Cognac Market

Cognac Market Outlook (2022-2032)

The global cognac market is currently valued at US$ 5.5 Billion in 2022, and it is expected to grow at a 6.4% CAGR from 2022 to 2032. The global cognac market is expected to be worth US$ 10.2 Billion by 2032.

The global acceptance of premium alcoholic beverages among millennials is expected to broaden the cognac market scope in the coming years. The exclusivity of cognac production is a major factor influencing the growing popularity of craft products. Cognac production is strictly limited to its production region Cognac, similar to champagne. As a result, the grapes used to make cognac all come from the same region, and such products are influenced by the region's soil.

Alcohol consumption has become a social norm during specific events and occasions in North America and Europe in recent years. Most employees prefer to enjoy a drink with friends and colleagues after work on Friday evenings. Similarly, students on campus have been observed to have a strong drinking culture.

The notion of cognac is certainly not new to consumers in lined with a freestanding, but the recent spike in demand for premium liquor experiences has disrupted the situation and opened up new cognac market opportunities in terms of both value and volume growth. However, it will be fascinating to see how the major cognac brands continue to innovate and pave the way for new entrants to gain cognac market share.

The COVID-19 pandemic caused market disruptions due to the virus's danger and government controls, which impacted cognac production, demand, and supply chain, stifling cognac market growth.

Report Attributes	Details
Cognac Market Size (2022)	US$ 5.5 Bn
Projected Cognac Market Value (2032)	US$ 10.2 Billion
Global Cognac Market Growth Rate (2022-2032)	6.4%
China CAGR	7.9%
United Kingdom’s CAGR	8.0%
Household & Residential Buyers’ Cognac Market Growth Rate	6.1%
Very Special’s Cognac Market Growth Rate	6.8%
Key Companies Profiled	Jas Hennessy & Co. The Rémy Cointreau Group Courvoisier Martell Otard (Chateau de Cognac)

Cognac Market - The Finest Premium Spirit Continues to Stand Tall

Premium liquor demands, i.e. demand for cognac, remains high, owing to the fact that premium alcohol varieties are not only infused with high-quality ingredients but are also subjected to exhaustive distillation processes. Premium liquors, i.e. cognac, are well known for their finely tuned viscosity and texture, which is one of the main reasons they are regarded as worthwhile investments.

This massive shift toward premium liquor is likely to boost sales of cognac in the coming years, with VS (very special) and VSOP (very superior old pale) being two of the most popular varieties. Furthermore, consumer interest in 'experiential drinking' is a key factor driving cognac consumption, as new-age consumers value experiences over products.

Aside from the premium drinking trend, which has long been a key driver of cognac market revenues, a growing appetite for brandy-based cocktails has boosted sales of cognac significantly.

Craft Alcohol is the Upcoming Big Thing

Craft alcohol is surfacing as the next big thing in terms of consumer appeal in the cognac market, as crafts spirits are generated by licenced distilleries and come with the assurance of ‘reliability'. Craft spirits are expected to grow at a faster rate than craft beer, according to experts.

Leading cognac market players are jumping on the 'craft spirit' bandwagon and working to develop new products to satisfy this ever-changing demand for cognac. The trend toward craft spirits is expected to accelerate in the near future, opening up new cognac market opportunities.

Window of Opportunity in Cognac Market

‘Emerging in Food service Chains’

A growing number of food service chains are promoting their redecorated menus with the addition of new brandy-based cocktails as part of their strategy to increase in-store footfall. Cognac is by far one of the most popular choices for preparing brandy-infused cocktails, as it provides a cognac market opportunity for food service operators in terms of flavor and aesthetic experiments.

‘Digital Commerce Witnessed a Huge Opportunity’

Another trend that has persisted as the pandemic fades is digital commerce, which can link up cognac drinkers with brands in much more interactive ways than before. Digital commerce has created a huge cognac market opportunity and is undoubtedly the category's fastest-growing channel.

Restraints of the Cognac Market

The COVID-19 pandemic caused market disruptions due to the virus's threat and government regulations, affecting cognac production, demand, and supply chain, stifling cognac market growth.

