When the first barrels of brandewijn left the Charente river ports in the 17th century, the distilled spirits in those casks resulted from the innovations of Dutch shippers, French distillers and local winemakers. At that time, the spirit makers in Cognac were at the cutting edge of creating a wine-based product safe for transport.
That was a long time ago, and while the region still boasts estates and brands more than 200 years old, and an incredible range of spirits valued worldwide, the spirit of those early years of innovation sometimes seemed to fade as producers from other regions and countries increasingly tweaked, improved and developed their wares.
But while the Cogançais may be slow to change, they are not immune to modern influences. In the past few years, the major houses have produced Cognacs incorporating modern ideas in aging, taste and marketing, including Hennessy Black, Courvoisier C and Remy V, as well as wine and cognac blends including Courvoisier Gold and Courvoisier Rosé. Smaller producers have decided that the right changes will benefit them as they push into the U.S. market, with such things as 90 proof Pierre Ferrand Original Formula 1840 and lately Louis Royer Force 53, a higher proof spirit also designed for cocktail culture recently relaunched in the New York market. And new brands are appearing as well, including some driven by interest from hip-hop culture, but others, like the recently introduced D’Usse, coming from major suppliers, in this case, Bacardi’s House of Otard.
Other houses are taking chances as well. Camus recently introduced three expressions with a maritime connection, collectively called Ile de Ré after the island off the west coast of France where the grapes are grown. Influenced by the island’s turbulent weather and the island’s pre-phylloxera vines, the three expressions are Ile de Ré Fine Island Cognac, Ile de Ré Double Matured and Ile de Ré Cliffside Cellar, all particularly specific for Cognac, where consistency has usually been paramount.
Innovating Is Working
How important is the new innovation in the region? Megan Frank, brand director for Courvoisier, says it’s the watchword at the brand today, with those newer spirits accounting for about 25% of the mix.
“We made a strategic decision to focus on innovation, and it’s had a halo effect on our base business of VS and VSOP,” she says. Including the two main Cognac iterations in all the marketing, sampling and upcoming advertising for the extensions guarantees the halo effect is broad and bright.
“Our new approach and focus on innovation is working – we’re having success driving growth via innovation and outpacing the category and key competitors, showing positive net sales growth in a category that had been declining,” she says.
New products can enliven an entire category, says JC Iglesias, marketing director, Scotch and Cognac for Pernod Ricard USA. “New products bring in new consumers or bring back consumers to a category that may have gotten stale, contemporizing the product for consumers distracted by other spirits.”
New consumers targeted include more women. Courvoisier’s Frank says Gold and Rosé, both combining Cognac with wine, are designed to be approachable and have brought more women into the category, and Courvoisier C has picked up appeal to younger African-American males.
Things haven’t been so rosy for other brandy makers – in the U.S., that means mostly California brandies, and the contrast between brandy and Cognac trajectories continues: brandy, the larger of the two in volume, dropped 1.5% in 2011, with only sub-category leader E&J gaining any ground (+ 0.5%), while Cognac volume grew 2.8% with the top three brands – Hennessy, Remy Martin and Courvoisier – all adding 30,000 – 35,000 9-liter cases.
The innovations have started to extend to brandy, where the flavor revolution arrived in the last two years in the form of Christian Brothers Honey, which has done its job, according to associate brand manager Chris Ratterman. “It was a big initiative for the brand. The premium flavor expanded the shelf set and provided more of a range of products for the brandy drinker in general.”
Flavors have been an effective way to introduce other spirits to new consumers in a way that translates to success for the flagship marque, a transitional method that has worked especially well in whiskey lately. Paul Masson brandy marketing manager Joanne Vinci agrees there are opportunities here. “Spirit innovations in other categories are vying for the domestic brandy consumer’s attention. There is opportunity for brandy to present consumers with new usage occasions and innovations that take advantage of current trends.”
But in general, the brandy and Cognac buyer is still extremely brand loyal, says Ted Carmon, spirits buyer for Beverages and More (BevMo!), which operates 123 stores in California, Arizona and Washington State.
“Brandy and cognac is a very predictable and stable segment for us,” says Carmon. “Our sales show our customers, who are pretty high end and sophisticated, split about 70% coming from Cognac and 30% domestic brandy segment and are definitely brand loyal – the Hennessy consumer does not seem to be interested in changing brands, for instance.” He notes Hennessy VS maintains its status as leader of the pack. “Where Hennessy VS goes, so does the Cognac segment.” And he points out that while offering new expressions to customers is important to the BevMo! philosophy, customers are so loyal to their brands it’s tough to get them to switch.
Trading Up Success
Hennessy’s success has been bolstered by the modest advances of Hennessy Black, says Rodney Williams, senior vice president of Hennessy at Moet Hennessy USA. Keeping current with newer consumers is required, Williams notes, and says Hennessy Black’s trade-up opportunity and smoother flavor profile is still building awareness. “Consumers consistently tell us they find it light and smooth in flavor profile and finish and they love the packaging. For a brand that’s been around 247 years, it will take a little while for everyone to recognize the Hennessy Black proposition.”
“We’re very excited that Cognac is growing and we see many opportunities on the horizon as consumers appreciate the fact that Cognac can be enjoyed neat or in a mixed drink, and we’re increasingly engaging new and younger consumers to experience Hennessy in a mixed drink,” Williams says.
This year the brand launched one of their biggest advertising and marketing campaigns around Hennessy VS, trying to connect with younger consumers, based on the notion of pushing the limits of one’s potential “which we feel resonates pretty powerfully with some of the challenges young adults face today,” he says. Called “Never stop, never settle” the campaign employs ads with boxer Manny Pacquiao, director Martin Scorsese and singer Erykah Badu.
