With the resurgence of the market over the past couple of years, the Economic Organisation of Cognac (Oreco) is set to invest 20 million euros over the next 4 years. The aim is to raise the production and sale of pure alcohol from 460,000 hectolitres to 700,000.
Currently there are only 2 ‘high threshold’ sites in the Cognac region. These are Hennessey’s Bagnolet and Remy Martin’s Merpins, which produce a minimum volume of 500,000 hectolitres of pure alcohol per year. This is set to rise to 4, or even 6 sites with storage and production at this level.
The region of Cognac is also home to some 20 ‘low threshold’ sites. These have a production level of at least 50,000 hectolitres per annum.
Oreco has more than 120 wineries spread throughout France at over 40 different sites. Today, 30 of the sites comprise over 80% of the stock. Therefore, the expansion will see the closure of the more isolated, outdated or unproductive ones.
Managing Director, Daniel St Ours, aims to focus their stores in the Cognac region, and by using this approach they will be able to offer a storage capacity of 1.1 million hectolitres. This will increase its regional stock from 13 – 15%.
This also gives way for a ‘buffer’ to allow them to ride out the typical sharp rises and falls of the market. For example, if the sales of brandy drop, then the pure alcohol can be diverted elsewhere in the market. Should they rise, then the company needs to be able to anticipate and provide for this.
To do so requires the company to be in a strong financial position. In the current tax year up until June 30 2010, Oreco had a turnover of 13.6 million euros – and this generated a profit of 1.3 million euros. The value of stock held was 621.2 million euros against the previous years total at the same point of 571.6 million euros.
It is in the interests of all concerned that the expansion goes to plan. A target has been set to raise the sales to 18 million cases (a case = 12 bottles) from the current 12-13 million today.