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Cognac

Why Cognac Makers Want More U.S. Business

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Reuters
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November 23, 2015, 4:25 PM ET
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CognacPhotograph by Getty Images/Image Source
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France’s centuries-old cognac houses are raising their bets on the U.S. market with new products and campaigns to broaden the drink’s appeal beyond its African-American stronghold.

The big four producers–LVMH Moet Hennessy, Remy Cointreau, Pernod Ricard, and Beam Suntory–have turned more of their attention to the U.S. following a drop in sales in China after an anti-graft campaign.

On its home turf cognac, is seen as the drink of choice for mature gentlemen but in the U.S., it is often enjoyed by status-conscious revelers inspired by blingy bottles and hip-hop name-dropping songs like Busta Rhymes’ “Pass the Courvoisier.”

Black culture’s taste for cognac, which only comes from the area around the western French town of that name, dates back at least to the time when U.S. soldiers were visiting jazz-mad Paris bars during the world wars. Back home it was an alternative to American whiskey, often made in Southern states with histories of slavery and racial segregation.

The African-American community accounted for nearly two-thirds of all cognac consumed in the world’s biggest market, say executives and analysts. Yet that’s now changing.

Producers of the drink, made by distilling white wine and aging it in oak barrels for anywhere from two to dozens of years, now need to reach other groups to help fill the space left by China.

“We don’t want cognac just to be for one category of person,” Remy Martin Executive Director Augustin Depardon told Reuters during a visit to the Cognac region, where over 75,000 hectares of vineyards grow mostly Ugni Blanc grapes that become the building blocks of cognac.

Depardon said a new campaign featuring Hollywood actor Jeremy Renner, one of the stars of The Avengers, was aimed at a broader audience.

“Priority No. 1”

Hennessy, Remy Martin, Martell, and Courvoisier make 85% of all cognac, and they are competing harder than ever, trying to harness the current boom in “brown spirits” like bourbon and rum.

“We’ve seen a lot of our cognac competitors be more aggressive in the U.S., actually investing in media campaigns on a scale we’ve never seen before,” said Jean-Baptiste Rivail, Hennessy’s director of business development for the Americas. “The momentum of Hennessy and brown spirits has attracted quiet players to play harder in the U.S. market.”

One of the quiet players is Pernod Ricard’s Martell, which at 300 years old, is cognac’s elder statesman. After pushing hard to become the leading player in China, the brand is now trying to lift its 2% share of the U.S. market.

“It is going to be our priority No. 1,” said Christophe Pienkowski, Martell’s international heritage brand ambassador.

Initiatives include a new variety called Charactere, which Martell hopes will help convert whisky-drinking Latinos, and a campaign with The Roots, who have recently gone from respected hip-hop group to household name as the official band for the U.S.’s Tonight Show Starring Jimmy Fallon.

Cognac suppliers sold 4.1 million 9-liter cases in the U.S. last year, according to the Distilled Spirits Council of the United States, up 11.9% from 2013, which only saw a 3.7% gain. It was the fastest-growing segment of a spirits market that rose only 2.2%, though from a small base. The trade group’s economist said this year may be even stronger.

Euromonitor forecasts U.S. retail cognac sales of $5.2 billion in 2015, up 9% from last year. That would see it surpass the Chinese market, which it estimates will have lost 36% of its value since a peak of $7.8 billion in 2012.

Cocktail Craze

The companies are also trying to push cognac into cocktails. While brandy is the main ingredient for classic drinks like Sidecars and Alexanders, it is not as prevalent as bourbon, tequila, and gin on modern cocktail menus.

To that end, Hennessy has launched Hennessy Black, which it says is better for cocktails, with a delicate taste that eases mixability and a stronger alcohol content that can withstand dilution.

“Cognac seems, in my mind, to have a rightful place in the cocktail craze that hasn’t been fully taken advantage of,” said Rabobank analyst Stephen Rannekleiv. “There’s an opportunity to continue making inroads in a demographic they have not generally had a strong presence in.”

Nielsen data for the most recent 30-day period suggests that white adult consumers drank 27% of the nation’s cognac even though they represent 66% of the adult population. Black consumers drank 40%, though they were only 11.2% of the population.

Despite efforts to broaden their market, the brands will be treading carefully so not to alienate their core audience, having seen how quickly Cristal champagne fell from grace in 2006 after a boycott by hip-hop mogul Jay-Z, who is now a backer of Bacardi’s new cognac D’Usse.

“African-Americans are still accounting for a huge part of cognac consumption in the U.S., and this is still our main target with D’Usse,” said Philippe Jouhaud, sales and marketing director for D’Usse.

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