Cognac is a fast growing category, some say it’s because of the whisky scarcity problem that people are turning to other spirits; so what does it mean for the global market and what does it mean for Singapore and Malaysia?

I think you need to look at this question in reverse. It was actually cognac that was having a massive scarcity problem or more accurately, we had a demand higher than our capacity to produce because we historically have never produced more cognac than we do today.

In terms of scotch whisky, some brands have scarcity but as a category, there’s still lots of availability globally. The reason why Cognac is limited in its production is because of the French appellation d’origine contrôlée (AOC) designation, with production standards including only producing it in region, to meet certain legal requirements. That means by law, there’s a limited surface on which you can plant your vines and that needs approval from the French government and that can take a lot of time. Furthermore, you lose a big portion of your production to the “angel’s share” (Ed’s note: evaporation).

So when you put all of this together as a category, there’s only so much you can produce a single year and you also have to factor in harvest yields, which means that you need to maximise every single drop of cognac that you can produce. The global demand for cognac until recently was soaring and we were running behind in terms of availability.

That said, everything is cyclical; there’s global economic tension today, inflation is playing its role as well and markets are starting to slow down which means that we can bring the equation back to balance.

Has it really slowed for your segment because luxury sector as a whole appears to be growing?

I would say it’s an equilibrium – before we had demand higher than our capacity to produce. Now, we are back to where we can match it. The tension is lower than when everyone was fighting to get a bottle. Now, you can raise your hand and you get allocation. This means we had capacity for Singapore and Malaysia, especially for Singapore, to formulate a new strategy and propose an ambitious plan to reignite Hennessy. The plan was approved and now we are back in the game.

How are you going to reignite Hennessy for our market?

I’m not going to give away my strategy but its about understanding the consumer, seeing the potential and how do you bring your brand back to market and building upon its desirability. It’s about building the brand on our own values, porpoise and platform. It’s not just a question of being available, that’s not how we operate.

The consumer in Singapore has changed a lot over the last two years, influenced by the types of consumers coming into Singapore as the country becomes an important regional hub. It’s a luxury window which opens and shines on the region. We defined consumer targets that are of interest to us and we want to match them with the offer that we will bring through the platforms we have chosen.

Do you think you’re about to face a problem where customers are treating a premium spirit like Hennessy Paradis as a commodity and then it goes into a safe for “value appreciation” and it never gets experienced by the consumers who really want to drink it?

It’s a luxury, it happens sometimes. Probably some bottles of Paradis will go into a collection and not to be consumed, this would your limited editions and these are by design, collectibles; these tick a box and that’s why we produced them, even counting the personalised bottles that are gifted, these represent only a small portion of the business. As a brand, Paradis is mostly purchased to be consumed and the numbers support that. Sometimes I even see the empty bottles myself so I can do the math. I won’t say Paradis runs that risk of becoming a commodity where people invest and wait. It is a cognac and all spirits, unlike wine, does not age, you can buy a bottle, keep it in your cellar for 50 years and 50 years later, it’s still has the same body, consistency and flavour profile. You can buy a wine, store it for 10 years in good condition and find that its value has increased because your wine has evolved. A bottle of Paradis bought today, can still be bought be bought directly from Hennessy in 20 years, and its still the same bottle. [laughs]

So you will never run into a Rolex problem (waitlists, low production coupled with high demand)?

Not for Paradis. There are some offers from Hennessy that will be in that category: La Dame Jeanne, Edition Particuliere, Beaute du siècle Cognac but these are exceptional bottles and I would definitely want it to be a commodity with people investing in them and the values growing 50% in 10 years.

Paradis is obviously very premium but what is your perspective on growing Hennessy’s market share by releasing entry level version of your spirits?

If you look at Hennessy’s releases in the past year, we have never gone below the structure of the family: we don’t have anything that is entry level. Hennessy VS might be considered as our most accessible offer but it is still considered more expensive than most of our big competitors out there. We have never launched anything that would sell below and the reason is pure business savvy. If you have a limited amount of eau de vie, why would you put it in something that will be margin diluted by launching a product that will sell more at a lower price? This means that you will make les money per drop and that’s not how we build our brand; if anything, we build our brand brand by increasing its desirability, justifying the price increases over time, so that we can maximise profitability as we are a publicly listed group and we owe it to the shareholders.

I’m asking because your competitor made such a move and opened up the world of cognac to very young consumers, generating a new market in the process…

Definitely. This is why we are coming back to Singapore. Martell has been alone in this segment for too long and now we are stepping into the ring to give them a fight. Keeping in mind, globally, when you add all our competitors together, they’re still smaller than Hennessy – Singapore is kind of an anomaly for us. I was a bit puzzled how absent Hennessy was in Singapore but that’s about to change. I saw some offers where they were offering Martell VSOP drinkers a free trade up to Nobliege, we would never do that. We know we are in the luxury space and in this segment, there’s no such thing as a “free’ trade up. Mr Arnault is a shareholder and in his definition, a luxury is when the end consumer is willing to pay the full price because he sees the value and he thinks that the desirability of that brand justifies the price. When you go into discounting and sales, it stops being luxury. Rolex has never sold at discount. At Rolex, you literally pay, and then wait and if you get it earlier, you say “thank you”.

