There is nothing perfect about the storm that has hit the cognac industry, which is in crisis mode as it battles falling sales and a Chinese anti-dumping probe.

Earlier this month China opened an anti-dumping investigation on brandy imported from the European Union,  after noting price reductions in the local market of 15.88%.

The Bureau National Interprofessionnel du Cognac (BNIC), which represents French cognac makers, said the price reduction was very low and questioned the “real purpose” of the investigation. The bureau was alluding to the tit-for-tat trade dispute between the EU and China that was sparked last year when the EU announced a probe into China’s subsidies for electric vehicle makers.

The anti-dumping probe comes at a difficult time for BNIC, which is facing falling sales in its biggest market – the United States – due to cost of living pressures.

As the Financial Times notes: “When New York’s nightlife reopened as pandemic lockdowns eased, partygoers wanted to drink one thing: cognac. ‘Everybody was ordering excessive amounts of bottles . . . at one point there was a shortage of Henny,’ said club promoter Frankie Banks, referring to LVMH’s Hennessy brand cognac.

“But the party is now over. After a three-year boom, US demand for cognac has slumped, with the French groups that dominate the market — LVMH, Rémy Cointreau and Pernod Ricard — each reporting declining sales in their third-quarter earnings. The trend matches a slowdown in the broader market for luxury goods.

“Premium alcohol sales rocketed during COVID-19 lockdowns as bored consumers stuck at home with extra savings splashed out on pricier spirits. This continued as bars reopened. But drinkers are now dialling back on spending amid worries about the economic outlook with aspirational spirit brands becoming one of the first luxury categories to moderate.”

“We are crossing into territory where the savings are gone, the support is gone,” said Euromonitor spirits analyst Spiros Malandrakis.

“It looks like a hangover after the great party that followed the pandemic recovery.”

However, Union Générale des Viticulteurs pour l’AOC Cognac President Anthony Brun said that the drop in cognac sales was consistent with other drinks categories. 

“There is no disenchantment with the cognac as a product or existential questions to be asked there,” he said.

“We are suffering, like others, the consequences of the end of COVID-19, the war in Ukraine, inflation, which have all had an impact on the world economy.”

Export volumes of cognac fell 18.9% between August 2022 and the end of July this year, while Rémy Cointreau saw cognac sales fall by 33.9% on an organic basis in its third-quarter results for 2023/2024.

The company cited “major destocking in China and a persistently sluggish market in the United States” as the reasons behind the decline.

Beam Suntory exits cognac market

Beam Suntory sold Courvoisier Cognac to Campari Group for US$1.2 billion in December, with Beam Suntory President and CEO Greg Hughes saying the decision was made because the company had taken intentional steps to sharpen its focus on its areas of strength and must-win brands and categories.

Founded in 1828, Courvoisier is one of France’s top four historical Cognac houses. It has been with Beam Suntory for almost 20 years. It has become the most-awarded Cognac house based on the top 20 spirits competitions since 2019

Despite the challenges cognac is facing, Campari said cognac remains one of the spirits industry’s most successful categories.

“Despite current cyclical trends driven by consumption normalisation, after pandemic-induced very strong growth, negative short-term trends have been further amplified by inflation-related price increases which have led to destocking in core regions,” the compamy said.

“However, the long-term prospect of the category remains positive given structural premiumisation trends in the US, China and travel retail.

“Within the US, premiumisation across the spirits industry and particularly within brown spirits remains, while supporting demographic and macro trends point to a recovery in 2024. Within China, international spirits are growing in popularity, particularly among the younger demographic, especially penetrating major tier one cities while premiumisation remains.”