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COGNAC & BRANDY - A new life for an old spirit
Cognac and brandy are products that truly encapsulate what premiumisation means, but as Andy Young discovered, there is now a lot more to these magnificent old drinks.
Cognac and brandy are enjoying consistent growth in Australia at the moment, with Cognac sales of around $35 million a year and 281,000 litres, which actually equates to just a 0.9 per cent share of total glass spirit sales. For brandy total sales are currently at around $74 million and 1.4 million litres, which is around two per cent of total spirit sales.
So less than three per cent of total spirit sales are currently taken by Cognac and brandy and what that adds up to is that there is tremendous potential for Cognac and brandy to enjoy strong growth and increase that share of total spirit sales. According to IRI Cognac enjoyed double digit dollar growth last year of 14 per cent and volume growth of 8.3 per cent, which compares to overall category growth of 3.6 per cent and two per cent respectively.
That mirrors the global trend for Cognac, which has seen exports grow for four consecutive years, most recently rising by 5.4 per cent in value and 8.2 per cent volume according to the Bureau National Interprofessional du Cognac (BNIC).
In the 12 months from 1 August 2017 to 31 July 2018, by value the turnover from Cognac exports reached 3.2 billion, accounting for nearly a quarter of the total value of exported French wines.
While the United States remains by far the largest market for Cognac, emerging markets including Oceania and areas such as South Africa, Vietnam and the Caribbean, achieved an increase of 5.3 per cent in value and 12.2 per cent in volume. The BNIC said that together, these new areas of opportunity represent more than 6.7 per cent of global volumes shipped, or nearly 13.9 million bottles.
Valeria Catterini, Marketing Manager for Champagne and Cognac with Pernod Ricard Australia, explained what the company, which owns Martell, believes is behind the growth being seen in Australia.
“There are several factors that can be attributed to Cognac category growth in Australia,” Catterini said.
“The changing demographic of Australia continues to see an increase of people with Chinese heritage. Cognac is more ingrained in their consumption habits in China and this has carried through into Australia.
“We are also seeing increased interest from mainstream retailers as premiumisation and craft trends have taken off in the Australian market.”
She adds: “The rich heritage and craft of Cognac is becoming increasingly appealing as consumers are looking beyond established categories, such as whisky.”
Matt Redin, Marketing Manager for St Agnes Australian brandy, agrees that the premium nature of the category is helping to fuel growth.
“For St Agnes Distillery our growth is all being driven at the premium end of the market. While our entry level VS is holding its own, against a raft of cheap direct imports, from our VSOP up through super premium St Agnes XOs we are seeing solid growth across all channels.”
As far as brandy, and particularly Australian brandy is concerned, Fred Siggins, Strategy Manager at Sullivans Cove says there is another factor at play.
“Australia has been producing brandy for well over 100 years, but with the growth in craft distilling and renewed interest in locally produced spirits, it follows that consumers would be taking a second look at brandy,” he said. “We do expect brandy to grow more in 2019 as both on and off-premise retailers along with craft producers continue to breathe new life into the category.”
MAKING THE MOST OF THE TREND
So with the trend and the reasons behind it established, what can retailers do to make sure they are making the most of what Cognac and brandy have to offer?
For James France, Founder of Vanguard Luxury Brands, which distributes Hine Cognac in Australia, it’s a straight-forward point of “knowledge is key”.
In terms of being able to use that knowledge to talk to consumers and bring about an upsell in purchase, France adds: “If retailers can educate their customers about the differences in the Cognacs used in a VSOP compared to an XO, consumers will very often be happy to trade up. Ask your supplier for more information on their Cognacs. Our team at Vanguard is well-trained in communicating the nuances between the different grades of Cognac.”
Catterini agrees, but adds that the brands should be looking to do more to help fully realise the potential that is there in the category.
“Retailers are very open to grow Cognac in Australia and we’ve already seen some amazing activations during key periods such as Christmas and Lunar New Year,” she says.
“The next step for Cognac brands is to provide retailers with simple yet impactful tools on lowering the barriers to Cognac consumption. Education and trial is key, as this is where retailers can play a crucial role in recruiting new consumers into Cognac.
