The Brandy Report (4/12): The Promised Land

02 March, 2015

Could any another brandy styles emulate cognac’s success? Richard Woodard looks at the candidates for premium enlightenment 


COGNAC’S ON-OFF LOVE AFFAIR WITH GREATER CHINA HAS RAMIFICATIONS FAR BEYOND THE BANQUETING HALLS OF BEIJING AND THE KTV BARS OF SHANGHAI. As sales of older expressions surged, prices inevitably escalated and allocations pushed away from traditional western markets and towards the far east.

But, as boom has turned to bust over the past two years, the bullish forecasts of the cognac houses have been wrecked. “Everyone, from cognac producers to luxury goods analysts, agrees the situation has lasted longer than anyone first predicted,” says Loïc Rakotomalala, brand ambassador for Distell-owned Bisquit. “But, with the light at the end of the tunnel too far away to simply ‘hang in there’, producers are seriously starting to alter their business models to recoup lost sales.”

The result? A greater focus on younger expressions (VS shipments were up 3.1% by volume and 1.8% by value in the year to July 2014, according to the BNIC) and increased discounting to drive volumes in a number of markets.

Nonetheless, longer-term trends for cognac show supply failing to meet demand, with prices rising as a result. As the cheapest cognac becomes ever more expensive, what opportunities does this give non-cognac brandy, particularly at premium and super-premium levels?

“In South Africa, a VS cognac of four to seven years old can retail for ZAR350 (roughly US$35), whereas a four- to seven-year-old potstill brandy of similar quality can retail for ZAR180 (US$18),” says Christelle Reade-Jahn, director of the SA Brandy Foundation. “So if stock in Cognac is limited and these producers focus on value, then there is a great gap for South African brandy to offer very competitive quality at an attractive price.”

This is particularly true for Distell, which has a foot in both camps thanks to its ownership of Bisquit and its stable of SA brandy marques, including Klipdrift and Van Ryn’s. The latter in particular is building a growing international reputation through an array of medals and trophies.

“With a rapidly growing middle class in South Africa, there is ever-increasing opportunity for premiumisation,” Reade-Jahn says. “The base for what makes South African brandy special has been clearly established by spirits judges throughout the world – we now need to find the most appropriate ways to add and create value through desire and aspiration. 

“The upward trend in price witnessed in the cognac category will certainly help uplift the higher-tiered premium brandies.”

Others, however, are less convinced of the interchangeability of cognac and brandy. Bardinet’s Isabelle Dubois reckons there is “no activity transfer” between the two as “these are two different categories”, while Matias Llobet, master distiller at Miguel Torres, says: “Logically, with cognac prices rising due to limited stocks, there should be an opportunity for increased sales of value-oriented brandy.

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