Cognac makers look for the good times to return

By David Jones

LONDON, June 19 (Reuters) - The global cognac market may be on the slide with the worldwide economic downturn as shipments continue to contract, but the four big cognac houses are upbeat that the good times are just around the corner.

These four -- Hennessy, Remy Martin, Martell and Courvoisier -- have suffered falling sales volumes in 2008 and into this year, but have been successful in moving cognac drinkers towards more expensive tipples as they prepare for the recovery.

Any drive for growth is likely to come from abroad as over 96 percent of cognac is exported, but it often struggles for shelf space with larger spirits with the French drinking more scotch whisky than the world does of cognac.

Only grapes grown in the Cognac region of south western France can be distilled to make the spirit, which limits production and makes its worldwide market only three-quarters the size of the biggest brand of scotch whisky, Johnnie Walker.

Cognac shipments tumbled 6.2 percent in 2008 and in the 12-months to end-April 2009 the volume fall sharpened to 13 percent as wholesalers and retailers cut their stock levels to cope with the spreading recession around the globe. This came after 3 percent annual growth over the last 10 years.

The French 1.6 billion euro ($2.2 billion) cognac industry shipped 148.2 million bottles in 2008 and the way 2009 has started this year might well be lower again, but the four main houses -- which account for 80 percent of the industry -- are still upbeat.

"We think the cognac market will drop a little through the rest of 2009, but we hope it will pickup in 2010 when hopefully world economies start to recover," said Courvoisier president and managing director Jean-Marc Olivier.

Courvoisier sold 1.2 million 12-bottle cases in 2008 making it the smallest of the big four houses. It was bought by U.S.-based Fortune Brands Inc (FO.N: Quote, Profile, Research) in 2005 in the joint breakup with Pernod Ricard of Britain's Allied Domecq.