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TURNED OUT FINE AGAIN

The last ten years have been an amazing roller coaster ride for Cognac. At the time of the last global crisis - the Gulf War - the fortune of quality Cognacs knew no bounds. At the very time that demand for Champagne was sinking like a stone - in 1991 and '92 - sales of Cognac were scaling unprecedented peaks. And it was the most expensive styles and qualities which dominated the scene at that time. By the end of 1992, more than 134 million bottles of Cognac were being consumed around the world, with superior quality styles (VSOP, XO, Napoleon and Extra) accounting for more than 70 million bottles, mostly to the booming markets in Asia. Today, Cognac is having to squeeze itself back onto the world stage, having lost' sales of two million cases. It was only after the difficulties in the Japanese economy became apparent from 1993 onwards (Japan was then the premier market for Cognac, with sales of 28.5 million bottles) that Cognac began to suffer the same problems that had beset other luxury products three years earlier. The situation was exacerbated by the collapse in other Far East countries, and Cognac sales in Asia quickly fell from a peak of more than 50 million bottles a year to less than 24 million bottles, in the space of four years. It is sobering to note that today's demand for Cognac in Japan is now down to 6.5 million bottles. On the eve of the 1998 harvest, the Cognac area was in crisis. Total demand for Cognac had fallen from the peak of 135 million bottles to just 110 million, and the loss was made up entirely of the high-value (and high-margin) Cognacs at the top end of the market. Sales of superior quality Cognacs, for example, had fallen from 70 million bottles to little more than 45 million in the space of six years. The industry was hopelessly overstocked, and growers within the large Cognac AOC production area - faced with a large harvest of grapes and only a limited demand from the producers - went out on strike and virtually sealed off the towns of Cognac and Jarnac for a two-week period, demanding rescue action from the authorities. When the dust settled, growers were encouraged to withdraw from the appellation through offers of compensation and subsidies, and stricter yield limits were applied for producing the basic wine for distillation. In fact, there is still an urgent priority within the industry to uproot some of the excessive vines (estimated at between 15,000 and 20,000 hectares) and to work towards converting the Charentais vineyards, in order to find a better equilibrium for the region. However, despite all this, the picture for Cognac today is very much brighter.

Market recovery In the last two years, global sales of Cognac have not only stabilised but recovered a little, to reach 117 million bottles. Significantly, demand for the higher-quality Cognacs has pushed sales above 51 million bottles, so that this profitable sector of the business has increased by 3%, to 44% of the current total world market for Cognac. During the depressing years of sharply declining sales in Asia and an overall stagnant position in almost all of the European markets, the only bright spark for Cognac was the US. Few pundits in the business had ever believed that Cognac sales in the American market would do anything but continue to fade gently away, after Cognac had reached its former peak of 33 million bottles in the late 1980s. By the beginning of 1993, sales had dropped to below 20 million bottles. But then the miracle happened: a new consumer (young, black and upwardly mobile) saw Cognac as an aspirational drink, and the results in the US since then have been startling. Within four years, sales had recovered to 30 million bottles, reaching 34 million bottles in 1998, 36 million in 1999, and 39.3 million in 2000. While this boom in the US has all but ensured the stability of the Cognac industry in terms of global volume sales, it has also triggered off a new wave of confidence within the trade. Never lacking in package innovation, the Cognac producers had been stuck, nevertheless, with the idea that Cognac's future lay in its prestigious niche within the connoisseur end of the market. The American experience has opened producers' eyes to the benefits of appealing to new consumer sectors, thus widening the global appeal of Cognac.

