Trading up, trading down

16 April, 2010

Cognac has been hit by the recession, with the latest figures suggesting consumers have been trading down in favour of cheaper alternatives.

The category’s off-trade value sales have fallen by 1%, according to Nielsen, while volumes are down 8% (year to October 31, 2009). Meanwhile, French grape brandy has seen value sales rise by 6% while volumes remain flat.

However, Janice McIntosh, Maxxium UK’s marketing manager for market leader Courvoisier, says, despite the declines, Nielsen is continuing to report positive growth figures for the luxury end of the Cognac market.

“Sales of higher marques from XO and above are up 8% value and 10% volume for the year to October 10,” McIntosh points out.

James Robinson, Martell senior brand manager and ambassador, Pernod Ricard UK, agrees. “Despite economic pressures, consumers do still enjoy treating themselves and are willing to invest in their favourite affordable luxuries. It will be market-leading and recognised brands they respect and trust which will benefit from this trend.

“The XO category mustn’t be overlooked – shoppers looking to offset the impact of the recession on big?-ticket items, such as ‘stay-cations’ versus foreign holidays, may be more willing to treat themselves to a higher style.” He says this trend is being supported by the recent listing of Martell XO 70cl and 35cl in Ocado, which offers shoppers the opportunity to trade up.

Nick James, managing director of Pol Roger, which took over distribution of Hine in May, is also optimistic about the opportunities stemming from the recession.

“We have seen a level of trading up as people entertain more at home. We have a good presence in quality-driven restaurants and hotels and that can follow through to the retail environment. Customers that used to go out to eat twice a month might be cutting back to once a month but they’re still enjoying post-prandial drinks at home.”?However, consumers in the value? end of the market continue to be very price-focused. OLN’s Spirits Report in September revealed triple-digit growth for Halewood brand Dubaron Napoleon. It saw a 122% rise in sales, albeit from a small base.

Nigel Tarn, Dubaron brand manager, says: “While the brand does not receive any marketing support to speak of, it is showing a good performance.

“This is down to a combination of factors including a strong proposition underpinned by an excellent formulation and packaging, all at a competitive price point.”?One area to watch is Spanish brandy, according to supermarket buyers.

Vanessa Pearson, Sainsbury’s spirit buyer, says: “Spanish brandy has gained momentum over the past 12 months but is still a small part of the overall brandy category. Cognac across the market has seen some declines with people switching to brandy and malt whiskies as alternatives.”?Michael Simpson-Jones, spirits buyer for Waitrose, agrees: “Spanish brandy is performing reasonably well, as is own?-label French brandy – this is largely because they have a very competitive price point.”?James Rackham, founder of spirits agency Emporia, says: “The demographic market profile of Spanish brandy is different. Cognac appeals to consumers aged 45-plus, Armagnac to people aged 35-plus, but brandy de Jerez appeals to those that are 25-plus.

“Fifteen million tourists from the UK go to Spain every year, and they are hitting the bars where it’s served with Coke – because it’s sweet, it’s a perfect match.” Festive sales rush?Christmas remains the number one sales period for Cognac – representing 30% of VS and 50% of VSOP sales, according to Robinson. “Research shows people trade up for special festive occasions such as social gatherings with family and friends, parties and celebrations or when buying gifts,” he? says.

“Gifting is a key buying occasion at Christmas and, according to our research, people are still willing to trade up when purchasing a gift,” he adds.

McIntosh says: “Christmas is a vitally important trading period for Courvoisier and accounted for 48% of our sales last year.

“This year across the board spirits promotions are happening later than previous years which could be attributed to the financial climate.

“Consumers are waiting to ensure they get the best deals which may appear closer to Christmas in order to make their money go further throughout the festive period.”?

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