Global market review of brandy and Cognac forecasts to 2014 2009 edition
Page i Global market review of brandy and Cognac forecasts to 2014 2010 edition November 2009 By The IWSR Published by Aroq Limited Seneca House Buntsford Park Road Bromsgrove Worcestershire B60 3DX United Kingdom Tel: +44 (0)1527 573 600 Fax: +44 (0)1527 577 423 Web: www.just-drinks.com Registered in England no: 4307068
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Page iv Table of contents Table of contents Single-user licence edition... ii Copyright statement... ii Incredible ROI for your budget single and multi-user licences... ii just-drinks.com membership... iii Table of contents... iv List of tables... vi Notes about the data... xi Terminology... xi Chapter 1 Scope of the market... 1 Global Cognac sales fall... 4 Overview by region... 7 Impact of the downturn... 7 History of boom and bust... 9 Consumer trade-down?... 10 Overview by quality... 11 Overview by brand... 12 Industry structure... 12 Supply and demand... 14 Regulatory changes... 16 Marketing developments... 16 New product activity... 18 Promoting mixability... 20 Cognac-based liqueurs... 22 Single malt lessons... 23 Role of gifting... 25 Extreme price products... 26 Relationship between non-cognac brandy and Cognac... 27 Reduction of subsidies hits European producers... 27 Competitive market... 28 Chapter 2 The markets... 29 North America... 29 United States... 29 Cognac... 29 Non-Cognac brandy... 31 Canada... 33 Mexico... 34 Latin America... 38 Chile... 38 Brazil... 41
Page v Table of contents Asia... 42 China... 42 Hong Kong... 46 Taiwan... 47 Japan... 49 Vietnam... 50 Malaysia... 52 Philippines... 54 India... 56 Western Europe... 58 Spain... 58 The UK... 61 France... 66 Germany... 68 Italy... 71 Ireland... 74 Greece... 76 Scandinavia... 76 Finland... 76 Norway... 78 Eastern Europe... 80 Russia... 80 Serbia... 84 Rest of the world... 86 South Africa... 86 Travel retail... 88 Other emerging channels... 93 Additional market data... 95 Chapter 3 The major Cognac brands... 102 Hennessy... 102 Rémy Martin... 103 Martell... 104 Courvoisier... 105 Appendix: Brandy s rich heritage and diversity... 108
Page vi List of tables List of tables Table 1: World brandy sales by total volume consumption - world total and by major market, 2004-2014 ('000s nine-litre cases)... 2 Table 2: World Cognac/Armagnac sales by total volume consumption - world total and by major market, 2004-2014 ('000s nine-litre cases)... 5 Table 3: Top ten Cognac/Armagnac brands in United States by total sales volume, 2003-2008 ('000s nine-litre cases)... 31 Table 4: Top five Cognac/Armagnac brand owners in United States by total sales volume, 2003-2008 ('000s nine-litre cases)... 31 Table 5: Top ten brandy brands in United States by total sales volume, 2003-2008 ('000s nine-litre cases)... 32 Table 6: Top five brandy brand owners in the United States by total sales volume, 2003-2008 ('000s nine-litre cases)... 33 Table 7: Top ten Cognac/Armagnac brands in Canada by total sales volume, 2003-2008 ('000s nine-litre cases)... 34 Table 8: Top five Cognac/Armagnac brand owners in Canada by total sales volume, 2003-2008 ('000s nine-litre cases)... 34 Table 9: Top seven Cognac/Armagnac brands in Mexico by total sales volume, 2003-2008 ('000s nine-litre cases)... 37 Table 10: Top five Cognac/Armagnac brand owners in Mexico by total sales volume, 2003-2008 ('000s nine-litre cases)... 37 Table 11: Top ten brandy brands in Mexico by total sales volume, 2003-2008 ('000s nine-litre cases)... 38 Table 12: Top five brandy brand owners in Mexico by total sales volume, 2003-2008 ('000s ninelitre cases)... 38 Table 13: Top ten brandy brands in Chile by total sales volume, 2003-2008 ('000s nine-litre cases)... 40 Table 14: Top four brandy brand owners in Chile by total sales volume, 2003-2008 ('000s nine-litre cases)... 40 Table 15: Top ten brandy brands in Brazil by total sales volume, 2003-2008 ('000s nine-litre cases)... 41
