LIQUID ASSETS

1098cogn

They are consumed in snifters after dinner and are in some of the hippest retro-cocktails.

For the last several years, brandy and cognac brands have been seeking to expand their image — and their efforts have been paying off. According to the authoritative Adams Liquor Handbook 1998, the total brandy/cognac market saw its sales increase by 2.6% in 1997, to reach more than 7.7 million cases nationwide.

And cognacs, the most upscale of all brandies, have grown even faster than other brandies, so much so that cognac is now considered a separate spirit category by many suppliers. The top cognac brands grew by 10.6% from 1996 to 1997. Hennessy, the segment leader, representing almost half of all cognac sales in the U.S., grew by more than 16%, with Courvoisier, the number two brand, showing growth of 5% and Remy Martin, in the number three position, up by 15.4%.

Some non-cognac brandies are also on fire. The brightest of these is Paul Masson Grande Amber Brandy, the third largest domestic brandy on the market, sales of which shot up by 33.3% nationwide in 1997.

Other growth brands in brandy include, on the domestic side, Christian Brothers, the number two domestic, up nationally by 5.8% and Almaden, which, like Paul Masson Grande Amber, is from Canandaigua Wine Company, up by 6.2%.

Meanwhile, several of the top imported brandies have also shown growth. Presidente, nationally the number one imported brandy (excluding cognacs), was up by 4.3% nationally, while its sister brand Don Pedro grew by 1.6% nationally. St. Remy, the number three imported brand, grew by 16.4%.

What’s the secret behind all this growth?

Cognac suppliers say their success is a direct result of the consumer desire for premium products. “There is a whole trend in brown spirits of exploration and connoisseurship,” said Liz Sorota, senior brand manager for Hennessy at Schieffelin & Somerset. “Consumers with sophisticated palettes are looking for new experiences.”

Schieffelin & Somerset’s newest cognac products, three single-distillery cognacs (called Lepeu, Izambard and Camp Romain, with suggested retail prices of about $47 to $49) take advantage of this experimentation trend at the upper-end of the brown spirits market. Sorota pointed out that the single-distillery concept is very similar to the idea behind single malt Scotch.

Several other suppliers are also introducing new cognac brands. Domecq Importers launched a new Courvoisier product, Millennium, in September. To be retail-priced between $39 and $49, the brand is meant to mark the Year 2000. It is positioned above Courvoisier’s VSOP product and is said to “be very celebratory in nature, a very good gift-giving item,” according to Marc Birnbaum, Courvoisier’s marketing director.

Meanwhile, Rémy Martin is launching its 1738 Accord Royal. Set to retail for about $70, the product and its packaging are based on the cognac style of the 18th century.

Unlike most other cognac brands, whose VS, or least upscale product, accounts for the bulk of their sales, Rémy Martin’s VSOP, the mark above VS, is its flagship grade. “When you hear that Rémy is doing well, it means premium cognacs are doing well,” said Hilary Peck, director of marketing at Rémy Amerique.

Indeed, upper-end cognacs are doing so well that Rémy Martin has launched a new product size for its famous Louis XIII, which retails for approximately $1,200 for a 750 ml bottle. The new size, a 1.75 Baccarat crystal decanter with a neck collar of 24-carat gold, sells for $2,500. “And it’s already back-ordered,” reported Peck. “There has been a tremendous amount of interest.”

Other suppliers are entering the cognac market or are paying new attention to their cognac brands. Among the new entrants is Shaw-Ross Importers, which acquired marketing responsibility for Davidoff Cognacs this past June. “Cognac,” said Phil Consolo, Shaw-Ross’s director of marketing, “is an exciting category, with a growing premium segment, and we are thrilled to be associated with the Davidoff name, which is so linked to superpremium products.” The company is marketing Davidoff Classic, which retails for about $59.99, and Extra, at $159.

Meanwhile, Larry Kass, group marketing manager for whiskies, brandies and cognacs at Heaven Hill, reported that Ansac Cognac, once a “sleeper product” for the company, is doing “very, very well. And we’ve started to invest in the brand,” he said.

Even some of the biggest brands in the cognac market are beginning to sit up and take notice of the growing interest in the spirit. “For a few years, we didn’t pay attention to the brand,” said Domecq’s Birnbaum of Courvoisier. Last February, the brand launched its first advertising campaign in three years, “Welcome to the State of Courvoisier.” It also updated the packaging for both its VS (in March) and VSOP (in June) products. And Seagram Americas is set to launch a global ad campaign for Martell Cognac at the end of the year.

Brandy suppliers have also taken note of cognac’s success. Indeed, the biggest trend in brandy is the continued attention suppliers are paying to the upper-end of their category. No one has had greater success with this strategy than Paul Masson Grande Amber. When Canandaigua Wine Company received the marketing rights to Paul Masson Brandy in 1993, the company set about reformulating and repackaging the product. The result was Grande Amber, which is aged for three years in oak and whose advertising tagline is “Taste the difference between the good and the Grande.”