Brandy is not purchased by health-conscious consumers because excessive consumption can lead to health problems such as a rise in blood pressure and calories, as well as heart and muscle damage, which reduces demand for cognac and slows its cognac market growth. Cognac, as a premium drink, is significantly expensive, limiting its demand among consumers with average incomes. It also faces a high threat from cheaper substitutes.

The cognac market is divided into two segments based on application: online and offline. The COVID-19 outbreak has resulted in a significant increase in internet purchasing, which is expected to persist. However, offline purchases continue to constitute a fairly large portion of the cognac market.

Which is the Leading Segment in the Cognac Market by Grade? 

Very Special, led the cognac market, accounting for more than 50.0% of total volume with a CAGR of 6.8%. This is due to customers' constant desire for new products. Courvoisier S.A.S. introduced Avant-Garde Bourbon Cask Edition in February 2020, which is derived from Courvoisier VS liquid and finished in Kentucky Bourbon casks. The 40% ABV product is priced at USD 39.99 and has notes of vanilla, honey, and sweet marmalade.

In terms of volume, V.S.O.P. is expected to grow at the fastest rate of 6.7%. Various product launches are making a significant contribution to the segment's cognac market growth.

For example, Altia launched a limited-edition cognac under its Larsen brand in November 2019. The VSOP Double Toasted cognac has been aged in handcrafted barrels that have been twice toasted. The extra charring imparts a sweet aroma of vanilla, toffee, and other roasted flavors. It has a 40% ABV and is available in Finland and Norway. The price of a 500mL bottle is EUR 38.

Which is the Leading Segment in the Cognac Market by Distribution Channel? 

Off-trade led the cognac market, accounting for more than 55.0% of the total volume. Customers prefer to purchase drinks from various liquor stores because they are less expensive than most other on-trade distribution channels. Furthermore, people who enjoy collecting and sampling various brands prefer to purchase from off-trade channels.

In terms of volume, on-trade is expected to have the fastest CAGR of 6.4%. The gathering in bars, restaurants, and other eateries has increased sales of cognac through on-trade channels. Furthermore, certain dishes and recipes sold in fine-dining restaurants pair exceptionally well with cognac, fueling demand for cognac. In addition, the demand for various cocktails is contributing to the channel's cognac market expansion.

Decoding the Real worth Equation in the United States Cognac Market

The US is one of the key cognac markets in North America. United States remains the leading and is expected to grow significantly over the next ten years with a CAGR of 4.9%.

According to recent studies, the United States topped the list of the top ten cognac export markets in 2018, with a nearly 5% increase in volume to 86.5 million bottles.

The United States' export volume was equal to the combined volume of the other nine countries on the list, namely Singapore, China, the United Kingdom, Germany, France, Latvia, Hong Kong, South Africa, and the Netherlands.

Historically, Black Americans were among the first to be introduced to the spirit and thus accounted for a sizable proportion of purchasers. However, in recent years, cognac brands' concerted efforts of influential advertising have sparked a wave of interest among white consumers in North America.

Furthermore, cognac consumption patterns in the United States and Canada continue to be heavily influenced by cultural considerations and the economic sentiments of consumers in these regions.

The occasions on which cognac varieties are served and savoured are also changing dramatically. Cognac varieties appear to be successfully making their way into the regular drink cabinets of United States consumers, from being a traditional digestive and a casual drink on special occasions.

Asia Pacific is the Major Hub in the Cognac Market

In terms of revenue, Asia Pacific is expected to grow at the fastest CAGR of 4.0%. The region's brand owners have been debating whether to abandon the traditional label in favor of age statements. It is expected that the improved label will aid in the understanding and stability of cognac, thereby increasing sales of cognac.

Courvoisier has already experimented with this by releasing the 12 and 21 ranges. China and India are among the potential cognac markets in the region due to their large consumer base and increasing disposable incomes of middle-income consumers.

How is the Start-up Ecosystem in the Cognac Market?

