The Cognac market in China may be almost half the size of the US market in volume terms but, in value terms, has grown to be worth 70% more than the US, according to recent research.

In 2009, the retail value of the Cognac market in China was US$370m more than the value of the US Cognac market. However, last year, the value of the Chinese market soared while the US’s value declined as consumers downtraded and volumes stagnated. In 2010, the retail value of the Cognac market in China grew to $950m more than that of the US.

Pernod Ricard's Martell and Moet Hennessy's Hennessy brands are the key drivers of the Cognac market in China. Cognac grows as it has an advantage at all levels of the distribution chain: For consumers, VSOP is seen as a trade-up from 12-year-old Scotch whisky; for importers, the price per case of Cognac is higher than the price per case of whisk(e)y, and, for bar owners, Cognac is more profitable as they can charge more.

Cognac and Scotch continue to lead the imported spirits categories in China; in 2010, Cognac outsold whisk(e)y for the first time since 2004, according to The IWSR Spirits in China Report.

The US Cognac market, on the other hand, has been hit hard by the recession, with many core African-American consumers at the forefront of the job losses in many key urban areas for Cognac, including Los Angeles, Atlanta and Detroit. The category is also facing greater competition from other brands in other categories, especially super-premium vodka. Last year, Cognac was more or less flat at 3.4m cases, according to The IWSR Spirits in the United States Report.

This year, there have been some significant price promotions on some Cognac brands in the US, resulting in growth for some VS brands. Some others have launched higher-priced line extensions that also seem to be helping growth. Trading up is taking place on a limited scale, with higher qualities also appealing to Chinese-Americans.

The US remains comfortably the largest premium spirits market and, although China is growing faster, the US remains the critical market for premium Western-style spirits. It is also a premium market in growth. In 2010, the market rose in line with the past five-year CAGR, growing by 4% to 47.3m nine-litre cases. This represents an increase of 1.8m cases, according to The IWSR. 

Source:chinabevnews