It’s been a long haul for the Cognac industry, with the golden child of China literally being cut off in its prime with the Government austerity measures. Remy Martin, in particular, really did get their fingers burned in this sorry process.
But it appears that there may be a little chink of light appearing at the end of the tunnel. Third quarter sales results issued by the BNIC, covering the period from August to December 2014, are indicating signs of recovery. In fact, the sales figures for this period were practically the same as during the same period in 2013.
Looking at the figures a little more in depth, it’s clear that there’s still a way to go before the industry is over the worst. Global sales fell from 2.4 billion Euro to 2.1 billion Euro in 2014, and the volumes of Cognac shipped were down by 3.6% (to 155.6 million bottles). Shipments to China dropped 21.6% in value, and 17.4% in volume. European sales dropped by 21.4% in value and 8.2% in volume.
Luckily, the USA market is surprisingly buoyant, showing strong increases of 7.9% in value and 12.2% in volume. New market exports also increased, up 17.1% in value and 12.9% in volume.
When looking at the hardest hit of the ‘big 4’ Cognac houses, Remy Martin, (albeit their Year to Date net sales being 9% to 425.9 million Euro) their 3rd quarter sales to the Chinese region have risen. In addition, Remy Cointreau (parent company of Remy Martin Cognac), announced their new CEO on 27 January 2015, with the promise of an ‘ambitious and bold’ group strategy and board reshuffle. Valerie Chapoulad-Floquet, of the rare female CEO specimen (!), is taking the reins to lead Remy Cointreau into 2015 and beyond. She promises to appoint a new management team and “optimize the group’s agility and responsiveness”. This includes increasing the drink giant’s executive committee to 12 members. This will mean adding new managing directors for various market brands, including Remy Martin and Louis XIII.
What is in store for Remy, and indeed the whole Cognac industry, in 2015 remains to be seen. Sales for the Chinese New Year will help in the short term, but it appears that there might be further clampdowns on corruption from the Chinese Government. This means luxury goods can no longer be used as gifts’ the same way they used to in China. However, the nightclub, bar, and ‘family karaoke’ bar trade is growing in strength. And whilst this might not mean there’s quite such a demand for the highest end Cognac, there’s no denying that the Chinese have certainly got a taste for the best drink on offer.
Analysts are still optimistic about the Chinese Cognac trade, with predictions being that in the long-term, China still remains a viable option for the Cognac industry. There is a low per-capita consumption level, and this hints that sales of Cognac to China won’t follow the pattern of Japan in the 1990s, where the market crashed and never quite recovered.
Sources: thespiritsbusiness.com, just-drinks.com, thespiritsbusiness.com