Can Hennessy provide better perceived value when it comes to premium cognacs? Was the Paradis Imperiale too ahead of its time?

Cask programs and the uber pieces like La Dame Jeanne and the H8 are available for direct or private sales, these are not available in trade. We have uber pieces like the H8, we released this three or four years ago and it keeps selling, we only produced 200 bottles and they’re selling one by one. We also have the Paradis limited editions created for Lunar new year and collaboration with NBA star Lorenz Baumer and this broadens the brand’s appeal beyond the usual consumers and it allows you to justify the premium price increases because the consumer perceives this as a true luxury brand.

That said, beyond Paradis and Paradis Imperiale, you’re forgetting that our highest offer available to the market is Richard Hennessy and a bottle of that retails for 5000 Euros. That is probably the highest offer you will get from a big branded cognac that is selling on the shelf and not as a limited edition. The demand for Richard is very interesting, the less available you make it, the more people want it. Our approach to Richard is tightly controlled availability so that people understand it is something super special and there’s value behind its very small production numbers each year to justify its price as well.

If you just put a brand on a bottle with a big price tag on the shelf, people will not just go and buy it. They need to be told and they need to go discover it for themselves. This Paradis party is a big moment in Hennessy. It’s not a commercial strategy but a brand building one centred around music and I believe it will be a memorable experience. This is how you need to speak to the consumer, speak to their emotions and then leave an impression that will last three to four years where they associate Hennessy Paradis with that special moment on a Wednesday evening in Singapore.

A few months before you had a Hennessy XO limited edition with Kim Jones, how would you describe this sort of distribution strategy? You probably won’t touch a bottle of Kim Jones because it is beautiful and complete, how is the consumer supposed to react to a limited edition Hennessy and a Paradis?

It’s a different consumer. The Paradis consumer is a hedonist, someone who understands pleasure and the liquid he is drinking. He’s also someone with a high disposable income as well. So Paradis is all about the Hennessy brand and what we bring to luxury cognac storytelling. The XO with Kim Jones is completely different, there’s no overlap perhaps only a small one. The audience is much younger, can or not drink cognac, and we are usually unable to reach them with our normal narrative and story telling of Hennessy XO which is very cognac and lifestyle-centric. The Kim Jones partnership takes you into culture where the brand has a role to play but where we don’t live all the time – a partnership with a powerhouse fashion brand fits that category; this opens us to a public that is more usually into street fashion or haute couture. This is no longer just a limited edition bottle but a true partnership with Kim Jones and there were things that go beyond the limited edition bottle because we also included a masterpiece and the exclusive sneakers. This was a genuine partnership between two brands which truly delivered something special where at the end of the day, one plus one equalled three.

Alicia Keys is involved with Paradis and she connects with a younger audience, contrasted with the gravitas of a serious concerto pianist like Lang Lang for the mature, is this the direction Paradis is going? It’s not an old guys drink, it’s for all ages and all genders.

I don’t see it as an old man’s drink to be honest. You’ll be surprised with the number of women who drink it. It’s one of the most astonishing spirits you will ever taste because you have expectations of cognac. People expect the fire and heat but instead, the you never get that from Paradis – it’s so elegant, so grounded and floral: elegance and complexity without the fire. That makes Paradis exceptional. Having the association with Lang Lang and Alicia Keys makes so much sense.

It sounds like the Paradis something you should only have neat…

I’ll only give you my personal opinion because there’s no such thing as guidelines and at Hennessy we always say that “the right way to drink a cognac is the wrong way, which is your way” – no one should tell you how to drink it. We can inspire people and share amazing ways to have it. Though some of my favourite cocktails are cognac based, I have yet to experience a Paradis cocktail to my liking. The best way to have Paradis is to have it chilled below 3 degrees and you have that with a shot of foie gras. I don’t know what heaven is like, but I’m pretty sure there is a VIP table where this is served. [laughs]

Look, it’s good that some people are rule breakers and ground breakers. Changing the rules or reinventing the rules takes us to new places. The first guy who invented to cocktail was not very welcomed in the beginning, but then we had the Phylloxera crisis which destroyed most of the vineyards leading to cognac becoming very rare and this is when people stopped drinking cognac neat. When the crisis ended, that’s when some people started telling bartenders that it was blasphemy if you mix cognac with anything because it’s so rare. That’s such a shame. Imagine if you can no longer have a true Sazerac. A true Sazerac is made with cognac, what a boring place Earth would be without it.

written by.

Jonathan Ho

Managing Editor
Jonathan Ho might have graduated with a business degree but he thumbed his nose at commerce and instead opted for a harder life in journalism. He edits Augustman, a title he first joined when he became a writer after a career in advertising and now, earns a living writing commentaries on the luxury industry.
Patrick Madendjian, Managing Director for Moët Hennessy Diageo on what makes Paradis an exceptional spirit for iconoclasts
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