Cognac was the second most exported spirit from the EU in 2016.
Spirits EU, a European Union Trade Organization recently released its 2017 trade review. According to the report, European Union spirits exports topped €10.2 billion euros in 2016, representing a doubling of exports over the past 10 years and an increase of 5% over 2015.
The leading European exported spirit was whiskey constituting 45% of overall European Union spirits exports. Cognac was the second most exported spirit from the EU, representing 30% of overall European Union spirits exports.
The United States was the leading destination of EU spirits with over €4.06 billion worth in spirits exported in 2016, up 6% over 2015 and up 49% over the past 10 years. China was the third leading destination for EU spirits with €479 million, up 16% from 2015 and up 179% from ten years ago. Singapore was the second leading destination with €843 million in EU spirits exports heading to that nation in 2016.
Cognac sales to the United States
Of the over €4 billion euros worth of EU spirits exported to the United States in 2016 cognac represented 29% of that amount (or approximately €1.18 billion). While the EU spirits and Cognac export numbers to the United States are solid, spirits EU is concerned that the Trump Administration may introduce a border adjustment tax which may slow growth on exports to the United States.
Hennessy Cognacs account for a majority of Cognac exports to the United States with the vast majority of that Cognac being Hennessy V.S. Hennessy has warned due to the rapid growth of sales of 30% per annum over the past three years that it is likely that Hennessy V.S. shortages may be experienced by us consumers later in 2017. V.S. sales account for well over 80% of all Hennessy Cognac sales in the United States.
Cognac sales to China
EU exports of Cognac to China over the past 10 years have been explosive. Indeed, of the over €479 million in EU spirit exports to China, Cognac exports represented a whopping 83% (approximately $400 million) of that total in 2016, with whiskey exports accounting for just 12.5%.
While the largest sales of Cognac in dollar volume in the United States are in the V.S. designation, China in contrast imports a greater percentage of higher end V.S.O.P. and XO designated Cognacs. China’s predilection for such Cognacs have made the Chinese market very important for high-end producers of Cognac like Rémy Martin who produces the exquisitely expensive Louis XIII Cognac and a range of Fine and Grande Champagne V.S.O.P and XO Cognacs.
Markets with Growth Potential
Spirits EU noted four countries that could provide exceptional potential growth for EU spirits in the coming years: India, Thailand, Brazil and Argentina. EU spirits sales in these countries are subdued because of excessively high trade tariffs, ranging from 20% (Brazil and Argentina) to 150% (India). Cognac is not particularly harmed by not having free market access to these countries as there is a limit on Cognac’s overall production because Cognac can only be produced in the six growing crus of the Cognac Appellation d’origine contrôlée (AOC).