As the western world struggles to clamber back from the last few years of recession, the fact that cognac sales are breaking records seems to be defying all the odds.
However, as we’ve reported regularly over the previous year, these sales are not coming from the struggling west, but from the prosperous eastern countries. Export figures to countries in the Asia Pacific region have been steadily climbing for the past few years.
And whilst the US and European figures have plummeted and are only slowly beginning to recover, export growth to countries such as China have doubled since 2005.
Just-Drinks report: $7.06 billion record
In a new ISWR/Just-Drinks report just published, not only did cognac sales break all records in 2011, but forecasts ahead to 2016 are confident that this upward trend is set to continue.
With sales of higher end cognacs to China continuing to rise on an almost daily basis, the report highlights what it refers to as ‘the really dramatic aspect’ of cognac sales. And that is the growth in monetary retail sales value. In 2001 this stood at $3.8 billion US dollars. This rose to a record $7.06 billion in the previous boom year of 2008, whilst 2010 broke all records at $7.16 billion.
These figures include both domestic and travel retail sales, with a huge percentage being attributed to sales to China. Along with this, travel retail sales have bounced back in a remarkable fashion, rising by 24.4 per cent in 2010.
The Asian world has ridden the global recession far better than the west, and rather than struggling, markets here are showing strong economic growth. The outcome of this is that people in this area of the world have far more disposable income, and are looking to spend this on luxury items such as high end cognacs and scotch.
Whilst this is great for the exports of cognac, it does provide the industry with one not-so-small problem. And that’s the fact of managing to keep up with demand.
The report states;
“One natural cap on Cognac’s expansion in China, at least from a product standpoint, is tightening supplies of aged inventories. This raises the question of whether there will be enough Cognac to satisfy growing demand, particularly for the higher qualities.”
A new ‘Golden Age’
This potential problem might well give cognac’s main competitor, scotch, a chance to forge ahead in the Chinese popularity stakes. It might also see alternative brandies, such as armagnac, begin to rise in popularity. However, armagnac sales are by necessity strictly limited, due to the small annual amount produced and the fact that the armagnac industry has invested little into raising awareness in the Asia Pacific region.
The report has gone as far as stating that cognac is entering a new ‘Golden Age.’ The last time sales were so buoyant was in the late 1980s and early 1990s when sales were driven by exports to Japan. This ‘boom’ was then followed almost ten years of ‘bust’ when the Japanese economy crashed. However, this time it’s hoped that the strong sales are on a more stable footing, with more than one country fuelling the increased demand.
Read more about this highly interesting report about Brandy & Cognac business at Just-Drinks.com