Cognac has long been tied to nightclubs, African-Americans, Asians and the luxury markets, and the slowly improving economy bodes well for the category in the near term, says Emma Medina, Rémy Martin senior brand director. “The trend is certainly returning towards quality and luxury goods. While the cognac category remains flat, super premium cognacs are reporting double digit growth and we continue to see increased demand for luxury spirits.”
Searching for Higher Marques
As BevMo!’s Carmon points out, Remy VSOP drives that tier of the Cognac trade, but that lately, the increased interest in the higher marques has created challenges for retailers – suppliers simply don’t have enough.
Martell has focused on the marques above VSOP in the U.S. and Iglesias agrees success has created issues. “When you are focusing on a higher marque, the planning is more complex. We depend on the Borderies region for Martell, which is very small and can only produce a limited amount of and we basically make all we can get our hands on.”
Even new brand D’Usse is being careful to make sure they can supply their customers. The brand’s initial offering, a VSOP only now available in New York, with perhaps two more major Cognac markets to come by year’s end, was designed to be spicier and woodier than other expressions coming from the Otard house, according to Giles Woodyer, brand managing director of D’Usse. The slow roll-out in the U.S. is caused by a need to manage their supplies carefully to make sure demand here is met first.
While the Cognac drinker is difficult to switch to other brands, the brandy fan is more susceptible, especially to pricing, says BevMo!’s Carmon, and regionality is a consideration – in Northern California, Korbel does better while in Southern California and Arizona, it’s E&J, for instance.
E&J dominates its sub-category, commanding about 40%, with E&J XO Brandy up 41% recently, says Gerard Thoukis, senior director of marketing, E&J Gallo Winery. Keeping the brands moving is based on halo brand positioning, since the distribution and consumer targets are similar, he says. “This has allowed us to become more efficient and targeted with our advertising and activation investments. It is important to note that despite a halo communication platform for the family, the individual tiers deliver distinctly different styles of brandy.”
But here, too, change is inevitable, he notes. “The retail environment, through new entrants and innovation, is changing frequently. Therefore, we place just as much focus and effort to remain relevant among our customers as we do our consumers,” he says.
Opportunity in Cocktails
Cocktails present an opportunity for both brandy and Cognac makers, says Joanne Vinci, marketing manager for Paul Mason. “There is opportunity to take advantage of the current trends toward more premium spirits and expand our VSOP blend business. Additionally there is also opportunity to leverage the current cocktail renaissance and present new usage occasions for Paul Masson Brandy to an expanded audience beyond our core consumer base.”
“Among brandy consumers specifically, we are focusing on the popular “mixability” theme that we hope will aid in opening up new usage occasions for brandy,” agrees Thoukis.
So important is cocktail culture to newer expressions that the latest Ferrand expressions, 1840, was created to mimic the style of Cognac more common in the late 19th century when Cognac-based cocktails were among the most important. Alexandre Gabriel, president and owner of the brand, engaged cocktail writer David Wondrich to develop the flavor profile. “Retail is extremely important to the Cognac business and Ferrand in particular, but it’s still true today that bartenders and cocktail bars are an important place to build sampling and awareness of brands, whether from a large house or small.”
Even though D’Usse’s initial product is a VSOP, Woodyer says breaking the brand via bars and cocktails is an important way to drive sampling and awareness, though retailers will get their chance to stock the stylish bottle.
While brandy marketers hope that home consumers employ their wares in cocktails as well, keeping in contact with their base is crucial, marketers say. Like most brandies, Paul Masson is focusing on solidifying relationships with their core consumers – in their case, through social media and the Paul Masson Facebook page, with a fan base of more than 114,000.
The strength of the Northeast and Upper Midwest for brandy brands means niche focusing, like Christian Brothers’ efforts to connect with ice fishermen with retail displays and promotions.
Above all, keeping consumers interested at a time when the introduction of new spirits is at an all-time high is essential, says Thoukis of E&J, “While our advertising and promotional investments remain focused within the four walls of the retailer, we have started to invest additional funds in digital to develop closer relationships with consumers. Additionally, we will continue to pursue local market activations through sports and music. As the market leader, it is imperative to continue to communicate with the consumer outside the point of purchase to ensure the brandy category remains relevant and top-of-mind.”
The Rules of the Region
All Cognacs are brandy but not all brandies are Cognacs, goes the old saying, useful in reminding everyone that the classic French grape brandy can come only from a specific region. Cognac also has numerous rules and regulations that have made it the world’s most sought after brandy.
All Cognacs are also blends of many different spirits from the allowed regions, aged for different lengths of times and brought together by a house’s master blender, the person really responsible for the final bottled product. Start with VS, or Very Special, sometimes called Three Stars – first, it can be made of up to 40 different eaux-de-vies that come from all of the six crus, or vineyard regions, allowed to provide spirits for Cognac (For the note-takers, these areas are Grande Champagne, Petite Champagne, Borderies, Fins Bois, Bon Bois, and Bois Ordinaires). VS must also contain no spirit aged less than two years, and probably most spirits have been aged between three and five years.
In a VSOP (Very Superior Old Pale), also called Reserve, the youngest spirit is by law allowed to be four years old, though they usually contain spirits up to 10 or 12 years or even older, depending on the house style, tradition and the needs of the blender.
In an XO (for Extra Old), also called Hors d’âge, components must be at least six years old, and they are likely to include some of the oldest Cognacs used. Most Cognac makers will use Cognacs much older than required by law, allowing, say, XOs to reach a minimum of 20 years in order to create an attractive blend.