Page vii List of tables Table 16: Top five brandy brand owners in Brazil by total sales volume, 2003-2008 ('000s nine-litre cases)... 42 Table 17: Top ten Cognac/Armagnac brands in China by total sales volume, 2003-2008 ('000s nine-litre cases)... 46 Table 18: Top five Cognac/Armagnac brand owners in China by total sales volume, 2003-2008 ('000s nine-litre cases)... 46 Table 19: Top eight Cognac/Armagnac brands in Taiwan by total sales volume, 2003-2008 ('000s nine-litre cases)... 49 Table 20: Top five Cognac/Armagnac brand owners in Taiwan by total sales volume, 2003-2008 ('000s nine-litre cases)... 49 Table 21: Top five Cognac/Armagnac brand owners in Japan by total sales volume, 2003-2008 ('000s nine-litre cases)... 50 Table 22: Top eight Cognac/Armagnac brands in Vietnam by total sales volume, 2003-2008 ('000s nine-litre cases)... 52 Table 23: Top five Cognac/Armagnac brand owners in Vietnam by total sales volume, 2003-2008 ('000s nine-litre cases)... 52 Table 24: Top six Cognac/Armagnac brands in Malaysia by total sales volume, 2003-2008 ('000s nine-litre cases)... 53 Table 25: Top five Cognac/Armagnac brand owners in Malaysia by total sales volume, 2003-2008 ('000s nine-litre cases)... 54 Table 26: Top ten brandy brands in Philippines by total sales volume, 2003-2008 ('000s nine-litre cases)... 55 Table 27: Top five brandy brand owners in Philippines by total sales volume, 2003-2008 ('000s nine-litre cases)... 56 Table 28: Top ten brandy brands in India by total sales volume, 2003-2008 ('000s nine-litre cases)... 57 Table 29: Top five brandy brand owners in India by total sales volume, 2003-2008 ('000s nine-litre cases)... 58 Table 30: Top ten brandy brands in Spain by total sales volume, 2003-2008 ('000s nine-litre cases)... 60 Table 31: Top five brandy brand owners in Spain by total sales volume, 2003-2008 ('000s nine-litre cases)... 60 Table 32: Top ten Cognac/Armagnac brands in the United Kingdom by total sales volume, 2003-2008 ('000s nine-litre cases)... 65
Page viii List of tables Table 33: Top five Cognac/Armagnac brand owners in the United Kingdom by total sales volume, 2003-2008 ('000s nine-litre cases)... 65 Table 34: Top ten brandy brands in the United Kingdom by total sales volume, 2003-2008 ('000s nine-litre cases)... 66 Table 35: Top five brandy brand owners in the United Kingdom by total sales volume, 2003-2008 ('000s nine-litre cases)... 66 Table 36: Top ten Cognac/Armagnac brands in France by total sales volume, 2003-2008 ('000s nine-litre cases)... 67 Table 37: Top five Cognac/Armagnac brand owners in France by total sales volume, 2003-2008 ('000s nine-litre cases)... 68 Table 38: Top ten Cognac/Armagnac brands in Germany by total sales volume, 2003-2008 ('000s nine-litre cases)... 70 Table 39: Top five Cognac/Armagnac brand owners in Germany by total sales volume, 2003-2008 ('000s nine-litre cases)... 70 Table 40: Top ten brandy brands in Germany by total sales volume, 2003-2008 ('000s nine-litre cases)... 71 Table 41: Top five brandy brand owners in Germany by total sales volume, 2003-2008 ('000s ninelitre cases)... 71 Table 42: Top ten Cognac/Armagnac brands in Italy by total sales volume, 2003-2008 ('000s ninelitre cases)... 73 Table 43: Top five Cognac/Armagnac brand owners in Italy by total sales volume, 2003-2008 ('000s nine-litre cases)... 73 Table 44: Top ten brandy brands in Italy by total sales volume, 2003-2008 ('000s nine-litre cases)... 74 Table 45: Top five brandy brand owners in Italy by total sales volume, 2003-2008 ('000s nine-litre cases)... 74 Table 46: Top four Cognac/Armagnac brands in Ireland by total sales volume, 2003-2008 ('000s nine-litre cases)... 75 Table 47: Top four Cognac/Armagnac brand owners in Ireland by total sales volume, 2003-2008 ('000s nine-litre cases)... 75 Table 48: Top ten Cognac/Armagnac brands in Finland by total sales volume, 2003-2008 ('000s nine-litre cases)... 77 Table 49: Top five Cognac/Armagnac brand owners in Finland by total sales volume, 2003-2008 ('000s nine-litre cases)... 78