“The world did not need another low-cost brandy,” explained David Boggs, Grande Amber’s brand manager. “Brandy and cognac are miles apart in terms of consumer perception. We saw that there would be a real opportunity for us if we could split the difference.” According to Boggs, Grande Amber is currently growing at rates of approximately 25%. For the holidays, the brand will launch its “Grand Masters of Jazz” promotion, which includes free posters at retail and an instant-win sweepstakes, where legal.

Other brandies, both domestic and imported, have also seen the potential of an upscale image. Two years ago, Korbel, nationally the fourth best-selling domestic brandy, underwent a packaging change and a price increase. According to Gary Heck, president & chief executive officer at Korbel Wine Cellars, Korbel Brandy’s sales slowed initially after the changes but have since been stabilizing.

Christian Brothers’ more premium line extension, Christian Brothers VSOP, continues to do well. The line extension was introduced 18 months ago and is priced $1 to $2 higher than Christian Brothers Amber, the line’s popular brand.

On the import side, David Sherman Corporation has focused on educating consumers about the cognac-like qualities of its brand, St. Rémy. Its new packaging, introduced about a year ago, has a traditional feel. A necker/brochure, introduced this year, explains the brand’s production process. “It is really produced in the cognac style,” said Meg Syberg, director of marketing. For the holidays, St. Rémy will offer a gift pack with a brandy snifter.

Shaw-Ross has replaced Raynal Reserve Extra, the upper-end offering of its Raynal French-bottled brandy. The new premium entry features an age statement on its label, Raynal Five-Year-Old and is priced $2 to $3 more than the line’s base brand, Raynal VSOP.

Phil Consolo, marketing director at Shaw-Ross, said the company is pleased with the premium images of its brandies — both the Raynal brands and its Cardenal Mendoza brands from Spain. “There’s been a return to style in what Americans are doing, eating and drinking,” he said.

Indeed, said Hector Hernandez, senior brand manager of Mexican & Spanish brandies for Domecq Importers, the consumer trend toward upscale products is so strong that his company saw its effects even without trying to actively court it. “Without doing anything, our Azteca De Oro has been up consistently 5% to 6% a year,” he said. With a retail price of approximately $27 for a 750 ml bottle, Azteca De Oro is Domecq’s most upscale Mexican brand. And in September, Domecq plans to begin actively promoting the brand’s upscale position. But the real volume for Domecq’s Mexican brandy portfolio rests with Presidente and Don Pedro.

Cognac has two markets: one upscale, where connoisseurs are willing to pay top dollar, and the other — and far larger — for the brands’ less-upscale offerings. Most brands, for instance, report that the bulk of their sales are at the VS level.

Perhaps the biggest difference between these two markets is in how the spirit is consumed. “VS is mainly mixed, especially with Coke,” reported Laurent Martell, category manager for Martell at Seagram Americas.

Many cognac brands, therefore, focus on mixability. “A lot of the market is drinking [Hennessy] as a premium spirit, with soda, in a Sidecar, with Coke,” said Schieffelin & Somerset’s Sorota. “This market has been in existence for some time and is growing. And it is all focused on VS.” Hennessy will continue to focus on the mixability of its VS brand with its newest advertising campaign, entitled “Appropriately Complex.”

Likewise, Rémy Martin is continuing its “Rémy Lounge” campaign, which focuses on the mixability of its cognac, especially in branded versions of classic cocktails, such as the Metropolitan and the Stinger. “People like branded cocktails because they are premium, they are expensive, and they are different,” said Peck. “They don’t want to do things the way everyone else does them.”

Yet, in the arena of mixability, many brandy suppliers say their products may have an advantage over higher-priced cognac. “Cognac is a whole world unto itself: a lot of times, people won’t mix it, they’re afraid to violate it,” said Canandaigua’s Boggs.

And brandy suppliers are pursuing the mixability angle, in all its manifestations. “People consume brandy with ice, with water, with cola and 7Up, with orange juice, with cranberry juice, all the way to cocktails like the Brandy Manhattan and the Brandy Alexander,” Boggs pointed out.

Eric Pope, associate marketing manager at Gallo, agreed. “It’s amazing how much it is mixed,” he said. In September, E&J Brandy launched a mixability program, which include materials such as bin cards and chalkboards.

Most brandy suppliers seem to believe that mixability is the way to go when it comes to growing the market for brandy. “The whole [brandy] industry is looking for brandy to be something more than an after-dinner drink, something you drink warm before bed,” said Korbel’s Heck. Korbel is currently working with Ghirardelli Chocolates on a drink mix meant for its brandy.

