{"id":9685,"date":"2023-11-04T21:25:57","date_gmt":"2023-11-04T21:25:57","guid":{"rendered":"https:\/\/infundpros.com\/business\/post-pandemic-partys-over-as-americans-shun-cognac\/"},"modified":"2023-11-04T21:25:57","modified_gmt":"2023-11-04T21:25:57","slug":"post-pandemic-partys-over-as-americans-shun-cognac","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=9685","title":{"rendered":"Post-pandemic party\u2019s over as Americans shun cognac"},"content":{"rendered":"
\n

When New York\u2019s nightlife reopened as pandemic lockdowns eased, partygoers wanted to drink one thing: cognac. \u201cEverybody was ordering excessive amounts of bottles\u2009.\u2009.\u2009.\u2009at one point there was a shortage of Henny,\u201d said club promoter Frankie Banks, referring to LVMH\u2019s Hennessy brand cognac. <\/p>\n

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 \u2014 LVMH, R\u00e9my Cointreau and Pernod Ricard \u2014 each reporting declining sales in their third-quarter earnings. The trend matches a slowdown in the broader market for luxury goods. <\/p>\n

Premium alcohol sales rocketed during Covid lockdowns as bored consumers stuck at home with extra savings splashed out on pricier spirits. This continued as bars reopened. <\/p>\n

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.\u00a0<\/p>\n

\u201cWe are crossing into territory where the savings are gone, the support is gone,\u201d said Spiros Malandrakis, spirits analyst at Euromonitor. \u201cIt looks like a hangover after the great party that followed the pandemic recovery.\u201d<\/p>\n

Export volumes of cognac, a brandy produced from white wine grapes in western France, fell 18.9 per cent between August 2022 and the end of July this year, according to the cognac producer\u2019s association UGVC.<\/p>\n

The US is by far the largest consumer of cognac, importing more than half of bottles produced, according to the Bureau National Interprofessionnel du Cognac (BNIC).<\/p>\n

<\/source><\/source>\"Rare<\/picture>
Rare and old cognac is stored in Hennessy\u2019s factory in Cognac, southwestern France. Export volumes of cognac fell 18.9% between August 2022 and the end of July this year<\/span> \u00a9 Regis Duvignau\/Reuters<\/span><\/figcaption><\/figure>\n

Half of all cognac in the US is drunk by African Americans, a demographic that has been disproportionately affected by the cost of living crisis, according to analysis by Bernstein.<\/p>\n

The skew to African American consumers is in part due to the fact that French spirits producers ignored the segregation mandated by America\u2019s Jim Crow laws and \u201ccultivated the African American market segment in ways that other producers did not,\u201d said David Crockett, professor of marketing at the University of Illinois Chicago.<\/p>\n

French spirits producers at the time marketed to Black-owned and targeted publications. As early as the 1970s the advertisements conveyed a message of upward socio-economic mobility, said Naa Oyo Kwate, a sociologist at Rutgers University, with campaigns running in magazines such as Ebony. She highlights a spread from one 1983 edition, showing a glamorous woman pouring a drink with the tagline: \u201cI assume you drink Martell\u201d. <\/p>\n

Cognac became a status symbol in night clubs in the 1990s and 2000s, when rappers introduced cognac brand names in lyrics, like Busta Rhymes\u2019s and Diddy\u2019s 2001 hit, \u201cPass the Courvoisier,\u201d which led to a spike in sales of the cognac, which is owned by Japan\u2019s Beam Suntory group. <\/p>\n

<\/source><\/source>\"Children<\/picture>
Half of all cognac in the US is drunk by Black Americans, and throughout the 2000s ads have targeted Black Americans with tag lines such as \u2018You Wish\u2019 <\/span> \u00a9 Naa Oyo A. Kwate<\/span><\/figcaption><\/figure>\n

Ads targeting Black Americans throughout the 2000s featured taglines such as, \u201cYou wish\u201d, \u201cUpgrade\u201d and \u201cEnvy is so unattractive\u201d, Kwate said.<\/p>\n

A cognac market dominated by four labels \u2014 Hennessy, Martell, Courvoisier and R\u00e9my Martin \u2014 expanded further as Black celebrities became brand owners. Ludacris launched Conjure Cognac in 2009 and Jay-Z launched D\u2019Uss\u00e9 in 2012.<\/p>\n

While sales in categories like whisky and champagne dropped in 2020, cognac was one of the few spirits that did not decline during pandemic lockdowns as consumers continued to drink it at home, according to Euromonitor. <\/p>\n

Anthony Brun, president of UGVC, said that the downward trend for cognac in the US was consistent with other drinks categories.\u00a0<\/p>\n

\u201cThere is no disenchantment with the cognac as a product or existential questions to be asked there. We are suffering, like others, the consequences of the end of Covid, the war in Ukraine, inflation, which have all had an impact on the world economy,\u201d he said.<\/p>\n

At LVMH, the luxury industry\u2019s bellwether, the wine and spirits division was the only one where sales fell in the first nine months of the year compared to the same period in 2022. \u201cDemand [for cognac] is pretty soft in the US,\u201d LVMH CFO Jean-Jacques Guiony told analysts. <\/p>\n

The post-pandemic hangover has been exacerbated by the effect of destocking, said Brun; at the height of the party, retailers became overexcited and ordered more to meet rising demand. Waiting for the excess inventory to be sold has weighed on sales, but he expects inventory levels to be back in balance by the end of the year or early 2024. <\/p>\n

Speaking to investors following the third-quarter trading update last week, R\u00e9my Cointreau\u2019s CFO Luca Marotta said it was not clear what proportion of the declines were a result of destocking and how much was due to competition from discounting activity by its key competitor in the cognac market, which he did not name but is LVMH.\u00a0<\/p>\n

LVMH has ramped up promotions of its Hennessy brand to attract US consumers hit by the cost of living crisis, according to analysts. Marotta said intensive promotion by its competitor was \u201cdestroying value\u201d and damaging consumer perception. LVMH did not respond to a request for comment. <\/p>\n

Bernstein analyst Trevor Stirling said consumers were likely trading down to a more affordable label in the LVMH stable. R\u00e9my Cointreau only sells the more expensive cognacs in the US \u2014 Very Superior Old Pale and Extra Old \u2014 while LVMH sells a third, cheaper cognac, Very Special.<\/p>\n

Cognac\u2019s popularity may also be threatened by tequila\u2019s booming popularity, which has in turn also been boosted by celebrity endorsements. African Americans who historically have not drunk tequila are starting to move into the category, said Stirling. <\/p>\n

Part of tequila\u2019s appeal is its lower price point said Aleen Tran, a business analyst at Pernod Ricard in California. Tran, who focuses on Martell, said that with inflation, \u201cprices have gone up across the board, but tequila is still cheaper than cognac\u201d. <\/p>\n

\u201cCognac is dying a very slow death in New York right now,\u201d said Christopher Collins, director of events at nightclubs Taj and Katra Lounge. \u201cTequila has taken over the whole hip hop scene.\u201d<\/p>\n

Euromonitor\u2019s Malandrakis said the cognac downturn raised alarm bells about the health of the economy, and resilience of the US consumer. <\/p>\n

\u201cYou can\u2019t have people continuing to buy the most premium alcohol categories in this inflationary environment \u2014 something didn\u2019t make sense,\u201d he said. \u201cWhat we\u2019re starting to see is the inevitable.\u201d<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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