COGNAC PRODUCTION WILL BE GOOD THIS SEPTEMBER 2018

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Even with a dry summer the production of grapes in Cognac are looking goodaccording to the BNIC by 31st August 2018.
"Quasiment pas de pluie lors de la semaine passée. Dans l’ensemble le vignoble supporte bien cette sécheresse, toutefois certaines parcelles montrent des symptômes déjà marqués : jaunissement du feuillage, baies petites et molles. Les températures encore élevées en milieu de semaine provoquent de nouveaux dégâts d’échaudage. Elles se rafraîchissent nettement en fin de semaine."

Source: http://www.cognac.fr/cognac/_fr/4_pro/index.aspx?page=actualite&id=7501&src=flash

Hence, the Government and Cognac Society (BNIC) have agreed for a rather high rate of harvest per hectar of vineyard for the production of cognac, i.e., 14,64 hl AP /ha.
This decision follows a rather large demand for cognac in 2018 with + 8,2% in volume and 5,4% in value on 31st juillet 2018.
"Confirmant un besoin total de 914 700 hl AP, la filière Cognac a validé, au sein de la Section ODG du BNIC, un rendement annuel Cognac 2018 à hauteur de 14,64 hl AP /ha. Ce chiffre, issu du Business Plan Cognac a été entériné ce jour dans le cadre du Comité Régional INAO. Cette décision collective et unanime répond à la forte demande des marchés et à la croissance des expéditions ... et ... tient compte de la capacité du vignoble affecté par les aléas climatiques et des dernières estimations de récolte de la Station Viticole du BNIC."

Source: http://www.cognac.fr/cognac/_fr/4_pro/index.aspx?page=actualite&id=7505&src=flash

10 TIMES MORE DISTILLERIES IN THE USA IN 10 YEARS

Craft Pot Still Distillery

The number of craft distilleries in the USA is ten times larger in 10 years. This is showing a healthy growth.

Original Title: Number of US craft distilleries rises by 26%

Source: beveragedaily.com

July 18, 2018

In 2016 there were 1,315 active distillers, which rose to 1,589 in 2017, according to figures compiled by the American Craft Spirits Association (ACSA), Park Street Imports, and the IWSR.

A craft spirits producer is defined by the ACSA as one that has not removed from bond more than 750,000 proof gallons; markets itself as craft; is not openly controlled by a large supplier and has no proven violation of the ACSA Code of Ethics.

All about local?

The West boasts the largest number of distilleries (32.7% of total US craft distilleries), but the South - with classic spirits states like Texas, North Carolina and Kentucky - comes a close second (29.3%). The Midwest accounts for 19.1% and the Northeast 18.9%.

California is the state with the most distilleries: a total of 148, which makes up 9.3% of the nation's total. This is followed by New York, Washington, Texas and Colorado.

On average, more than half of a craft spirit producer's US sales come from within its home state (18% at the facility and 34% outside its premises).

"Nearly one-fifth of all sales take place at the production facility, underscoring the importance of tasting rooms and on-site retail to the bottom line,"? says ACSA in its 2017 annual report.

Meanwhile, employment in the craft spirits industry has grown nearly 50%: from 13,239 full time jobs in 2016 to 19,579 jobs in 2017.

The ACSA highlights 2017's 'most game-changing moment' as when Congress passed the Craft Beverage Modernization and Tax Reform Act (CMBTRA) on December 19 as part of the larger Tax Cuts and Jobs Act.

"The significance of the tax vote cannot be overstated, for it is the first time in modern history that the federal government has acted to lower the Federal Excise Tax (FET) on the nation's small craft distillers," ?explains the ACSA.

"The legislative action has helped level the playing field for spirits within the broader craft beverage space, putting distillers on par with breweries and wineries. Prior to the law's enactment, a craft spirits producer had paid 5.4 times more FET than a craft brewer and 16.4 times more FET than a small winery, for equal quantities of beverage alcohol.?

"While it certainly is a time to celebrate, our work is only just beginning. ACSA's priority now is to ensure that Congress votes to make the tax relief permanent."?

The American Craft Spirits Association is a registered non-profit trade group representing the U.S. craft spirits industry.

INVESTMENT ADVISES ON BUYING REMY COINTREAU SHARES

Remy Cointreau logo

Rémy Cointreau (RCO FP): Premium Growth but Premium Valuation

Source: Jefferies International Limited

Edward Mundy, ACA

June 11, 2018

Rating HOLD

Price Target $120.00 (from $105.00)

Price $122.90

Key Takeaway

We like Remy's category exposure (80% cognac) and see upside as the CEO rolls out her vision for the company as a super-premium business. Fundamentals in the Cognac Division remain strong which should support EBIT growth 12-13% in F19. While we like Remy, trading at 33.3x CY19E (vs staples 18.9x), the shares need upgrades to perform. Remain at HOLD.

Attractive category exposure... With 80% of the business cognac, rising further if other brown spirits Metaxa, St Remy, Mount Gay, Islay Spirits are included, Remy offers a highly attractive brown spirits portfolio that is well positioned to capitalise on the spirits premiumisation trend.

...with a vision as a super-premium business... Remy does not have the financial superpower to compete head-on with spirits majors. Instead, the business will borrow from the CEO's experience in luxury goods, relying more on digital and direct to consumer sales than traditional FMCG marketing.