Heaven Hill’s Kass pointed out that, in the advertising for Coronet VSQ, the company’s largest brand, the brandy is shown in a variety of drinks. “There are the variations on classic cocktails, like the Sidecar, there’s the growth and experimentation in Martinis, and Coke & Brandy is a strong franchise,” he said. “We’re adapting the product to people’s usage and are being inclusive in its marketing.”

The expansion in products being offered and images being portrayed have helped both brandy and cognac establish a broad appeal. “Brandies have a very broad demographic base. In age, it’s from 25 on up,” said Shaw-Ross’s Consolo, who pointed out that his company’s Spanish brand, Cardenal Mendoza, has definitely been crossing over from being a mostly Hispanic product to being “a national brand in a national category.”

Though many of Domecq’s brands have been most pop ular among ethnic consumers — with its Mexican brands (Presidente, Don Pedro and Azteca De Oro) appealing to Mexican-Americans and its Spanish brands, including Fundador, appealing to consumers of Cuban, Dominican, Filipino and Puerto Rican descent — Hernandez noted that the Hispanic market in the U.S. is a growing one. “By the year 2005, Hispanics will be the largest minority in the U.S.,” he said, “and by the year 2051, one out of every four Americans will have some Hispanic background.”

And Domecq is looking to cross over into non-Hispanic markets as well, hoping for what Hernandez called “the Corona Beer effect.”

“Brandies have a lot of growth potential. We have a lot of places to grow,” he said.

Meanwhile, Heaven Hill has been targeting Coronet VSQ’s advertising at a younger market. “We position the brand as part of an active lifestyle, showing it in casual, outdoor settings, showing people in active situations, like skiing and rollerblading,” explained Kass.

Gallo has also been focusing on younger consumers. In February and March 1999, it will, in partnership with Bollé sunglasses, launch a ski-based promotion, which will tie in with ads running in consumer ski magazines.

Gallo has also been using its marketing campaigns to expand its brandies’ seasonality. Last summer was the fourth summer it ran a golf-based promotion. “In May, our sales were up by double-digits, while June and July saw increases of just under 10%,” reported Pope.

Many cognacs are also focusing on younger consumers — and consumers who are new to their spirit in general. Seagram’s Martell is launching a marketing campaign based on rhythm-and-blues music, for example. “Before, we targeted people in their 30s and above,” said Martell. “We also want to target younger consumers, ages 21 to 30.”

In addition, Rémy Martin, with its largest marketing budget ever, is working on a number of different fronts. These include launching a 100 ml flask size of its VSOP for about $5.99, and its new “Only Rémy” ad campaign, as well as sponsorship of its “Tastemaker Series,” a showcase of independent films and theater running in selected markets.

And brandy and cognac suppliers are not turning their backs on their spirits’ traditional appeal–or their existing consumers. Many focus on cigar-related events and promotions, such as Sidney Frank’s cigar on-pack, available, in markets where legal, both on- and off-premise. Promotions connected with jazz music, such as Korbel’s cross-promotion for the coming holiday of a jazz CD, in markets where legal, have also proved successful. And in ads, suppliers continue to display their brands in snifters, even as they also show them in lots of retro and new cocktails. “We still have that traditional snifter segment,” said Heaven Hill’s Kass.

Young, old, male, female, drinking it straight, drinking it mixed, different ethnic groups: the bottom line is that brandy and cognac have branched out. “There are so many different skews, any conclusion that you could draw about the general brandy consumer would be way off base,” said Boggs. And that expanding appeal is good news for brandy and cognac.

Cheryl Ursin is a regular contributor to Beverage & Food Dynamics and Cheers magazines. Her writing has also appeared in The New York Times and other publications.


LEADING BRANDS OF BRANDY
(Thousands of 9-Liter Cases)

BRAND ORIGIN SUPPLIER 1996r 1997

% CHANGE

E & J USA E & J Gallo Winery 1,950 1,900 -2.6%
Christian Brothers USA IDV North America 1,191 1,260 5.8%
Paul Masson Brandy USA Canandaigua Wine Co. 450 600 33.3%
Korbel USA Brown-Forman Beverages 407 375 -7.9%
Presidente Mexico Domecq Importers 230 240 4.3%
Coronet Brandy USA Heaven Hill Distilleries 180 175 -2.8%
Raynal France Shaw-Ross 202 160 -20.8%
Mr. Boston Brandy USA Barton Brands 93 87 -6.5%
J. Bavet USA Heaven Hill Distilleries 85 85 0.0%
St. Rémy France David Sherman 73 85 16.4%
Total Leading Brandy 4,861 4,967 2.2%
Others 648 532 -17.9%
Total Brandy 5,509 5,499 -0.2%
Total Cognac 1,998 2,205 10.4%
Total Brandy & Cognac 7,507 7,704 2.6%
Source: Adams Liquor Handbook 1998 (r) Revised.

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