Guests at bars and restaurants across the U.S. are spending less on Cognac, according to the latest on-premise ordering data from Union. Dollar sales are down from 1.31 percent to 1.29 percent share of Spirits in the 12 months ending December 31, 2023.
Sales of the French, barrel-aged Brandy had boomed during the pandemic in the U.S., especially at home, and then at bars when on-premise came back. But that growth has now stalled across the board for Cognac. By volume, Cognac represents just under one percent of all on-premise Spirits unit sales.
“Because Cognac’s unit share of all Spirits is relatively low to begin with, this small drop in Cognac dollar sales is insignificant from an operator’s perspective. But, this drop does amount to a significant loss of share for Cognac producers,” says Layne Cox, chief marketing officer at Union.
Premiumization is still strong for the Cognac category, despite slowing sales. Across brands, some of the most expensive, ultra-premium Cognac items are actually seeing slight gains at Union venues. Notably, the average price per ultra-premium Cognac drink is down, and lower prices on these most expensive Cognac items may translate to increased sales, as customers perceive better value for the price.
Hennessy Rules On-Premise Sales
Even with Cognac sales taking a hit, one of the globally successful “Big Four” Cognac houses, Hennessy, is performing well on-premise, in large part due to successful promotions and price decreases.
Hennessy is the leading brand of Cognac at Union venues, taking in over 85 percent of all category sales. D’Ussé, a celebrity brand launched by rapper Jay-Z in 2012, has a strong on-premise presence, with over 9 percent of Cognac sales share. However, the brand has experienced significant sales declines in 2023.
Top Cognac Brands at Union
- Hennessy
- D’Ussé
- Rémy Martin
- Courvoisier
- Pierre Ferrand
Source: OnPrem Insights by Union, 12-month period ending December 31, 2023. Ranked by dollar sales share.
Beyond the top two brands, a few other big players are in on the action. The No. 3 best-selling brand, Rémy Martin, represents 3 percent of Cognac share, and Couvoisier (recently purchased by Campari) at 1 percent. At No. 5, Pierre Ferrand’s share is less than one percent, as is share for other top brands, which include Martell, Kelt, and Conjure.
Across the top-selling brands, all are experiencing share decline except for modest increases for Hennessey and Pierre Ferrand.
“This global slowdown in Cognac has been ongoing for a while,” says Spiros Malandrakis, industry manager of alcohol drinks at Euromonitor International. “The luxury segment is recession-resilient, not recession-proof.” He says that even the top brands shouldn’t be complacent, and that they shouldn’t expect to be untouched even if the economy declines.
The Top-Selling Cognacs
Looking at SKU-level, the top items sold at Union are, largely, Hennessy.
While Hennessy VS is slightly up in share growth, its higher-end VSOP and XO Cognacs are booming at the bar, showing a hefty points-share increase of over 20 percent each. By contrast, the No. 2 item sold at Union bars and restaurants, D’Ussé VSOP, points-share of on-premise Cognac sales has dropped by over 20 percent, while its XO point-share is down by about 9 percent.
Rémy Martin is also showing overall brand declines, but follows a similar pattern to D’Ussé and Hennessy: The higher-priced, ultra-premium XO Cognacs are faring better than the premium VS and VSOP Cognacs.
Top Cognac Items Sold at Union
- Hennessy VS
- D’Ussé VSOP
- Hennessy VSOP
- Hennessy Black
- Hennessy Richard
- Rémy Martin VSOP
- Hennessy XO
- Rémy Martin 1738
- Courvoisier VS
- D’Ussé XO
Source: OnPrem Insights by Union, 12-month period ending December 31, 2023. Ranked by dollar sales share.
Hennessy has dominated Union’s Cognac sales for some time, and with its recent increase in sales, it’s winning even in the face of weak demand for the category as a whole. Pierre Ferrand is the only other brand that’s consistently holding ground against broader category declines, though its overall sales share is still small.
Pricing Battles and Premiumization Continue into 2024
The price of Cognac drinks is high, with VS (aged minimum 2 years) selling for an average price of about $14, and XO (aged minimum of 10 years) commanding an average of about $19. These prices are down year-over-year, but still land at the highest end of the menu, in comparison to the average overall spirits-drink price of $9.15. (Prices reflect averages across the U.S. venues).
While Cognac is certainly losing some share to premium Tequila, as nearly all categories are these days, there are multiple issues contributing to Cognac’s sales slump. Wholesalers and retailers are clearing excess inventory, on top of a bumpy U.S. economy. But there’s more to it, explains Cox.
“Cognac sales by dollar may be slightly down on-premise, but by unit they are flat,” she says.
Hennessy is taking share from all other Cognac brands, and much of its growth is coming from ultra-premium SKUs, which have dropped significantly in price. For example, Hennessy XO drinks dropped nearly $3.00 in price to $18.60 over 2023, and showed 22 percent growth for that item.
“I wouldn’t exactly call it a pricing war,” explains Malandrakis. “Hennessy has fired the first shots, and the other brands are trying to hold off from joining the fight,” he says. “[Hennessy] is winning, at least in the short term.”
How long competing brands will be able to hold off that tide of discounting is the question, he says, along with concerns that deep discounting could devalue the category in the long run.
There is an even bigger long-term issue at play for Cognac, which is a lack of product and audience diversification, and little effort to cross over into non-luxury trends. Key global thematic trends including non-alcoholic beverages, RTDs, de-premiumization, and mixology-forward cocktails are worrisome for the category, which shows an overall lack of innovation. ”Strategically, it’s a serious issue,” he says.
Into 2024, however, data shows an appetite for the higher-end Cognac at Union venues, regardless of price fluctuations from brand to brand on-premise.
Drink prices for Cognac remain among the most expensive for Spirits. The data shows that guests are still willing to pay top dollar for special pours like these — especially in the late night hours after 10 p.m., when nearly two-thirds of Cognac sales take place, according to Union ordering data.
Cox says: “Based on resilient ultra-premium sales across Cognac brands, I think we can expect to see more limited editions, single cask releases, and more of the ‘rare’ releases, likely at very competitive price points, as on-premise guests continue to seek out the higher-end Cognacs, at least for now.”
