Is Brandy Back?

Last year, when the economy was still flat-lining, the market for brandies and cognacs was too.  But now, many brandy and cognac companies are seeing – and seizing upon -signs that their market is recovering.

“We’re seeing positive trends, including growth in the category,” said Matthew Rice, brand manager for Paul Masson at Constellation Wine. “Brandies and cognacs are slightly outpacing the spirit market as a whole.”

Rice went on to point out that both domestic brandies and cognacs are growing this year, “but cognacs are growing faster, which is a very positive sign” for the entire category.

JC Iglesias, director of marketing for Scotch whisky and cognac at Pernod Ricard, home to Martell Cognac, also sees glimmers of hope in the cognac category, which suffered the worst of the brandy market’s declines over the past couple of years. “We’re starting to see recovery in places. The super high-end, which had the most significant declines a few years ago, is stabilizing,” he said.

Etude Wines released two high-end domestic brandies, its Etude Non-Vintage XO Alambic Brandy and its Etude Non-Vintage Pinot Noir Alambic Brandy, this past February. Derek Bromley, marketing director for Etude, pointed out two trends. “Domestic brandy continues to see positive growth in the U.S., with a 2.4 percent increase posted in 2009,” according to the Handbook Advance 2010, he observed. And, he said, “Special-edition cognac products continue to outperform the brandy and cognac category, demonstrating the market exists for high-end limited release products like Etude’s brandies.”

A Split Category

While cognac is a specific type of brandy, when it comes to the brandy/cognac market, there really are two markets – for cognacs, which are generally priced at $30 and up, and for brandy, mostly represented by domestic brands, which sell for $10-$12 and less. There’s just a bit of overlap between the two, from high-end non-cognac brands such as those from Etude.

On the brandy side of the equation, the top four brands are all domestic and are all outperforming the overall brandy/cognac market. The number-one brand, with sales of over 3 million cases in 2009, is E&J from Gallo. E&J showed growth of 6.6 percent between 2008 and 2009 (-0.8 percent in the control states), far outperforming the entire category, which was basically flat, with a slight decline of 0.6 percent (-2.5 percent in the control states).

Paul Masson comes in at number-two, with sales of approximately 1.4 million cases in 2009. “Paul Masson is the most premium of the domestic brandies,” explained brand manager Rice. It is priced at $10-$12, which is a dollar or two more than E&J and the number-three brand, Christian Brothers. Its products are aged longer and have age statements on their labels, with the VSOP containing some cognac in its blend.

Constellation Wine is supporting the brand with a print campaign, which has been running since August and will continue through the holidays, and it is also in the process of launching a Facebook-based campaign featuring J.B. Smoove, a comedian and actor (best known for playing Leon in “Curb Your Enthusiasm”). In a campaign called “Smoove on Smooth,” Smoove will appear in a collection of short videos on Facebook, giving humorous tips on how to be smooth. Paul Masson will also, in mid-November, launch a “Smooth Detector” on the Facebook page. Consumers will be able to upload their photos and have them analyzed for their “smoothness” factor. They will also be able to play a game where they can enter some examples of their “smooth talk” and have them rated for their smoothness.

“Right now, our brand skews a little older, which is typical for brandies. We are going after a younger audience with this campaign,” said Rice

The number-three domestic brandy, Christian Brothers from Heaven Hill, saw its sales increase by 1.3 percent in 2009 (-0.3 percent in the control states) and is feeling bullish enough about the market to introduce a new product. Christian Brothers Honey launched in September. “We think the domestic brandy category is [still] probably benefitting greatly from imported brandy and cognac trade-downs,” said Justin Ames, senior brand manager for Christian Brothers. “Looking forward, though, we think the category is ripe for innovation. Christian Brothers Honey is our first step towards broadening the appeal of the spirit.”

Christian Brothers breaks its marketing program down into three distinct markets. The largest is “The Ice Belt,” ranging, in the north, from New York to North Dakota, which the brand targets with a series of ice-fishing festivals and competitions. The brand targets other marketing toward its strong urban market in the East and towards its strong Hispanic market in the West.  “Each of these markets is targeted using local marketing programs through our distribution partners,” explained Ames. “In doing so, we can leverage disparate styles of merchandising more effectively.”

