Last week, the Office of the United States Trade Representative (USTR) announced the imposition of a 25% tariff at U.S. borders on new French products. This new surcharge is part of the conflict over civil aeronautics between the authorities of Donald Trump – who is still trying a few cheap shots before his departure – to the European Union, namely an old dispute between aircraft manufacturers Boeing and Airbus.
After the so-called “still” (non-sparkling) wines of less than 14 degrees, it is cognac, but also all the still wines, in bulk and over 14 degrees, which bear the brunt of the commercial showdown between the Old Man. Continent and America. These new sanctions, which must apply from January 12, 2021, have aroused the anger of French producers, worried and who condemn the measure. But despite this umpteenth bad news for the French vineyard, cognac is attractive, like last year when the sector recorded a turnover of more than three billion euros, in particular thanks to exports.
Has cognac, a product that is increasingly popular both in France and abroad, withstood the Covid-19?
Jérôme Durand: Collectively yes, because the region ends at -10% over the year 2020. It is therefore a resilient position of the market, given the current context. This can be explained by two main factors. On the one hand, the United States, first in the world, is a market which has held up well and which has remained stable despite the health crisis. On the other hand, the Asian market, number two after America, was admittedly affected earlier by the virus but it quickly restarted and big events are coming, such as the Chinese New Year, for which the very large orders, have already left. To sum up, the internationalization of the sector, the quality of the products and the power of the brands mean that the situation is stable today, with very honorable results at a time of a global pandemic.
In France, how does the market look, excluding Covid-19?
France represents around 2% of cognac consumption worldwide. It’s a bit of a frustration for us, the producers that we are, because the product shines around the world as a symbol of the French art of living and France remains a minor in this category. The grass is probably always greener elsewhere …
But to put my point into perspective, we have all the same felt a slight tremor in recent years with special attention to the aperitif, with cocktails, in a number of trendy bars and luxury hotels. There is an increasingly sustained presence of cognac in places of interest to our image with customers who consume.
And for the country, has the health crisis had an impact on the sector?
Strangely no, France is even in positive, of the order of + 5%. The industry is therefore generally satisfied. We perceived a desire to consume perhaps less but better. In those dark times, people thought it was an indulgence they were giving themselves and cognac luckily benefited from it.
In addition, the cognac vineyard exports more than 40% of its volume across the Atlantic every year. How do you explain this craze?
The success of cognac in the United States comes from the African-American community, a big fan of this spirit for almost 60 years. She wanted to consume it to stand out from the White community, which is more inclined to taste whiskeys. It is therefore a big ethnic consumption which has taken place over time and which has become anchored and accentuated. Also the phenomenon of rap in the 1980s and 1990s, with many rappers who illustrated and still illustrate their wealth through the consumption of our most beautiful bottles.
More than a craze, the cognac market in the United States is exploding with real dynamism. It represents the world’s largest market with nearly 100,000 million bottles sold last year, in other words almost 50% of sales. It is a social marker in addition to the quality of the products.
In 2021, the Larsen house begins its canvassing in the United States. Isn’t this a perilous choice at a time when new taxes are being implemented?
Larsen was created a hundred years ago. Very present in the Scandinavian countries, the house has become increasingly strong following its takeover seven years ago by the Finnish group Altia. It was a global redeployment for the brand. First in France and then in China four years ago, a market which is also very successful. The United States, number one on the world map, was therefore missing. Even though this market is complex, especially everything related to distribution, it made sense for us to set up there, but with a very specific strategic approach.
In March 2021, we are indeed going to launch a cognac specially dedicated to the American market, aged in barrels which provide complex aromas and tastes adapted to American cognac consumers.
Finally, in this turbulent context, what are the future prospects for the sector?
First of all, this new wake-up call from the Trump administration is a decision that must be taken very seriously. But what is regrettable for us is that we are involved in a dispute which, in fact, does not concern us directly.
Then, and in my opinion, the presence and strength of cognac will not be threatened in the United States. It is a strategic market, for Larsen but also for the entire spirits sector. The prospects are good and are being built in the long term and therefore in confidence. Currently, we produce what we will sell in five or ten years. We cannot therefore react to every volatility in the market. For years, the sector has shown that it knows how to adapt to many situations. And today, after more than a year of Covid-19, we are going out with the honors.
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