Page ix List of tables Table 50: Top ten Cognac/Armagnac brands in Norway by total sales volume, 2003-2008 ('000s nine-litre cases)... 79 Table 51: Top five Cognac/Armagnac brand owners in Norway by total sales volume, 2003-2008 ('000s nine-litre cases)... 79 Table 52: Top ten Cognac/Armagnac brands in Russia by total sales volume, 2003-2008 ('000s nine-litre cases)... 83 Table 53: Top five Cognac/Armagnac brand owners in Russia by total sales volume, 2003-2008 ('000s nine-litre cases)... 83 Table 54: Top ten brandy brands in Russia by total sales volume, 2003-2008 ('000s nine-litre cases)... 84 Table 55: Top five brandy brand owners in Russia by total sales volume, 2003-2008 ('000s ninelitre cases)... 84 Table 56: Top nine brandy brands in Serbia by total sales volume, 2003-2008 ('000s nine-litre cases)... 85 Table 57: Top five brandy brand owners in Serbia by total sales volume, 2003-2008 ('000s ninelitre cases)... 86 Table 58: Top ten brandy brands in South Africa by total sales volume, 2003-2008 ('000s nine-litre cases)... 88 Table 59: Top five brandy brand owners in South Africa by total sales volume, 2003-2008 ('000s nine-litre cases)... 88 Table 60: Top ten Cognac/Armagnac brands in travel retail by total sales volume, 2003-2008 ('000s nine-litre cases)... 93 Table 61: Top five Cognac/Armagnac brand owners in travel retail by total sales volume, 2003-2008 ('000s nine-litre cases)... 93 Table 62: Top ten Cognac/Armagnac brands in Belgium and Luxembourg by total sales volume, 2003-2008 ('000s nine-litre cases)... 95 Table 63: Top five Cognac/Armagnac brand owners in Belgium and Luxembourg by total sales volume, 2003-2008 ('000s nine-litre cases)... 95 Table 64: Top ten Cognac/Armagnac brands in Netherlands by total sales volume, 2003-2008 ('000s nine-litre cases)... 96 Table 65: Top five Cognac/Armagnac brand owners in Netherlands by total sales volume, 2003-2008 ('000s nine-litre cases)... 96 Table 66: Top ten Cognac/Armagnac brands in Switzerland by total sales volume, 2003-2008 ('000s nine-litre cases)... 97
Page x List of tables Table 67: Top five Cognac/Armagnac brand owners in Switzerland by total sales volume, 2003-2008 ('000s nine-litre cases)... 97 Table 68: Top eight brandy brands in Romania by total sales volume, 2003-2008 ('000s nine-litre cases)... 98 Table 69: Top four brandy brand owners in Romania by total sales volume, 2003-2008 ('000s ninelitre cases)... 98 Table 70: Top ten brandy brands in Ukraine by total sales volume, 2003-2008 ('000s nine-litre cases)... 99 Table 71: Top five brandy brand owners in Ukraine by total sales volume, 2003-2008 ('000s ninelitre cases)... 99 Table 72: Top ten brandy brands in Hungary by total sales volume, 2003-2008 ('000s nine-litre cases)... 100 Table 73: Top five brandy brand owners in Hungary by total sales volume, 2003-2008 ('000s ninelitre cases)... 100 Table 74: Top six brandy brands in Albania by total sales volume, 2003-2008 ('000s nine-litre cases)... 101 Table 75: Top five brandy brand owners in Albania by total sales volume, 2003-2008 ('000s ninelitre cases)... 101
Page xi Notes about the data Notes about the data Where - or a blank table cell appears in The IWSR data tables, this indicates no sales recorded by The IWSR. When 0.0 precedes - in previous years, this indicates that the brand had not yet been launched in the year(s). There may be some cases where low sales are registered as 0.0 due to rounding. Low sales may also be recorded as Min to signify minimum sales. Unless otherwise specified, all data quoted in this report refers to 2007 market data. When cases are quoted, these refer to nine-litre cases unless otherwise specified Data in tables does not include figures for travel retail. Data may not some due to rounding. Terminology CAGR: compound annual growth rate A&P: advertising and promotions
