Why Cognac is so “Expensive”

Have you ever walked through your favourite liquor store and noticed the cognac seems to be, ahem –  a little on the expensive side?  Did you ever wonder if this extra cost was worth it.  Perhaps reading the following might put your mind at rest.

So, let’s get to the number crunch.  For example, the  production cost of a litre of vodka is around €,0.90.  A liter of 12 year old whisky of 12 years is around €1.70.  And a liter of 3 year old cognac (a VS), bears a production cost of about €7.00!  Now that’s a big difference.  But why is the cost of making a liter of cognac so different from that of other spirits?  Let’s look at this in a bit more detail.

Resource

Probably the biggest factor for the relatively high cost of cognac is the cost of resources. Whisky and vodka are alcohol that’s created from grain, and the cost of suc resources are really quite low.  Grain is produced in large quantities, are is not limited in the harvest quantity (whereas the grapes for cognac are in strictly limited supply).  Another reason is that very often, big-time agrictultural crops like wheat get a lot of subsidies (from the EU, for example).

This puts the ratio between cognac and whisky at 7:1 – rather high, wouldn’t you say.  But when it comes to vodka, the ratio is even higher – at 14:1.  In other words, the cost of the resources in producing a liter of cognac is 14 times more than what it costs to produce a liter of former.  And if you’re wondering about gin, this lies in the middle of cognac and vodka, depending on the method of distillation and herbs used.

Branding

While the Hip-Hop community has been almost literally singing its praises over the past few years, cognac has enjoyed a cult following long before these flamboyant wordsmiths decided it was cool. So much so that the region has protected the name, much like Champagne and Port. It’s just not possible to distill a few grapes and call it cognac; that’s what brandy is. Just like a Scotch can’t bear the name unless it’s spent a few years in a barrel in Scotland, cognac doesn’t earn the moniker until it’s done its time in the region. And that’s only the first consideration for the generic name of “cognac”.

You then need to take into account that certain brands need to position themselves in the market based on their own unique method.  That also factors into the pricing strategy of all cognacs, especially the better-known brands such as Hennessy, Remy Martin, or Courvoisier. Just ask the original ladies’ man, Leon Phelps. He knows the value of a quality, branded cognac.

Production & Distillation

The exact method of creating each unique cognac is a well-kept secret, but the basic method is double-distilled wine, matured in oak casks, and blended to suit the particular product. No real surprise there. Naturally, the longer something ages, the more the final product is likely to cost. Many cognacs are blended from distillations that are  decades old.  Some more than a century ago That time spent taking up cellar space needs to be recouped somehow.

Distilling other liquors is much less expensive than distilling cognac. 90% of other liquors are produced using distilling procedures where the cost is very low. But with cognac it’s the opposite: Distilling wine from grape juice is a long and complicated process. The distilling must also occur in the actual region of Cognac (or, for cognac’s little cousin, think Armagnac).

Also, the alcohol comes from grapes – not grain. Harvests vary a lot.  In some years the results are pretty low and weak. The cost of harvesting grapes is much, much, much more expensive than any other resource used for alcohol.

Aging

Speaking of cellaring: quality barrels are vital to the aging process . While bourbon casks are also made to order, cognac barrels are sourced exclusively from within certain regions, made by true craftsmen. Other spirits manufacturers use these cognac barrels for their own aging process, reducing costs for other spirit manufacturers who don’t necessarily have such high demand for quality at that stage of the process.

Cognac barrels can only be used as cognac barrels if there was no other liquor inside the barrel before – e.g. if you take a bourbon barrel and then want to age cognac in it; you cannot name it “cognac”. Other liquors are allowed to use barrels where other products sat in like xéres, port.. Barrels are simply less expensive for other liquors.

Also many other spirits & liquors are crafted in a chemical way and produce neutral alcohol so the taste is added by using specific “d’eau de coupage” – water that gives specific taste.

Tradition

As opposed to the PBR-drinking, American spirit-smoking, vinyl record-collecting hipster who people like to publicly ridicule, but secretly admire, cognac distillers have been pouring their heart into what you pour in your glass: In other words, the passion was going on way, way before cognac was cool. This tradition of conserving wine has been continuously improving since the 16th century, and the cognac houses are (justifiably) very proud of their work.

This tradition of conserving wine has been continuously improving since the 16th century, and the cognac houses are very proud of the dedication and passion they put into their craft. These men and women aren’t some fly-by-night artisinal chocolate company or microbrewery, oh no.

Exclusivity

Finally, the demand for cognac has been steadily rising. Not only in America, but also in the orient, with China demanding the lion’s share of this delectable drop in certain cases. The demand has been so great that many producers are forced to allocate their stock so that no one has to go without. If you recall that some blends contain batches that are more than a century old you’ll see how this contributes to the restricted supply. It’s not like they can go back in time and produce more when the seasons were fruitful.

So there you have it!  The reason cognac is so expensive compared to other spirits.  So next time you’re trying to justify the new addition to your home bar, think about the wonderful tradition and craftsmanship you’re buying.  If you think hard about it, I t’s the closest we can get to time travel.

Comments (5)

  1. Anne Loloum Frangeul October 21, 2016 at 3:38 pm

    Thanks Max for this highly relevant post. Never stop to tell this as many consumers don’t think that first of all cognac is a vineyard. I share it on my page

  2. Dan October 28, 2016 at 2:40 am

    Excellent article and very informative .

  3. Ian Crow October 28, 2016 at 8:44 am

    Great blog….and very well put….can you tell me why Armagnac is significantly cheaper than Cognac., as I assume it uses the same production methods?

  4. Lani December 13, 2016 at 9:46 am

    I had no idea, loved reading this – thank you for sharing. I had to stop and look in my stock to see that my cherished bottle of cognac is indeed VS Courvoisier, purchased in 1999 to enjoy on a train journey with a bottle of port. It’s near it’s end with maybe an ounce remaining …. time to replenish :-) and I will be better prepared to purchase my 2nd bottle.

    Also, I am taking away from this blog a much greater appreciation for cognac and will be more apt to stock additional brands to explore the world and tastes of Cognac!

  5. chris January 25, 2017 at 10:43 pm

    Armagnac is not significantly cheaper. The reason is called branding.

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