Well, it’s almost inevitable that if the price of cognac rises, then the price of the vineyards that produce that very cognac will also begin to increase.

Since 2005 the cost of a single hectare of Cognac vineyard has increased by over 100 per cent – and is now higher than the previous so-called ‘Golden Age of Cognac’ in the 1990s.  With a hectare now costing anywhere between 50,000 to 55,000 euros – and in some cases over 60,000 euros, you’d think that the industry and land owners in particular would be rubbing their hands with glee.

There is no match between land prices and economic realities - Christophe Forget

However, those in the know don’t know whether to be happy or cautious about this.  One young winemaker who owns vines in the region of the “Grande Champagne“.

“It’s become crazy.  With these prices I’ve decided to re-structure my vineyard.  Some sellers are clearly being speculative, and upping the ante without end…  I recently proposed a price of €4.1 million for an operation that had a nice lot of water spirits – the original price was €4 million.  Eventually we agreed on €4.3 million, but at the last minute the seller re-canted and wanted €5 million.”

Suggestion: 10 Amazing Cognac Harvest Photos: The Grapes are in!

Warnings from every quarter

This rise has some of the most influential names in the cognac business (including the unions and the banks) speaking words of caution.

Christophe Forget, president of the l’Union Générale Des Viticulteurs de Cognac says, “There is no match between land prices and economic realities.”

And Sylvie Slain, director of Safer en Charente, comments “This subject is of great concern. With more than 50 000 euros per hectare, we don’t see where the profitability lies.  This price pressure raises important issues for the establishment of young winemakers and expansion of small farms, especially if the price of these transactions will serve as a reference.  We’re going to meet some very big problems in terms of succession.”

Vineyards changing hands

Since the beginning of 2012, 158 hectares of vineyards have changed hands – something surely fuelled by these incredible price rises.  And most of these are being bought up by the larger cognac houses that have the finances to do so.  Young winemakers and independents simply can’t price match with these giants.

Even the banks are not prepared to lend these kinds of prices.  Credit Agricole, for instance, has taken a clear stand on this.  They say that they will only fund up to 30,000 to 35,000 euros per hectare, although of course, prospective buyers are free to find the additional costs in other ways.

Winemakers the region through are being put in a situation reminiscent of that of 1992 – and the phrase “not reasonable” is being echoed throughout the industry.  In 1992 a hectare of vineyards had shot up to 300,000 francs per hectare.  But by 1999 a hectare would struggle to sell at 100,000 francs.

Of course, it’s human nature to want to get as much money as possible for any asset you own.  And it’s also true that the bigger concerns with their deep pockets will easily be able to fund smaller competitors out of the market.

We’ll just have to wait and see if common sense will prevail in 2012, because the slightest downturn in the cognac market could surely see a lot of people ending up regretting any rash and expensive purchases.

Sources: charentelibre.fr

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Strong Cognac Sales See Vineyard Prices Sky Rocket

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Jacki has been with Cognac Expert from virtually the beginning. She's the senior editor of the blog, and has spent much of her life living in rural France. Today she's based back in the UK, where she splits her working life between writing for Cognac Expert and working as a Paramedic at a large regional hospital.

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