Page 1 Chapter 1 Scope of the market Chapter 1 Scope of the market Grape brand y is the s ixth-largest global spirits category with sales of xxxm nine-litre cases. Within that broader brandy category there are a number of distinct sub-categories including: Cognac, Armagnac and the largest non- Cognac brandies, which are defined by country of origin. Brandy is an extremely diverse category and incorporates a broad range of products ranging from ultra-premium Cognacs or Armagnacs, some priced at thousands of dollars per bottle, to local unbranded products selling for a dollar or less. Although Cognac sales are dwarfed by non-cognac brandy in volume terms, the former is much more important from a value standpoint, and thus is the chief focus of this report. As might be expected, brandy consumption is generally based around the major wine producing regions. However, the leading consuming markets India and the Philippines are minimal wine producers. Other top markets, such as Brazil and the Russian Federation, are also not significant wine producers. Much of the pseudo-brandy consumed in India, Brazil, and Philippines is cane based (or ginger root based in Brazil ). If the xxxxm cases of pseudo-brandy produced by these three markets are removed from the global total the actual figure is closer to xxxxm cases. There is also vast brandy production in the wine growing regions of Central Europe (particularly Romania and Bulgaria), the Balkans and Southern Caucasus states of Armenia, Moldova and Georgia. Much of this production is low-priced and unregistered, often home produced. Some of it however, such as Armenian brandy, is highly branded and premium positioned. Armagnac does rival Cognac in terms of pricing and premium imagery. It does suffer from its inability to produce on any great scale due to its adherence to the pot-still method. The category has benefitted in recent years from the premiumisation that was so evident in many markets with global Armagnac sales rising b y xxxx% in 2008 over 2007. France rem ains its largest m ark et, accounting for xx% of global sales, followed b y Africa at xx% and the UK at xxx%.
Page 29 Chapter 2 The markets Chapter 2 The markets North America United States The US brandy market represents a very mixed picture in 2008. Overall, the categor y fell xxx% to xxxxm cases. W ithin this, Cognac/Arm agnac fell b y a m assive xxx% and im ported brand y fell b y xxx%. Non -Cognac brand y and local brand y rose by x% and xxx% respectively. Cognac Cognac sales in the US m ark et fell heavily in 2008, down xxx% to xxxxm cases, the category s first fall since 1993. The fall was universal across all qualities, although the higher-priced qualities stood up better than VSOP and VS. The category is suffering for a variety of reasons. The primary reason is the impact of the recession on Cognac s core consumer the urban African American. Some of the worst affected parts of the US economy are key to Cognac consumption such as Los Angeles, New York, Chicago, Atlanta and Detroit. However, this is not the only reason. The exchange rate has put severe pressure on prices and producers raised prices in 2008 before the recession really took hold. There is also the complicating factor of several companies withdrawing support from their brands VS qualities to protect longer-term supplies for China and Russia. The US market remains heavily weighted to VS Cognac, which still accounts for xx% of all sales. The segm ent as a whole fell by xxx%. Henness y VS rem ains the clear m ark et leader, accounting for over xx% of all VS sales; in 2008, volum es were down by xxx% to xxxxm cases. Courvoisier rem ained in the num ber two spot with sales dipping b y xxx%. Rém y Martin VS was completely flat which may in part reflect its slightly different consumer profile. The biggest faller was Martell VS, which slum ped by xxxx% following the company s decision to protect supplies for other markets, in particular China.