“Trade education is vital for Cognac growth, as such we have a dedicated Brand Ambassador who is based in Australia to help with upskilling the trade on how to sell Cognac. We are constantly making sure retailers have everything they require in terms of latest product knowledge and support. Our Brand Ambassador has personally facilitated over 50 different staff trainings last year alone.”
That aspect of getting people, both retailers and consumers, tasting the product is important to Jimmy Lekkas, Marketing Manager at Alepat Taylor the distributor of Camus Cognac in Australia.
“Education is really important as is getting people to taste the product and have them understand where it sits in the market place,” Lekkas says.
“If retailers can look at carrying more than one or two SKUs it can really make a difference, and also a couple of ‘point of difference’ Cognacs. Not just the traditional VS or VSOP, but have a look at carrying the XO Borderies or the Camus Extra. They don’t have to carry caseloads, but carrying a couple of different units and providing people with the understanding of why it’s at that price and what makes it unique and special will make a difference.”
Maxine Godet, of Godet Cognac which is distributed by Kollaras Trading Company in Australia, agrees with Lekkas.
“It’s all about education, price relativity and accessibility. If we can share this with the retailer, then in turn the retailer can share our story with consumers.
“Offer not only VS, VSOP, and XO – Cognac is much wider and deeper than this standard offer. We are offering Cognacs dedicated to mixology, higher ABVs to experiment with water reduction, Organic XO, aged statement Cognac, like 15 and 22 years old, Vintage, Single Cru, Single Grape Cognac – the list goes on.”
UNDERSTAND THE PRODUCT
Redin takes that advice a little further and says that once retailers are educated, they can pass that education on and also use it to think further about where the Cognac and brandy is located in their stores.
“Retailers can make more simply by educating their customers and moving brandy from the bottom shelf to the top or middle shelf,” he says.
“If they contact their St Agnes distributor Vintage House Wine and Spirits they can very easily organise a masterclass mentioned above for their customers. Advertise brandy in their catalogues more – all too often brandy and Cognac are totally omitted from the spirit section of many retailers advertising.”
Siggins adds: “I think there’s a symbiotic relationship between consumer trends and what retailers have on the shelf or list. But we’d encourage everyone to get stuck in, take the bottles down from the top shelf, blow the dust off, and have a try. If we put things out of reach, we can’t expect people to try them.”
One way that may help retailers understand where Cognac and brandy are sitting now, and what its potential really is, is to think of it as being like gin was a few years ago. It’s a product that is widely seen as being something that previous generations would drink, but it is much more than that. As consumers understand the product, understand the quality and the premium aspects within the category, and as it becomes a part of the cocktail culture it will realise its potential.
If on-premise does indeed lead what happens in the off-premise, then the fact that more and more bartenders are using Cognac and brandy in their cocktails and in their bars, has to be something retailers pay attention to.
Lekkas says that this aspect is what will help drive growth, “What we’re seeing with information from the rest of the world and online here, we really think there is going to be a comeback for Cognac and brandy. There’s a spot for these products and there always will be, especially if you can offer a point of difference. Retailers should also remember that the quality of the brand will always stack up.”
Redin takes things a little further and has this advice for retailers, “Put brandy front and centre of your premium spirits displays (maybe take out a few of the random gins), especially during cooler months. Actively promote brandy and Cognac as the dark spirit of choice – they are on the whole premium aged spirits with immense character and nuance.”
As Siggins points out, not only does it have the potential to follow the gin premiumisation trend, Cognac and brandy also has the ability to engage with consumers of other products. “Just encourage people to try it,” he says. “For anyone who loves wine, there’s so much to love about brandy. For anyone who loves whisky, or good dark rum, or aged tequila, there’s even more in common – so much amazing nuance and complexity. There’s a lot of excitement and innovation in the Australian distilling industry around brandy, so take the time to explore what’s happening, and encourage your customers to do the same.”
Godet adds, “The consumer is becoming more educated around brands, history, varietals and age statements. Consumers are looking to invest in heritage, and this is a global trend in all categories.”
So with Cognac and brandy hitting key trends such as premiumisation, cocktails at home, craft and from Australian brandy, localisation, there are many reasons for retailers to reassess where their Cognac and brandy is sitting in their store and how they can make the most of this premium product, as Catterini explains, there’s a very good reason to love Cognac and brandy.
“Cognac has the highest average selling price of all the spirit categories so ultimately it is one of the most aspirational products to drink.”
