The Cognac industry is grappling with a deceleration following a period of robust growth during the pandemic and a surge in demand in Hainan, but strategic initiatives could pave the way for its revival.
Anne Blois, Global Commercial Director at Camus Cognac, highlights the resilience of travel retail, stating, “The rebound in duty-free began with Europe, the Middle East, and Africa towards the end of last year, followed by Asia Pacific in Q2 this year. Year-to-date, we are at 90% of pre-Covid levels and anticipate growth compared to 2019 by Q1 2024.”
However, the broader Cognac sector is experiencing challenges. Manuel Gonzalez, GTR Marketing Director at Beam Suntory, owner of Courvoisier, notes a slowdown in 2023, both in domestic and travel retail markets globally, indicating a concern across regions, including the Americas and Europe.
This sentiment aligns with findings from an IWSR report on key trends in Global Travel Retail in 2023, which suggests Cognac has been impacted by soft demand in the US and the absence of Chinese travelers, its primary consumer groups. While Cognac sales in GTR experienced a significant growth of 24% in 2022, compared to 77% for whisky, Gonzalez speculates that Cognac may be losing ground to Tequila in the US and to baijiu in China, a category still experiencing substantial growth.
Despite challenges, Courvoisier saw a resurgence following a brand relaunch and the opening of a new boutique in Hainan, resulting in improved performance in China. However, the contraction of duty-free sales in Hainan by 30% last year poses a setback for Cognac, prompting a shift in focus to emerging duty-free destinations like Shanghai and Guangdong.
Charles Braastad, Managing Director of Delamain, emphasizes the need for innovation and diversification within the sector, pointing to the success of alternative categories like whisky. He underscores the importance of immersive activations in airports to educate consumers about Cognac, its origins, and unique characteristics. Despite the challenges, Delamain is witnessing strong performance with a revamped strategy and packaging, with travel retail sales surpassing pre-pandemic levels.
As the Cognac industry navigates these headwinds, the potential of travel retail emerges as a beacon of hope, offering opportunities for growth and revitalization through strategic partnerships and innovative marketing initiatives.
