China, cognac’s post-millennial promised land, has taken on a distinctly dystopian feel since the Beijing government rediscovered its communist principles and enforced an anti-extravagance crackdown at the end of 2012. Rumours of its demise as a market worthy of the attention and investment of the cognaçais have been exaggerated to the point of caricature, but it is a very different China that is emerging now.
“We see a clear shift from the most expensive expressions to the less expensive ones, with XO and above suffering, and younger categories growing, with the emergence of a market for VS,” observes Philippe Jouhaud, sales and marketing director at Bacardi-owned Château de Cognac, owner of Otard and D’Ussé. “Likewise, consumption occasions are changing – less gifting, less traditional on-trade, while modern on-trade is doing well. We are shifting from a situation where the consumers might not have been the buyers, to a situation where consumers and buyers are the
This last point, beyond the downtrading, is the most significant change impacting the market today. In the past, Europe’s crystal manufacturers were rushed off their feet making luxury decanters for a never-ending succession of über-luxurious expressions with stratospheric price-tags. But how much of it ended up in someone’s glass?
“Quite a few were [consumed], because that was part of the extravagance in China – they wouldn’t hesitate to open such a bottle,” says Anne Blois, commercial director, Asia Pacific, at Camus.
“But I’m sure there are still quite a few in some cabinets somewhere.”
“The demand has changed,” adds Olivier Hidier, export director at Cognac Deau, a relative newcomer to the market, and until now better known for distilling and maturing eaux-de-vie for the likes of Hennessy and Martell at its facility in Les Moisans.
“Now we are working in a normal market, there is no speculation and we are really building up and growing.
“Generally, cognac is selling less and to different customers. Every case sold in the Chinese market is a case that is going to be consumed, not simply offered and stored somewhere we don’t know.”
Quantifying the effect of these changes on sales is a more complex matter, but the scent of recovery is definitely in the air.
Rémy Martin – arguably the most severely impacted of the ‘big four’ cognac houses by the China downturn – said in April that sales had rebounded in the six months to the end of March, rising 15% organically and led by a resurgence in Greater China.
That said, the US has become its largest market – something that would have been unthinkable a year or two ago.
Speaking at the end of March, Pierre Coppéré, chairman and CEO of Pernod Ricard Asia, told investors that “the China challenge is being addressed”, although his optimism was decidedly cautious. No surprise given that the “improvement” amounted to a single-digit sales increase for the whole business around Chinese New Year – albeit one led by cognac.