Page 102 Chapter 3 The major Cognac brands Chapter 3 The major Cognac brands Hennessy Henness y is the largest global Cognac brand with sales of xxxm nine -litre cases in 2008, according to The IWSR s estimates. The brand has witnessed explosive growth, adding xxxm cases between 1999 and 2007. However, in 2008 Henness y declined by xxx% over 2007. The problem was centred in the US, Hennessy s largest market, where the brand fell b y alm ost x% to xxxxm nine-litre cases. Certainl y the brand suffered there from the onset of the economic crisis, and a steep decline in the fourthquarter. There are concerns that African-Americans, Hennessy s core consumer demographic, are becoming more experimental and moving toward such white spirits brands such as Patron, Ciroc and Grey Goose. Some are also possibly trading down to lower price brands. Hennessy has sought to re-engage that core group with the April 2009 introduction of Hennessy Black in the US. The move is an attempt to widen Cognac's appeal. Advertising for Hennessy Black will include outdoor, print and digital campaigns using the strapline Done Different, in an effort to emphasise the suitability of the blend for cocktails. Moët Hennessy USA CEO Mark Cornell said in a statement: Our fast growing consumer base is looking for new and innovative ways to consume cognac and we have the perfect blend to speak to this generation. Hennessy Black retails for US$xx, which incidentall y is roughl y the same retail price as Patron. Fortunately the Hennessy brand continues to perform well in China, its second-largest m ark et. The brand rose b y xxxx% CAGR between 2003 and 2008 to reach xxxxxxxx cases. That m om entum was m aintained in 2008 as Henness y rose b y xxxx% over 2007. Travel retail is the third-largest channel for Hennessy. Hennessy sales rose in travel retail b y just under xx% in 2008. The brand is certainly benefitting from the explosive growth of outbound Mainland Chinese travel in recent years. This growth came despite Hennessy being under allocation in some travel retail markets. As the supply of aged Cognac tightened in the beginning of
Page 108 Appendix: Brandy s rich heritage and diversity Appendix: Brandy s rich heritage and diversity The term brandy is derived from the Dutch word brandewijn, meaning burnt wine. This is how Dutch traders described it in the 16 th century as they introduced it to Northern Europe from its heartland in Southern France and Spain. There are numerous styles of brandy, and in some countries such as India the production method (produced from molasses) really stretches the definition of brandy. Brandy, in its most all-encompassing definition, is spirit distilled from fermented fruit juice or fruit skin and pulp. Within that broad umbrella are three main types: Grape brandy is made from distilled grape juice, or pressed crushed grape skin and pulp. This spirit is then aged in wooden casks (usually oak) where it attains colours and flavours. Fruit brandy is the broad term for all brandies that are made from fermenting fruit other than grapes. Fruit eaux de vie colourless fruit brandy, particularly from the Alsace region of France is a common style. Calvados, an apple brandy from the Normandy and Brittany regions of France is one of the more recognised styles of fruit brandy. Pomace brandy is made from the pressed grape pulp, skins, and stems that remain after the grapes are crushed and pressed to extract most of the juice for wine. They are not always aged, and if they are not always for long, or in wood. Italian grappa and French marc are two of the more popular types of pomace brandy. Cognac is the most successful and celebrated style of brandy. Named after the main town in the locality from which it comes from, Cognac is situated on the Atlantic coast of France, just north of the Bordeaux. Every step in the production of Cognac, from the growing of grapes to the distillation of the new brandy, must take place within certain delimited areas of the Charente and Charente-Maritime départements. This delimited area is divided into six districts: Grande Champagne, Petite Champagne, Borderies, Fins Bois, Bons Bois and Bois Ordinaires. The first