Modern image Once it became clear that the US success was not a flash in the pan, Cognac producers realised that the product could be successfully marketed to new consumers, and that growth was not dependent on traditional, existing consumers bringing out the bottle more often and consuming more regularly. This realisation has led to a great deal of innovation in the market, and Cognac has done well to rid itself of the dust and cobwebs connotation - becoming a modern spirit with a lively image. There are now three distinct categories of Cognac consumer which the industry has identified for future growth: traditional discerning consumers who drink Cognac at the end of the meal; the younger trendsetters (both male and female) who look to Cognac as an exciting base for long drinks and cocktails; and the emerging serious' wine consumer, who is fascinated by Cognac's association with wine and the modern way in which the product can be matched with many different types of food. Because more companies are approaching the market with a different mindset, there is a much wider appreciation of Cognac in many different countries, and positive results are emerging. In France, for example, where Cognac sales had slumped from a million cases to less than seven million bottles in the space of nine years, a strong generic campaign for Cognac over ice has stopped the rot, with sales edging back towards nine million bottles last year. Despite its huge success in the US, Europe continues to be the bedrock for Cognac consumption, accounting for 51% of all shipments (which, if you include the use of Cognac in such products as Pineau des Charentes, account for 71.4 million bottles). While there has been relative stability over the past several years in the demand for Cognac, the importance of promotion, both above and below the line, is paramount.

The UK market For the first time in a number of years, the Bureau National Interprofessionel du Cognac (BNIC) is to launch a new targeted campaign of education, information and promotion in the UK. In the last decade, shipments of Cognac to the UK have dropped from a high point of 16.7 million bottles in 1990 to a fraction under 11 million in 2000. Nevertheless, the UK remains very much the number two market for Cognac worldwide, after the US and above France, and accounts for almost 10% of the total consumption of the product. The British market has always been dominated by the big brands of three-star Cognacs, but there is now a definite trend towards higher quality styles. Last year, sales of VSOP, XO and Extra accounted for almost 15% of the market, compared with just 12% four years ago. What is not clear, of course, is how many bottles of Cognac are purchased in the faltering cross-Channel shopping market, but it is quite obvious that more than the odd bottle is finding its way into the supermarket trolleys of British shoppers in northern France. In May last year, the BNIC created a great deal of consumer interest in London by placing a genuine Cognac alambic still on the concourse of Waterloo Station, at the Eurostar terminal. More than 5,000 samples of Cognac were served during the week. The BNIC's new marketing campaign in the UK was given a kick-start last month, on 8 October, in London with a high-profile mini-fair Cognac Vendange Day' at the Great Eastern Hotel. This is being followed up by a permanent press office providing a photo library and ongoing information on Cognac; press trips to Cognac for specialist and consumer press; a radio and regional press media tour with a BNIC spokesperson during November; and a stand at the consumer exhibition Vive la France', to be held at Olympia, in London, in January next year. There will also be a consumer media campaign in key lifestyle magazines including Cognac competitions and reader events, as well as a Cognac mobile bar positioned in a mainline London railway station in October 2002. What is setting Cognac apart from most other spirits that seek to be modern, trendy and fun is the diverse approach taken by its producers. While the all-important trendy spirit mixer market has not been ignored - young people on the Continent still perceive Scotch, Bourbon and Dark Rum as the ideal base for their long drinks in discos and nightclubs - Cognac is being promoted with an emphasis on its strong association with wine. As consumers become more interested in the provenance of wine, the different grape varieties and the different flavours, so Cognac is playing on its own variety of origins and styles. The discovery of the three taste sensations of fruit, flowers and spices - pioneered by the small family firm of Leopold Gourmel - is a theme now being adopted by larger companies (such as Rmy-Martin) and developed into exciting food-matching exercises to whet the appetite of interested consumers. Other companies have gone down the single cru' route, demonstrating the subtle differences between Grande Champagne Cognacs and Borderies, for example, while others have developed special Cognac blends (such as Kohiba) to accompany the newly rediscovered pleasures of cigar smoking. But amid all this market activity, traditional Cognac aficionados have not been forgotten. At the top of the tree are the very old (and very expensive) limited speciality Cognacs, such as the recently launched Hennessy Private Reserve, which is available at prestige outlets for a mere 35 per shot.

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