Korbel, the number-four domestic brandy, is currently growing by 4 percent (-1.7 percent in the control states), according to Dick Reeves, national sales manager at Heck Estates. “In this economy, we are devoting our marketing dollars to couponing to keep sales moving,” he said. “We are also reaching new customers and building new relationships by focusing on social media, [such as] Facebook, Twitter and Foursquare.”

How About Cognac?

On the cognac side, things look bright as well. “Shipments of cognac to the U.S. are up so far this year,” said Jean-Louis Carbonnier, spokesperson for the National Cognac Bureau, “by 11.8 percent over the past 12 months compared to the same period last year.”

Carbonnier continued, “Cognac companies have been very active in the U.S. markets: some have launched new products, while others have increased their presence in the market.”

Hennessy, the number-one cognac brand in the U.S. market, rolled out a new brand, Hennessy Black, nationally in June, after successfully introducing it in select cities in 2009. The product is Hennessy’s first major product launch since Hennessy VS was introduced in 1961. The advertising tagline for Hennessy Black is “done different.” It differs from other Hennessy products in that it is meant to be very versatile, with an appeal that goes beyond the cognac category. Packaged in a sleek black bottle, it is meant to function well as the main ingredient in a cocktail, like a vodka or a tequila. Its suggested retail price is $39.99 for a 750 ml bottle.

Courvoisier, meanwhile, launched three new products in October. Two of the three are part of the Courvoisier Connoisseur Collection. Courvoisier 21 and Courvoisier 12 are, according to the company, Beam Global, the first cognacs on the market to declare their ages. Courvoisier 12 (12 years old) has a suggested retail price of $49.99 for a 750 ml bottle, while Courvoisier 21 (as its name suggests, 21 years old) has a suggested retail price of $250. The third new brand is L’Essence de Courvoisier. Bottled in Baccarat crystal decanters with stoppers inspired by Napoleon’s signet ring, only 250 bottles of this brand will be available in the U.S. soon and will retail for $3,000.

Courvoisier has also begun unifying the look of all its brands, starting with a new label design for its VS. The brand will make changes to the packaging for its other marques through 2011.

“Cognac is making resurgence in 2010 and [is] driving growth in the spirits category,” said Jay Mathew, general manager – classics, at Beam Global. Citing Nielsen figures, he continued, “Year-to-date 2010 the cognac category is +12.9% in dollar sales and a major contributor is Courvoisier, which is +18.2%.”

Meanwhile, a well-known cognac has re-entered the U.S. market: Camus. The number-three cognac brand in Korea and number-four in Japan, the Camus family of products ranges from its VS, retail priced at $26, to its Camus XO Elegance at $120 and its Camus Borderies XO at $140. The Camus family of brands will be offering gifts sets for the holiday season.

Opportunities still abound in the category, despite declines in the control states. JC Cognac, introduced a few years ago, is admittedly growing off a small base, but the brand shows what can be done even in a tight market. A VSOP JC Cognac is priced competitively, and the brand is highly visible in key accounts with tastings and in-store demos. JC Apple and JC Jasmine as doing as well or better in some cases as the VSOP due to their mixability.

For the holidays, Rémy Martin, the number-two cognac brand in the U.S., is promoting its “Red Hot Holiday Limited Edition Bottle.” “Why red? Red is the global/universal celebration color and a VSOP brand asset,” said Emma Medina, brand director for Rémy Martin VSOP & VS, at Rémy Cointreau USA.

The campaign, which will run from November to February, will include advertising in the brand’s key VSOP markets – Los Angeles, Chicago, New York, New Jersey, Washington DC, Baltimore, Miami, Atlanta and Philadelphia – along with in-store promotional materials.

Still, marketing a luxury good, like cognac, during a down economy can be a tricky thing, noted Pernod Ricard’s Iglesias. “You’ve got to maintain the brand’s equity and strength without losing sight of its premier image,” he said. For Martell, which has traditionally been stronger at the top of its range, XO and above, the issue is even trickier. The brand has shifted its sampling program slightly away from the on-premise, or restaurant, market, “which is dealing with its own set of challenges” [in terms of business] to more off-premise venues, Iglesias explained.  “Our focus shifted along with the consumers’. It’s a short-term shift [away from eating out], but we will move with them. The important thing is to still connect to the consumer in a relevant way.”

In other words, when the economy gets tough, cognac and brandy suppliers get going – working hard to stay top-of-mind and relevant to consumers – even as they wait for the economy to turn.


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