Smaller Players Gain Steam

Ferrand Cognac

• Ferrand Cognac is another brand that seeks to cash in on the premiumization trend. During 2020, a strong emphasis was placed on cognac education for consumers through virtual tastings with stores and consumers. These efforts have resulted in a significant increase in volume for the brand. On a 12-month rolling basis, Ferrand's depletion has increased by 31%.
• Ferrand appears to be benefiting from both a high growth in retail sales and a resurgence of cognac in beverage programmes with the re-opening of bars and restaurants. The house intends to capitalise on this momentum by releasing a new blend called Renegade No. 3 by the end of the year.

Bisquit & Dubouché - Acquisition

Campari Group is also betting on the high end with the relaunch of Bisquit & Dubouché (formerly Bisquit Cognac) this year, which was acquired by the company in 2018 and serves as the first spirit in its new rare division. Bisquit & Dubouché is a disruptor brand that is shaking up the traditional cognac tropes, beginning with the packaging.

The updated look, combined with the premium price, targets cognac consumers who want to experiment with different brands, as well as high-end whiskey and rum drinkers, with a sleek, contemporary bottle, metallic silver and black accents, and a bolder redesign of the brand's gryphon logo.

How are Cognac Market Players Luring 'New-Age' Consumers?

The cognac market has seen some consolidation, with the top players accounting for a sizable portion of the global cognac market share. The top five players - Jas Hennessy & Co., the Rémy Cointreau Group, Courvoisier, Martell, and Otard (Chateau de Cognac) - control nearly 75-80% of the global cognac market and continue to emphasise vertical integration.

With a series of impressive sales in the cognac market recorded in both 2017 and 2018, Hennessy, the cognac brand of Jas Hennessy and Co., is likely to remain 'chart-topping.' Camus Cognac, Thomas Hine & Co., ABK6, and Delamain, to name a few mid-level and emerging players in the global market space, continue to focus on geographical expansion strategies and boost their product pipeline with newer cognac additions.

A growing number of cognac producers are focusing on 'non-traditional' methods of producing and marketing their products. The main goal of this strategic move is to change the 'pre-conceived' image of cognac, which is either a fusty 'after-dinner' drink or a status symbol.

With an increased demand for cognac, leading players in the global cognac market are introducing lifestyle events to broaden the brand's reach and improve consumer interaction. Given that consumers heavily rely on social media advertisements for making pragmatic purchase decisions, cognac market players are also utilising social media channels as their primary marketing arsenal.

Recent Development:

• Launch:
  • Sazerac Company, Inc. announced the launch of their Seignette VS cognac in the United Kingdom under the brand name Hi-Spirits in October 2020, with the goal of engaging a new generation of cognac consumers with a fresh flavour and aesthetic appeal. In addition, the spirit's adaptability to use in mixed beverages and cocktails will be discussed.
  • Hennessy launched its 2019 Very Special Limited Edition Release in June 2019, with the VSOP Privil ge campaign designed by Argentine Spanish contemporary artist Felipe Pantone.
  • Unibev Ltd., a spirit start-up, announced the launch of the spirit brand L'Affaire Napoleon brandy in Telangana, India, in September 2018. The company intends to expand its spirit brand by introducing new products.
• Release:
  • Courvoisier announced the limited-time release of Courvoisier Sherry Cask Finish in February 2019. This Sherry Cask blend was created especially for the American cognac market.

Key Segments

• By Grade:

  • VS (Very Special)
  • VSOP (Very Special Old Pale)
  • XO (Extra Old)

• By Buyers Type:

  • Household & Residential Buyers
  • Institutional Buyers
  • Restaurants & Pubs

• By Distribution Channel:

  • Direct and Institutional Sales
  • Modern Trade
  • Convenience Stores
  • Online Retailers
  • Modern Grocery Retail Stores
  • Specialty Stores
  • Liquor Stores

• By Region:

  • North America
  • Latin America
  • Europe
  • East Asia
  • South Asia & Oceania
  • Middle East & Africa (MEA)