Premiumisation strategy on-track - co is making good progress with the premiumisation model with 53% of the portfolio now over $50 a bottle vs 45% in F15. The move to 60%-65% over the next three to five years should be feasible given that 80% of sales are over $40. Given that it is unlikely that Cointreau can be sold for >$50 a bottle, the conversion of this 27% of the portfolio ($40-$50 a bottle) is likely to take place across cognac (1738), gin (Botanist), Mount Gay (xo) and higher variants of Metaxa.

Margin outlook - positive trends. Given the stronger than expected margin growth in F18, the company has raised its margin guidance to 240-300bps F18-20E. With 130bps captured in F18 (22.0%), this argues for between 50-85bps org margin expansion p.a. F19 and F20. Although the company is investing ahead of growth in A&P, margins should be driven by continued GM expansion given the company's premiumisation strategy.

What are the risks? Key risk for an investment in Remy is concentration risk in cognac & that consumers move away from cognac towards other brown spirits. However, we see an attractive outlook for the cognac industry with scarcity of inventory helping to drive a robust pricing environment.

What's changed? We increase F19 EPS c2% and our price target to $120 (from $105) to reflect the upgrade and the roll-forward of our DCF by one year.

GROWTH OF SALES OF COGNAC FOR THE THIRD YEAR

 

Cognac Sales Image Logo Icon

In 2016-17, and for the third year in a row, cognac export figures showed increases , of 10.2% in volume and 15.2% in value. In total, 190.2 million bottles were exported this year, for a total revenue of 3.0 billion euros.

The NAFTA region was the leading market, with an increase of 9.3% in volume and 13.5% in value, helped by the US market, with an historic 78.7 million bottles shipped during the period.

Source: www.BNIC.com

SALES GROWTH FOR CALVADOS BUT COUNTERFEITING COMES WITH IT

Calvados, Cider and Pommeau

Calvados is suffering counterfeiting as well now with a 7% growth/year. Fake or want-to-be brands are copying or just simply alluding to Calvados to gain consumer attention but this is not fair and fraud really.

Since the 1990 Calvados has enjoyed growth thanks to export in about 100 countries. It might not be the mainstrean spirit but the little protected appellation in Normandy is getting attention all across the world.
No wonder, an original Calvados is delicious and unequalled!

Source: RVI

CRAFT SPIRIT BUSINESS IS LOOKING GOOD IN THE USA

The last time I check just about 4 or 5 years ago there were approximately 250 distilleries in the USA.

Now this week the Spirits Business online news announces 1315 distilleries in the USA.

What happened?

The US craft spirits industry is booming according to The American Craft Spirits Association (ASCA) and the International Wine and Spirits Research (IWSR).

American Craft Spirits Association Logo

Through collaboration these two organizations are currently running a research called the 'Craft Spirits Data Project'.

Main Findings from the Craft Spirits Data Project:

• The U.S. craft spirits industry is growing rapidly. As of August 2016, there were 1,315 craft distillers active in the U.S. The U.S. craft spirits market reached 4.9 million cases and $2.4 billion in retail sales in 2015, growing at a compound annual growth rate (CAGR) of 27.4 percent in volume and 27.9 percent in value between 2010 and 2015. The market share of U.S. craft spirits reached 2.2 percent in volume and 3.0 percent in value in 2015, up from 0.8 percent and 1.1 percent in 2010, respectively.
• Exports offer an additional runway for growth. Exports of U.S. craft spirits reached 523,000 cases in 2015, adding more than 10% of additional volume to U.S. craft distiller total sales.
• Employment and investment are on the rise among craft distillers. In 2016, the industry employed over 12,000 full-time employees (FTEs). Investments by the U.S. craft industry have reached close to $300 million in 2015, which primarily covered the build out of tasting rooms and other visitor experiences, equipment to increase production capacity, and associated labor costs.
• Geographically, the study found the US craft distilling market to be “concentrated”, with the top five states (states containing the highest number of craft distilleries) making up 35.6% of the category: California, New York, Washington, Colorado and Texas.
• The next five states – Oregon, Pennsylvania, North Carolina, Ohio and Florida – comprise an additional 16.5% of the market.

Source: The Spirits Business; Craft Brewing Business

AUSTRALIAN CONSUMERS ARE GETTING INTO COGNAC WITH MARTELL SELLING +10% PER YEAR

Increasing interest for premium spirits in Australia is driving consumer towards cognac. Cognac category in Australia is growing at 10 per cent a year, with Martell reaching 30 per cent market share in Australia.

The two fastest growing products of the 5 SKUs in Australia are Cordon Bleu and Martell XO according to Martell Brand ambassador in Australia.

Cognac Martell - Main Product Range 2012

Martell is also benefiting from a large diaspora of wealthy Asian people who had fled Hong Kong in the 1990s in fear of Hong Kong becoming a Chinese province. Soon to be a 300 years old brand in 2015, Martell is getting organized to celebrate the anniversary.

Martell was established in 1715 and it is the oldest of the 4 big cognac houses, i.e., Remy Martin (Estd. 1724), Hennessy (Estd. 1765), and Courvoisier (Estd. 1835).

Martell is not the oldest house. The oldest cognac house is supposed to be Augier Frères & Co founded in 1643. The Augier Cognac House was acquired by Martel I think in the late 1970s. Martell now and then makes a limited production of Augier cognacs.

Augier Freres XO

Source: The Shout Australia