A glance at the global top-line figures gives the impression that non-Cognac brandy is long past its heyday. The category hasn’t registered volume growth since 2013 and achieved a CAGR of -1.8% between 2012 and 2017.
One key factor in the category’s demise stems from image problems. Non-Cognac brandy continues to lose out to trendier categories and products perceived as more prestigious.
However, looking beyond the numbers there are positive developments. The continued recovery of the category in the CIS region, and a return to growth in Africa & the Middle East, all provide some positive news. Nevertheless, it is the re-emergence of the premium-and-above segments in the US – bolstered by an innovative craft segment – that truly inspires hope for non-Cognac brandy elsewhere.
A global overview
Overall, non-Cognac brandy volumes fell by almost 3.3m cases between 2016 and 2017. Bucking this decline, total volumes in the CIS region grew by just under 700,000 cases. The continuation of growth in the CIS is being fuelled predominantly by Russia, the third largest market for non-Cognac brandy. Here the ever-increasing minimum retail price of vodka in the market is closing the gap between the two categories, convincing many consumers to ‘trade-up’ to the nearest-priced brown spirit which is perceived as being more prestigious.
Perversely, one market that is seeing non-Cognac brandy benefit from a struggling economy is South Africa. The ninth-largest non-Cognac brandy market by volume is currently witnessing volumes transfer from pricier whisky to brandy – with the former shrinking by -2.5% and the latter growing by 11.3% between 2016 and 2017. In fact, it is this performance that primarily inspired the 1.3% growth registered by the Africa & Middle East region between 2016 and 2017, having recorded a -2.2% CAGR between 2012 and 2017. Despite these success stories, it is the performance of Asia-Pacific and Europe, the two largest global regions for non-Cognac brandy, that have dictated the overall direction of the category in recent years. Asia-Pacific accounted for 57.2% of all global non-Cognac brandy volumes in 2017, but its own totals fell by -3.6% between 2016 and 2017. This resulted in a volume loss of 3.7m cases.
This region contains the category’s largest two markets – India and the Philippines. The losses endured by the two markets amount to a combined 3.6m cases. India especially has seen long-term migration into the better-perceived local whisky segment, with non-Cognac brandy being a primary casualty.
In Europe, the category remains large but is finding growth elusive. In Europe, total volumes have shrunk by -1.8% between 2016 and 2017. Long-term movement away from non-Cognac brandy towards more dynamic and interesting spirits products has fuelled decline in the key markets of Germany, Italy, Spain and the UK.
Struggling to stay relevant
One issue contributing to the category’s current misfortunes is that non-Cognac brandy is generally associated with an aging consumer base in many key markets. Tajana Pecenicic, the international marketing manager for Stock brandy, points out: “The biggest challenge for non-Cognac brandy remains that it is considered an ‘old and not exciting’ category.” Herve Buzon, global brand director of St. Rémy brandy, agrees: “The biggest challenge is that in many markets brandy users are becoming older and older. The category does not recruit new consumers because it lacks consumer education and attractiveness.”
This is certainly true of prominent non-Cognac brandy markets such as Germany. Here, such products in the mainstream-and-below segments are identified as being ‘old-fashioned’ by younger consumers. This means that total category volumes shrink each year as producers are unable to replace those drinkers aged 50 and over, who typify the category’s main consumer base. Even further up the quality scale, non-Cognac brandies are losing out to other brown spirits in the premiumisation race as they are perceived to be more prestigious.
In parts of Eastern Europe younger consumers are increasingly eschewing the category, as they seek to avoid the Soviet-era drinking habits of their parents and grandparents. For example, in the Baltic markets of Estonia, Latvia and Lithuania, non-Cognac brandy sales registered a CAGR of -2.7% between 2012 and 2017. This decline picked up pace between 2016 and 2017 as total volumes of all three markets fell by -6.6%.
Non-Cognac brandy’s decline is set to continue over the next five years, according to the IWSR’s forecast data. The good news is that this decline is projected to lessen, slowing from a CAGR of -1.8% between 2012 and 2017 to one of -0.7% between 2017 and 2022. Exciting developments in the higher end of several key markets should help boost the reputation and image of premium-and-above non-Cognac brandies.
On non-Cognac brandy’s future, Osborne summarises: “It’s a product that belongs to one of the most mature categories in the world. It has performed differently depending on the region, but surely it will enter into an image renovation by exploring its heritage, origin, characteristics and consumption experiences that it has. This will appeal to a more up-to-date and educated consumer.”
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