Cognac market

Part
01
of two
Part
01

Cognac Market: Major Trends

The recent major consumption trends shaping the global cognac market include the revival of the cognac market, the highest share of VS (Very Special) cognac in the market, the consumption of cognac with food, China becoming one of the largest markets, and its association with the African-American urban culture. The details for each of these trends are given below.

Revival of the Cognac Market

After experiencing a decline in sales during the last decade, the cognac market is going through a revival phase globally. Specifically, the sales in the US market have skyrocketed during the last two decades, reportedly supported by its "close association" with rap and urban music. Examples of artists being associated with brands include "Jay-Z with Bacardi’s d’Usse, T.I./Tip with Rémy Martin and Snoop Dogg with Landy." Rapper Ludacris launched his own brand, named Conjure in 2009.

VS Cognac

Cognac consumption owes its largest share to the consumption of VS cognac. As of Q1 2017, VS (Very Special) and XO (Extra Old) cognacs have experienced growth in sales, specifically +11.4% and +16.8% respectively. This growth is, in part, due to the cocktail industry, as VS is an ingredient in aromatic and rich cocktails in the US. Since VS is a type of cognac, it can be found with all cognac brands and we didn't include examples of brands leveraging VS for their marketing strategies.

Consumption with Food

It has been observed recently that cognac is being used with food, and as a cocktail mix. This is because cognac is believed to be the "King of Digestifs" by some. Digestif is "an alcoholic drink enjoyed after a meal that, so we’re led to believe, helps our body digest the food." Although we were unable to find specific examples of cognac brands marketing their products as digestifs, there has been an increase in global cognac producers branding their products "as either a fusty after-dinner drink or something that people drink to show off rather than savor."

Chinese Consumption

The markets in China have contributed heavily to the growth of the global cognac market. This is fueled by the increased personal consumption of alcoholic beverages by Chinese consumers. To cater to this trend, cognac brand Rémy Cointreau offered more affordable "Club" and "1738 Royal Accord" bottles (between $70 and $100) to the upper-middle class.

Association with African-American Urban Culture

The association of cognac with the "African-American urban culture" has improved its market in Africa. Countries like South Africa and Nigeria, where sales are improving at a fast rate, strongly follow the urban culture in the US. This has also led to an increased cognac demand in these countries. Hennessy, the largest US cognac brand, was recently associated with Nas, apart from other rappers in the past.
Part
02
of two
Part
02

Cognac Market: Consumer Analysis

According to various reports in the public domain, cognac is a popular drink amongst all age groups. Millennials are the largest consumers of the drink because they prefer it mixed with other drinks (cocktail) and like to drink it before or during meals. Older and affluent men love their cognac neat. In addition, they typically take the drink during leisure time or after a meal . All age groups love their cognac on the rocks (ice).

Below are our detailed findings.

GENERAL OVERVIEW

According to a survey conducted by Science Direct group in the US and China, individuals between 18 to 59 consume cognac in different ways. It was also found that people who drink cognac and are above 60 years is more prevalent in the US compared to China.

Cognac drink is popular across all ethnicities. African American drinkers account for 55% of the cognac market while Caucasians make up 40% of the market. The market for Caucasians has grown from 25% to 40% within the last three years.

The drink is predominant among older and affluent males because it is stuffy, but this is undergoing change due to celebrities endorsing the cognac brands, hence, attracting the younger generation to the brand.

DIFFERENT AGE GROUPS OF COGNAC CONSUMERS

Cognac consumers are above 18 years, which is considered the universal legal age to consume alcohol. Millennials (18 to 35 year olds) form the largest segment of cognac consumers comprising up to 75% of the population, while baby boomers (between 54 to 72) stand at 10% and they primarily originate from the US region. According to Science Direct, 30 to 49 year olds are the largest consumers of cognac drink accounting for 57% of servings in the US. Below is the breakdown of cognac consumption by age groups.
  • 18–21 comprises 8.5%
  • 60+ comprises 2.6%

HOW ARE THEY DIFFERENT FROM EACH OTHER

Younger millennials are drawn to cognac-based cocktails than other cohorts. The Sidecar has been one of the top cocktails being served and consumed at many venues. Millennials, in general, prefer having cognac in cocktails before and even during a meal. However, the real taste of cognac (not mixed with cocktails) is primarily preferred by older and affluent males.

