much higher degree it was a great win for the Cognac category behind the bar,” Lamy adds. “For the first time in a long time, Cognac was recognized as a key component in a cocktail program.”
Indeed, the interest in historic spirits and cocktails will continue to benefit Cognac going forward. Beam Suntory’s Kang points out that many classic drink recipes originally featured Cognac, which most consumers still don’t know. “We’re excited to see the future of the category, because many trends haven’t yet trickled down to Cognac as much as with other spirits like Bourbon,” she says. “It’s an excellent growth opportunity for the category as more consumers are educated on the exceptional quality, complexity, and versatility of Cognac.”