Emerging markets give Cognac boost

Cognac could soon enjoy a long-awaited boost thanks to an improving picture in China and strength of emerging markets, Rabobank’s Q3 spirits report predicts.

“Asian markets finally saw a lift because of the Chinese New Year, starting a turnaround from the tough market conditions over the past two years,” said Stephen Rannekleiv, Rabobank senior analyst.  

Describing Cognac as “the most challenged” of all western spirits, particularly over the past two years, Rennekleiv said the first couple of months of 2015 had been “a little more upbeat”.

“Among the most obvious reasons for optimism is the return of Chinese demand”, said Rannekleiv. “The first couple of months of 2015 have signified some positive momentum gains after Chinese New Year. Cognac is also seeing positive trends in other emerging Asian markets, such as Vietnam and Malaysia.”

While emerging markets are providing new opportunities for Cognac, the US is expected to be its biggest market, driving growth for the category over the next couple of years.

“Barring any unexpected shocks to the economy, we are highly optimistic about Cognac’s future in the US market,” said Rannekleiv.

Rannekleiv attributed this to the ongoing rise in demand for brown spirits in the US, its burgeoning cocktail culture and millennials’ interest in exploring new categories – trends that he said had created the “ideal conditions” for the brandy, and Cognac, segment to return to growth.

Predicting opportunities for both spirits at “more premium points”, Rannekleiv warned that growth in the US market would require “sustained effort and resources, and a bit of luck”.