The major target market for the drink is driven by the people aged between 25 and 45, while those over 45 years have a fixed taste on a specific brand. The age of 35 is considered to be the age of choice refinements.

TANGENT INTERESTS ACROSS THE AGE GROUPS

Young urban consumers prefer drinking cognac at bars and nightclubs, while older men prefer to sip their cognac neat in a library or whilst wearing a three-piece suit and smoking a pipe.
Statistics also show that people across different age groups prefer to have cognac with friends while at home or a friend's place. Globally and across the age groups, people prefer having it while watching TV, especially a sport, though the overall percentage is dropping each passing year. In addition, people now prefer to take it while relaxing after work, apart from choosing it as a drink during special occasions.

SPECIFIC PREFERENCE OF DRINKING COGNAC

Millennials prefer drinking cognac in cocktails before and even during a meal, while older and affluent men prefer having cognac neat, preferably after dinner or when ailing with cold. In Asia, cognac is usually consumed alongside a meal. Overall, both categories prefer drinking cognac dry with ice. Among the younger millennial segment, cognac-based cocktails are on the rise, with The Sidecar emerging as their favorite drink at the most venues.

OTHER HELPFUL FINDINGS

ANALYSIS OF COGNAC AMONG MILLENNIALS

Millennials consist of the largest group of cognac drinkers accounting for 57% of servings in the US. They prefer having their cognac mixed in cocktails and usually like to have it before and during the meals, as opposed to the older age group who like to have it during leisure or post-dinner.

Due to major drift in the endorsement of cognac brands by celebrity hip-hop stars, younger urban consumers have increased the consumption of cognac brands at bars and nightclubs.

Middle-aged millennials (35 years of age) are the best target of the cognac market as they have a better probability to alter and refine their choices. Thus, people of age 25 and 45 belonging to the middle and upper middle class, and having more disposable income, are the best target market for the cognac brands.

ADDITIONAL CLASSIFICATION BY GEOGRAPHY

  • Cognac is popular amongst consumers as being a traditional cocktail ingredient that is known for not promoting a headache, unlike other alcoholic beverages.



  • In North America, the trend in the cocktail industry along with the usage of cognac as a cocktail ingredient is a driving force in fueling the growth within the US region.
  • India emerged as the major cognac market within Asia region with the cognac consumption of 62,000 cases (Standard 9L case) in 2014 which increased to 78,500 cases (Standard 9L case) in 2016.

  • The percentage of people having cognac neat is highest in the US with 54% of people consuming it either straight/neat/on the rocks.





