After over a century of producing Cognac for major players, one family is hoping to revive the category with their own fresh take on the storied French brandy.
Launched this month, Martingale Cognac comes from Guillaume Thomas, an 18-year Pernod Ricard veteran and his cousin Amaury Thomas, who together represent the fourth-generation custodians of one of the most prominent domaines in the cognac appellation. Andrew Weir, whose resume includes stints at Pernod Ricard, William Grant & Sons, and most recently as business development for Casa Lumbre, joins as co-founder and chief commercial and marketing officer.
The new brand represents a small crop of entrants into a traditional spirit dominated by major Cognac houses. Earlier today, the largest Black-owned distillery, Uncle Nearest, announced the purchase of a historic property with vineyards comprising 40% of one of the six distinct growth areas in the Cognac appellation. A former vice president of marketing for Patrón, Adrian Parker, will take the helm as president of this new venture, the name of which is yet to be revealed.
But Martingale and other new brands are entering into a category built on brand loyalty and troubled by downward sales trends. To make a mark, they’ll have to convert the spirit-curious into Cognac fans and appeal to a new generation of drinkers.
Small Appellation, Major Players
Nearly 100% of the Cognac market in the U.S. is dominated by a few players: Hennessy, Rémy Martin, Courvoisier, Martell, and D’Ussé, with Hennessy alone accounting for more than 55% of share.
With the exception of Jay-Z’s D’Ussé, the major Cognacs are legacy brands that have been disincentivized to take risks because their businesses were thriving, according to Thomas. Their dominance has left little room for smaller producers to find space in the market— Cognac has a tightly regulated, small appellation, meaning much of the harvest was accounted for.
“The Cognac category has enjoyed such growth, particularly over the last 25 years, so that most of the production of the Cognac category was going to the largest brands and the traditional products that they market,” he said. “In other words, there was no supply available to innovate.”
Thomas would know: his family produces cognac for Hennessey and Rémy Martin. By having its own aging inventory, the new brand has a leg up on new competitors. But as that product has aged, Cognac has been through some ups and downs.
Pandemic Hangover
Like it did for other high-end spirits, the pandemic accelerated Cognac’s growth trajectory: the category sold 9.28 million cases in 2022 compared to 4.15 million in 2012 according to the category’s trade group, the Bureau National Interprofessionnel du Cognac (BNIC).
But since mid-last year, Cognac sales growth has been falling: Moët Hennessy announced double-digit Q3 revenue declines for cognac and spirits today, and Rémy Martin’s Cognac sales dipped by 44.7% in its first FY quarter. The cognac sector has recorded a 15% fall in sales volumes over the past 12 months, the BNIC reported in May.
The BNIC and leaders of major brands have cited logistical challenges, inflation, excess stocks and price increases decided by a number of independent distributors, plus high comparables.
“Sometimes the term normalization when you do a financial communication is a word that you use to kind of disguise real problems,” siad Thomas, whose last Pernod Ricard role was as a CFO of North America for eight years. “My belief is that it is actually truly normalization because the category grew so much.”
For the category at large, the BNIC described that the strategy to “win back American consumers” now focuses on the visibility and desirability of Cognac, as well as on logistics and distribution in order to rebalance stocks.
While other luxury spirits sales are also experiencing declines, Cognac’s additional problem could also be that it’s feeling the squeeze from fast-rising premium plus agave spirits and whiskies. That’s why Martingale is positioning itself to recruit from categories, like mezcal and Scotch whisky, that appeal to adventurous spirit connoisseurs. Building on Thomas’s family story and Weir’s experience pushing Scotch into the mainstream, the team aims to bring spirit enthusiasts into the cognac fold offering a “fresher” production style of the spirit and a digital-first campaign.
A Mindset, Not Demographic
Weir, who hails from Scotland, made his first foray into beverage alcohol pushing Scotch whisky for 14 years. He’ll now be selling Cognac following a similar blueprint, targeting consumers and influencers who have a mindset for trying new spirits over any specific cultural or age demographic.
“In the past, we’ve had a lot of success with whisky and in finding pockets of people who just love to be the first person to try something new and go and tell their friends about it,” he said.
Their strategy differs from other Cognac brands that are continuing to build on the spirit’s affiliation with hip hop and R&B stars. Rémy Martin’s recent campaign with Usher seemed aimed at younger drinkers by offering an NFT and roller skating pop-ups with the superstar. The brand has also recently targeted demographics beyond cognac’s African-American fan base through a chef and mixologist-driven Sobremesa campaign which celebrates a post-dining Hispanic tradition, a Lunar New Year campaign, and women-led campaigns featuring figures like Serena Williams.
In top markets like China and global travel retail, branded boutiques or “stores within stores” selling exclusively Louis XIII and Rémy Martin in luxury malls and duty free have allowed the company to develop more customized experiences, tailor made offers, and an omni channel experience, which Nicolas Beckers, CEO of the Americas for Rémy Cointreau, laments isn’t possible in the U.S. due to the three tier system.
“We would support modernization of some of the existing rules and help the retail tier to have luxury platforms for our brands,” he said.
Meanwhile, Uncle Nearest has only teased a portion of the marketing strategy behind its new venture, with more to come in 2024. The new president will be flanked by Brielle Caruso, chief marketing officer for Uncle Nearest and a former Hennessy Cognac brand director.
“Our brand strategy pivots from the norm,” said CEO Fawn Weaver in a press release. “We are unveiling a short film first at several film festivals, then launching the brand.”
The draw for Martingale may be the first branded consumer product from a family that’s collaborated with the major cognac houses, but is producing a style that’s more aromatic and fresh, versus the traditional rich cognac flavors.
“Cognac brands do fantastic work marketing,” said Thomas. “But the lifestyle is very old-school, very French luxury.”
The Scotch whisky industry has been able to market whiskies in a way that’s more about education advocacy, explaining the product, creating experiences and talking about flavors, he said, which the team aims to emulate.
The company is hiring two brand ambassadors to start in both New York and Los Angeles, with their “number one rule to get out there and infiltrate these groups of spirit-curious consumers, whether it’s an office happy hour, or an event, or a club, or a space like SoHo House,” said Weir.
On-premise isn’t a priority, as the bottle priced upwards of $100 is targeted for e-commerce and retail sales through its distributor, Republic National Distributing Company. Marketing is going to be “very digital,” with anything from paid social ads, paid search, working with influencers and collaborating with e-commerce partners.
The new venture is funded by the Thomas family and by “a pretty interesting and diverse host of investors ranging from the music industry to people in finance and people who work in our business,” said Weir.