By Tassilo Hummel
PARIS -Annual cognac revenues dropped 13%, hit by a drop in demand for premium ranges of the French brandy and a slump in sales to China, according to industry data shared with Reuters.
After strong growth during the pandemic and a series of hefty price increases amid rising inflation, demand for cognac has been in decline for the past two years.
Extra pressure has come from an anti-dumping probe in China and tariff threats from the United States – the $3 billion industry’s two most important markets.
While the industry, led by LVMH’s Hennessy, Remy Martin and Pernod Ricard’s Martell cognac houses, headed off permanent Chinese import duties via a price pledge this summer, it has so far failed in its bid to escape a general 15% U.S. import levy.
Cognac shipments fell 4.2% by volume to 154.6 million bottles in the year to July 31, while revenues dropped 13.4% to 2.7 billion euros ($3.1 billion), according to the data compiled by France’s BNIC cognac industry body.
The steeper decline in value reflected a shift to younger, entry-level cognac, where shipments rose 2.6%, while the luxury VSOP and XO categories fell 11.3% and 12.9% respectively.
Exports to China plunged 24.4%, mainly hit by Beijing’s anti-dumping investigation, which took full effect from October when provisional duties were imposed. The BNIC said it was too early to tell whether a deal in July that suspended the duties for most cognac makers would reverse the trend.
North American revenues fell 4.6% despite a slight increase in volumes shipped to the U.S. as producers shifted to lower-priced bottles.
European revenues fell 11%.
Shipments to other countries rose 19.9% by volume as producers sought to reduce their reliance on the U.S. and China. But these markets remained relatively small, accounting for 17.5 million bottles exported in the period.
(Reporting by Tassilo HummelEditing by Mark Potter)
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