Sources
Sources

From Part 02
Quotes
  • " Younger millennials are increasingly asking for Cognac-based cocktails. The Sidecar, which comprises Cognac, triple sec liqueur, lemon juice and simple syrup, has emerged as a go-to drink in many venues."
  • "We’re seeing millennials drinking Cognac in cocktails before the meal and even during the meal,” Williams says. “That trend is consistent with Asia, where Cognac is usually enjoyed with food."
Quotes
  • "Among black consumers, Cognac has been very popular historically, relying heavily on this ethnic group to drive much of its volume in the country. The situation has changed in recent years, however, as white consumers are becoming more engaged in the sector."
  • "While Cognac has long been well-established in the US among black drinkers, who largely drink the spirit casually at home, white drinkers in the country are increasing their Cognac consumption. Black drinkers drive the majority of the Cognac market (55%); however, white drinkers have increased share from 26% to 40% in the past three years"
  • "30- to 49-year-olds drink the most Cognac, accounting for 57% of servings. Cognac skews male (78% of servings, 73% of monthly drinkers), and this skew has been growing in recent years"
  • "Cognac skews middle income, with households earning US$40,000 to $70,000 per year driving 36% of servings (compared to 26% for total spirits)"
  • "About 54% of all Cognac in the US is consumed straight/neat/on the rocks; a proportion that has been relatively stable over the past few years. The number one mix for Cognac continues to be cola, accounting for 12% of Cognac consumption; this is much less than it was two years ago, however, when cola accounted for 24% of Cognac consumption. Instead, consumers are exploring new mixing options such as ginger ale"
Quotes
  • "Considered a stuffy drink, Cognac consumers have primarily been older, affluent males. But that is all beginning to change, due to celebrity hip-hop stars having endorsed Cognac brands there has been an increase of younger urban consumers. Statistics have shown a huge growth in Cognac within the nightclub sector in the UK."
Quotes
  • "Unfortunately, there is a misconception that cognac is a spirit only consumed by the older generation or is an "old-fashioned drink" - a drink that one consumes after dinner or when ailing with a cold. However, that myth is gradually breaking. From the consumption of 62000 cases (Standard 9L case) in 2014 to 78500 cases (Standard 9L case) in 2016, cognac is definitely gaining popularity among the consumers in India."
Quotes
  • "There seem to be two types of Cognac drinkers out there. The first: old men, who sip Cognac neat, most likely in a library or study whilst wearing a three-piece suit and smoking a pipe. The second, rappers, who have written entire songs about their love of Henny. This is probably where most people’s knowledge of Cognac drops off."
  • "For starters, Cognac is a brandy made in the Cognac region of France and aged for a minimum of two years. Though it is technically a distilled wine, Cognac usually comes in at over 40%, and has rich, sweet notes of vanilla and caramel."
Quotes
  • "A big change is the drop in fashion of drinking cognac when watching TV. Figures in the year September 2013 – August 2014 numbered 37%. But now this figure has dropped to 21%. This is especially relevant when you look at who drinks cognac when watching sport, with a drop from 18% to 9%."
  • "But a whole lot of you are turning to cognac as your preferred tipple when relaxing after work. The figure has jumped over the last couple of years from 13% to a much larger 23%. And when it comes to choosing a drink at special occasions, this now accounts for 27% of consumption (up from 22%)"
  • "Cognac had somewhat fallen from fashion as an after dinner drink, but it now appears the trend is reversing. The figure of 9% two years ago has risen to 20% today. 17% of consumption takes place in the home (or in someone else’s home) – and this is a high amount (most spirits only account for around 10% here). But the most popular place to enjoy a cognac is in bars and pubs, and accounts for 21%."
Quotes
  • "The specific style of brandy has earned a stiff reputation for being a drink for older gents, being limned by bitter notes that younger audiences may not savour."
Quotes
  • "Our target market is people aged between 25 and 45, middle and upper middle class, who have more disposable income. People over 45 years are more likely to be already set in their ways. Those aged 35 are looking to refine their choices,” Delamarre said. She said they train bartenders on responsible drinking, and do not market their product to people under the age of 25."
Quotes
  • "Cognac is popular amongst consumers as a traditional cocktail ingredient. It is also known that unlike other alcoholic beverages, cognac does not promote a headache. The trend observed with cognac is that nowadays it is consumed with food or as a cocktail mix. "
  • "In North America, the trend in the cocktail industry and the usage of cognac as a cocktail ingredient is a major factor in fuelling the growth cognac market, as the U.S. is a very potential market for cognac."
  • "In Europe, cognac is mostly consumed as a high-end product and the cognac market is expected to have a very slow growth or remain almost static in the forecast period. "
  • "In Asia Pacific, China is the biggest market for cognac as the imports and exports of cognac were greatly affected by China’s macroeconomic conditions. "