The current slump in China's market is being felt all over the world as businesses get dragged down, in terms of sales, with them as well. The uproar over China's drawn-out economy has led to drop of prices in almost all the commodities and even high-end goods are affected.
Remy Cointreau, the French distiller, is among the companies that is taking a hit from China' s economic crisis. The rest of the cognac makers are feeling the negative impact on their business too, so they are trying to figuring out a way to gain their big losses in the past months.
The International Monetary Fund, an international organization working to promote worldwide monetary cooperation, perceives the growth of China's economy this year as its slowest since 1990. With this, the country is seen as a potential risk to the global economic growth.
"China is clearly a weakening environment in the near term," John Haynes, head of research at Investec Wealth & Investment, said via Bloomberg Television.
Moreover, the dull economy in China and its recent campaign against corruption and bribery have greatly contributed to the decrease in the demand for cognac. As a result, the the leading producers of brandy, namely the LVMH Moet Hennessy, Remy Cointreau, Beam Suntory and Pernod Ricard, are now shifting their attention to the US market.
On the profit of Remy Cointreau alone, its sales have gone down the most in the past 11 months. This was because the company missed its quarterly sales estimates as the wholesalers in China keep holding back their orders for cognac.
Now, in an effort to get back on the track, cognac manufacturers decided to focus more on the US market. The makers are planning to introduce new products and go all out with campaigns in order to attract more audience besides its African-American patrons.
According to analysts, the African-American group is the world's biggest market in terms of cognac consumption. They have been credited for the two-thirds of cognac being drunk yearly. However, things have change and manufacturers are trying to get other crowds into their market so that they can fill in the gap created by China.
"We don't want cognac just to be for one category of person," Augustin Depardon, Remy Martin Executive Director, told Reuters.
The Campaign and New Products
The makers of cognac want to introduce a variety of cocktails to the consumers. They are hoping that this move would help win over whisky-drinkers and make them shift to cognac.
While cocktail drinks like Stinger and Sidecars use cognac for the mix, it is not used as frequently as bourbon, rum, or gin. In view of that, Hennessy presented Hennessy Black, a brandy that is good for cocktails and better mixability.
"Cognac seems, in my mind, to have a rightful place in the cocktail craze that hasn't been fully taken advantage of. There's an opportunity to continue making inroads in a demographic they have not generally had a strong presence in," said Stephen Ranneklei, senior analyst for beverage at Rabobank, via Reuters.
Finally, Euromonitor predicts that sales of cognac in US will increase by 9 percent compared to the previous year. It stated that it will be around $5.2 billion in sales this year, a figure that will outperform the Chinese market.
