The area of Cognac and the port of La Rochelle has long been an important region of trade. From salt, to paper, to light wines, the region was bustling with exchange on a global scale. The Charente river was navigable up to the town of Cognac and provided a veritable trade highway for the trafficking of the region's goods. With a good trading position and access to the Bay of Biscay and foreign markets, the region was poised to be successful in commerce
The Dutch, an important trading partner, played a large role in the creation of what we now know as Cognac, the spirit. As early as the thirteenth century, the Dutch frequented the area for the salt and paper trade. Along with those commodities, they would also fill their boats with local wines. The sweet white wines of the Borderies, in particular, were much sought after by the Dutch, as they not only suited their palates but withstood sea voyages better than drier, more acidic styles of the Champagnes. The frost of 1766 took a toll on the vineyards of the Cognac region, however, and customers looked elsewhere, like Sauternes, for wines. The producers of the Charente region slowly began to shift to their grapes to use in distillation, a product the Dutch referred to as "Brandwijn" - burnt wine - which gives Brandy its name today. Initially, the distilled wine product was produced to be reconstituted with water after the sea voyage to Holland.
The Dutch began importing copper from Sweden and building stills, a process that would be emulated by the Congacais producers. In the 17th century, the process of double distillation was used by the Dutch and refined by the French. Today, this method used is referred to as the Charentais distillation method. With a more stable product as the result, the distilled "eau-de-vie" had no trouble with sea faring. It was delays in the handling of ship cargo that allowed merchants to realize that the product changed and improved when held for an extended time in oak cask and was pleasurable to consume directly from the barrel. 2
The Dutch were not the only people to lend their influence to the growing popularity of Cognac. The English and Irish developed a taste for Cognac's brandies as well. Demand for the spirit grew in the UK market throughout the eighteenth and nineteenth century.4 The aristocratic café society in London was affluent and fashion-conscious enough to pay premium pricing for a product that was more expensive to produce than simple grain spirits. The Irish were at times even larger consumer than England but were more price conscious and would wax and wane based on the going rate of the spirit. The domestic market, particularly Parisians were large customers as well.1. The Charente region was delimited in 1909 and divided into seven crus in 1936.
Cognac enjoyed a boom until 1871, when the wine root louse, Phylloxera, arrived in the vineyards. Like many regions of Europe at during this epidemic, the region's grape industry was devastated. Nearly 250,000 hectares of vines were destroyed over the next 20 years by the pest.4. Many of these vineyards were never replanted. Others were replanted with American rootstock and the traditional Folle Blanche variety was replaced by Ugni Blanc. Phylloxera, in a sense, forced producers to reevaluate both their viticultural and vinicultural practices for the better. During this downturn and rebuilding, however, other spirit categories like Scotch Whisky would shine. To complicate matters more, plague hit in the twentieth century as well as American Prohibition, and two world wars, all of which took their toll on the region and its business. It would not be until the late twentieth century that Cognac's sales would reach their pre-Phylloxera peak. Still, there are fewer producers than before and most of the Cognac industry has consolidated under four major producers (the Big 4): Courvoisier, Hennesey, Rémy Martin, and Martell.
In the region of Cognac, there are still many small farmers. Some of these farmers may have their own still and produce their own product, but it is more likely that they sell their crop or distillation to one of the larger producers. These larger producers, in many cases, also own vineyards but they do not grow nearly enough grapes to make the quantity of wine needed to satiate the demand for their product. It is then up to the farmers to either sell their grapes, distill the grapes themselves for sale, or take their grapes to a regional distillery to be turned into the distilled spirit.5. Growers producing their own Cognac from estate fruit are known as "hermitage" producers, a category that is growing in popularity and turns out some very fine product.6 The growers and producers, however, realized that there needed to be a way to regulate the quality and sale of Cognac. After the Second World War, the Bureau National Interprofessionel du Cognac (BNIC) was created and began managing every aspect of production and sales.7. The mission on the BNIC is "To develop and promote Cognac, representing the best interests of all Cognac professionals including growers, merchants and members of other activities related to the Cognac trade."78
One of the major initial contributions of the BNIC to the marketing of Cognac was the adoption of a lettering system (eg. VSOP for Very Superior Old Pale) to identify aging and quality levels in Cognac in 1975. This in addition to Cognac's traditional "star" rating system helped consumers navigate when making buying decisions, but many producers have since gone away from the stars and letters and instead opted to label their Cognacs based on the cru or a proprietary name. 6
Today, the "Big 4" Cognac producers account for 90% of sales by value.9 Hennessy holds the largest market share worldwide, with over 6.5 million cases sold in 2016, up from 4.2 million only six years prior. The other three shippers hover between 1.3-2.1 million cases respectively.10. The US is driving growth in the category now, taking over from China, which was leading the charge before in their search for all things "premium." China's government implemented an austerity measure to curb excessive gifting in 2012 leading sales of Cognac and all other premium alcohols to drop dramatically. Meanwhile, US imports of Cognac have surged to over 4.4 million cases, steadily increasing since 2008. This coincides with an overall growth of brown spirits in general in the US.10. The China import crisis seems temporary, however, as the global marketing director of China's leading Cognac, Martell, Charles-Armand de Belenet noted in an interview with thespiritbusiness.com, "After three years of decline, the Cognac category is back to growth, and brands are reinvesting, particularly in media and digital. Prestige volumes are stabilizing, and the XO category has recently accelerated its recovery with double¬-digit growth."11. Interestingly, as China switches to more personal consumption, the biggest growth has been noted in the lower categories like VS.
In the United Kingdom, Cognac and all other brandies have been on a steady decline in consumption over the past four years.12. Much of this can be attributed to shippers increasing prices to keep their margins in line following Brexit and the depreciation of the pound. Further complicating matters is the United Kingdoms' negotiations with the European Union regarding free trade. If a deal isn't reached when the UK officially exits the EU on March 29, 2019 it is likely that prices for goods may increase further. The talks continue and the representative body of the EU drinks industry has urged the EU and UK to agree to a "gold standard agreement" to preserve tariff-free trade on wine and spirits to not only ensure fair competition, but also maintain consumer confidence.13 It is left to be seen what the fate of trade into the UK, the largest importer of wine and spirits in the world, will be as a result of the Brexit discussion.
1. How Cognac's brands refresh and reinvent themselves (35 marks) The candidate should describe and discuss how the companies in the cognac industry keep their brands fresh and in so doing ensure that the region survives and even flourishes. Reasoned argument, evidence and well-chosen examples should be deployed to support any assertions made.
Meanwhile, France still sits in the sixth position for sales worldwide (2.7 million liters) despite the fact that 97.8% of Cognac is exported to the US, Singapore, China, the UK and Germany.14 The category is growing in France, up 4.4% from 2016. This should come as no surprise since Cognac has historically been created as a product for export. In France, it was traditionally consumed as an after-dinner drink, limiting opportunities for consumption. The BNIC seeks to change this image by encouraging bartenders to work with the product in cocktails. Since 2008, the BNIC has been inviting bartenders from around the world to Cognac to create cocktails using the spirit.15. This tactic seems to be working, as millennials, in particular, are increasingly seeking out craft cocktails using Cognac. Sidecars, Sazeracs, Vieux Carre, and other classics are once again as bartenders recreate traditional recipes from the 19th century and realize that some of the earliest mixed drinks used Cognac as a base instead of whiskey.16
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