Cognac had an interesting 2019, with encouraging sales and increasing interest in the category offset by poor harvests. Bad weather conditions from 2017 and 2019 resulted in harvest reduced by 25% which led to shortages for most brands, including Courvoisier. “It’s difficult to have a perfect harvest without any trouble. We had big hails in 2017 which had an impact on the crops that year. Last year we had some frost in April and this affected part of the vineyard. The year before was a good crop, but some areas of the Cognac, in general, were still affected,” Pinet explains. “It makes it difficult to have enough liquid to provide to all our markets because we don’t have a big product reserve, especially for the younger expressions like Courvoisier VS, because we use the recent crops to prepare the VS.”
Pinet concedes that the scarcity of VS may mean a little bit less availability than Courvoisier has had in the past. The increase in demand and reduction supply also dictates that there could be an increase in the price. However, he’s optimistic that major repercussions, especially for the consumer, are unlikely and Cognac as an industry should be able to deal with this setback. “We organise the region here to face such events. We implemented a new way of working in the Cognac region more than ten years ago now, to build what we call our ‘climatic reserve’, to face the weather conditions and to take advantage of good harvests,” Pinet explains. “We work with our winegrowers to increase crops when the years are good, like 2018”.
Courvoisier has been working with Bureau National Interprofessionnel du Cognac (BNIC) on research into new varieties of grapes which can be harvested earlier a month earlier. “In order to have enough Cognac in the future to face climate change we are always organising new research here in the Cognac region. For instance, we’re trying to find new grape varieties more resistant to climate change and more resistant to frost,” Pinet explains. “We’re also always working on how we can perfect our approach to cultivating a whole vineyard. Some, I would say in the north of France like the Loire Valley, or Champagne, or Barsac have a level of organisation in place to deal with the frost. We haven’t always had this in this region, but step by step we are organising and working to lessen the impact of climate on the harvest”.
It’s encouraging because the demand for Cognac is certainly there. In 2019, Courvoisier returned to growth in the on-trade and the IWSR Drinks Market Analysis predict that over the next three years Cognac sales will increase by 12% in volume and 14% in value. Premiumisation has been the key, with Courvoisier VSOP and XO excelling in recent times. In fact, 76% of consumers now say they’re willing to pay extra for a better quality Cognac. “We are very conscious and very attentive to the trend of premiumisation. What we can see is that people are enjoying Cognac differently, when they are drinking Cognac in the afternoon, in the early beginning of the night, or in the night, or the day and evenings. It’s important as a company that we can provide a large range of Cognac that people can drink neat or in long drinks or in cocktails”, says Pinet. “In 2019 the good news was that VSOP and XO are performing very well, especially in the on-trade now which is very important to capture. Consumers’ interest in the category can be explained because they are styles that can be drunk neat or in cocktails at a good price.
The consumption of Courvoisier and of Cognac has evolved over the past few years. The US and Chinese markets, in particular, have been significant. “The growth we had from them has a big impact on the global category. The growth in China was more significant in 2018 but in 2019 it became more stable, which will likely happen with the US as well. In the US, what we had to last year was very, very high and will not be sustainable so growth will return at a more reasonable pace,” says Pinet. “But the increase was enough to make us adapt and that’s why we have decided to plant some new vineyards in the Cognac region. We had the authorisation of the French government last year to plant about 3000 acres more and we expect to have the same authorisation this year. With this new plantation, we’ll be able to match this sustainable growth”.
From a strategy point of view, Pinet is optimistic about the appeal of Cognac to new markets and customers. “It’s true that in some markets Cognac has been a macho market and appealed to a certain generation of people, but in other markets, it is very young people who are drinking Cognac, like in America for instance,” says Pinet. “That’s why we try to educate the consumer on what the differences between VS, VSOP and XO and then create new experiences for consumers to enjoy their Cognac differently. The marvellous cocktail bars that are in cities like London are a good way to attract young consumers.”
The balancing act for Courvoisier will be to ensure that it can still champion the rich history of the brand and spirit while being innovative For Pinet, one can inform the other. “We know that our history is important and that people are always interested to learn about it, but we also appreciate that we know how we can change and evolve because we have done so throughout the decades until now,” he explains. “History is important for the roots, but continuous improvement comes from understanding the trends of the market, how we adapt our packaging, our ways of welcoming people here and the importance of eCommerce. We are very creative and are confident that we will develop to succeed in the market in the future”.