Despite the now proven impact of the Covid-19 on global spirits sales, the Cognac sector is preparing for an economic recovery
– A gradual recovery in shipmets in the coming months
– A request to plant 100 new hectares of vines in 2024, which takes into account the new global economy
Over three years later, it appears that the COVID-19 health crisis had a significant impact on the wine and spirits sector overall. As with other fields, the health crisis seems to have shifted the growth dynamic for the Cognac sector. The Business Plan of the cognac sector will be updated early next year on the basis of soon-to-be-published international statistical data. This will provide a more precise analysis of the situation. The data currently available, however, suggests that shipments should gradually increase over the course of 2024, albeit non-linearly. The request to plant 100 new hectares of vines in 2024, as outlined in the Business Plan, takes this transitional period into account and fully incorporates the planting rights already obtained since 2016.
THE IMPACT OF COVID-19 IS NOW PROVEN
Three and a half years after the start of the pandemic, it appears that the effects of COVID-19 have been felt for a long time and will continue to do so, and we now have a better understanding of the different phases involved for the Cognac sector. From summer 2020 onwards, sales significantly increased, thanks in particular to US government aid. 2021 was a record year for Cognac and other spirits categories. This trend continued in the first half of 2022. From summer 2022 onwards, sales started to fall under the combined effect of the end of government aid, distributors’ excess stocks on consumer markets, particularly the United States, and the effects of inflation. The impact of this decline continues to be felt to this day.
The rise in 2021 followed by a fall in 2022 were two phases of the same phenomenon which can now be considered unusual in terms of its intensity. From this perspective, the growth witnessed over the past few months should be viewed as a normalisation phenomenon.
Cognac sector forecasts predict a strong return to growth for the various international spirits categories, including Cognac, from 2024 onwards. For the Cognac sector, the Business Plan update scheduled for early next year will provide a better understanding of these projections. Some economic data (changes in purchasing power on key consumer markets, spirits consumption levels, etc.) nevertheless seems to show that the COVID-19 crisis and its consequences, including inflation, were not a zero-sum game in the long term and suggests that the health crisis certainly caused the global economy to shrink. The expected recovery is likely to match pre-COVID levels. This point will be clarified over the coming months.
THE REQUEST TO PLANT NEW VINES HAS BEEN REVISED
The request to plant new vines in the Cognac sector in 2024 has been revised to 100 hectares. This takes into account two aspects: the 15-year outlook for the global economy incorporated in our Business Plan and based on the most recent international statistics available and the planting rights already acquired in previous years.
“Producing and selling Cognac is always about anticipating in the long term. We have faith in the resilience and ability of the Cognac sector to bounce back. Today we are making cautious decisions and are very determined in the work we are doing to boost our recovery, particularly the efforts undertaken by Cognac merchant firms on the markets. This work will continue through to 2024 and will ultimately pay off”, stated BNIC President, Christophe Veral.
FIGURES FOR THE 2022 – 2023 CAMPAIGN
The slowdown in Cognac shipments from 1 August 2022 to 31 July 2023 reported on 14 June has been confirmed with 180.2 million bottles shipped, representing a turnover of 3.6 billion euros ex-Cognac, i.e. a 18.9% fall in sales by volume and a 6.2% decline in sales by value, following three years of exceptional results in 2019, 2021 and 2022 and in light of a less favourable global economic context.
This trend reflects the unusual nature of 2022, which, after strong growth during the first half of the year, saw a slowdown in Cognac shipments from Autumn onwards.
1.The North American Free Trade Agreement (NAFTA), signed by Canada, the United States and Mexico.
2.Far East: China, Hong Kong, Japan, Malaysia, Singapore, South Korea, Taiwan, Thailand.
3.The European continent.
© BNIC / Alain Benoit