Global Hennessy Sales
Hennessy Dominates Global Cognac Shipments
Last month, we reported that Cognac shipments for the twelve month period from April 2017 to March 2018 hit a record of more than 200 million bottles. According to LVMH Moët Hennessy Louis Vuitton (LVMH), the owner of Hennessy Cognac, nearly half of those shipped bottles had a Hennessy label.
LVMH reported record 2017 results, including Hennessy Cognac sales of 90.8 million bottles. The luxury behemoth reported 2017 revenues of €42.6 billion, up 13% from 2016 revenues. Hennessy volumes were up 8% in 2017, but were negatively impacted by supply constraints in the second half.
During the first quarter of 2017, the company noted that there was a potential Hennessy V.S. shortage brewing. At that time, a Hennessy representative noted “there may be issues of availability in the later part of the year given the consistently strong demand.” LVMH further noted that Hennessy V.S. sales had grown 15-20% over the past three-four years. Hennessy’s U.S. sales are primarily driven by its Very Special (V.S.) Cognac. The growth rate of sales of Hennessy V.S. is about 30% in the United States. V.S. sales account for well over 80% of Hennessy cognac sales in the United States. It was the growing popularity and sales of Hennessy V.S. that caused LVMH executives to realize that ‘they can’t go further down in inventory.”
Indeed, during the second half of 2017, inventory shortages of Hennessy V.S. were reported across the United Stated in selected markets, preventing the company from achieving double digit Cognac sales growth.
The company’s sales were strong in its two largest markets, the United States and China. While the U.S. makes up about 55% of Hennessy’s overall shipments, 65% of Hennessy V.S. sales occur in the United States.
Upmarket Cognac sales hold the key to growth
Hennessy is aware that continued growth will rely on pursuing an upmarket strategy that will involve selling increasing amounts of its V.S.O.P, X.O. and other longer aged cognac products. From the LVMH annual report: “Growth remained robust in the United States where it pursued its upmarket strategy.”
Preparing for growth
Hennessy opened a new bottling facility in the fall of 2017 at Pont-Neuf. The new plant will allow Hennessy to ship 8 million cases of Cognac in 2018, up from 7.5 million cases in 2017.