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Cognac Market Update
State of the Cognac Market
A broad view of what’s going on in the Cognac region and the global Cognac market as 2025 reaches its end.
Bonjour,
Hope you’re well! We wanted to write out a thorough, easy-to-digest update on what’s happening in Cognac right now. The region and industry are facing a perfect storm of challenges, some you’ve probably heard about, others that are newer or more nuanced. I’ll try here to break down the key issues, placing particular focus on the latest developments around tariffs, overproduction, market shifts, and the broader economic headwinds.
The China Situation: Tariffs, Minimum Prices, and a Bumpy Road Back
Let’s start with China, since it’s been a major source of anxiety for Cognac houses over the past 18 months. As you know, China is a massive market for Cognac; by value, it’s number one, and by volume, it’s just behind the U.S. In 2023, China imported about $1.7 billion worth of French brandy, almost all of it Cognac.
But things got rocky pretty quickly. In early 2024, China launched an anti-dumping investigation into EU brandy imports, widely seen as retaliation for the EU’s probe into Chinese electric vehicles. By October, provisional tariffs hit Cognac, and by July 2025, China made those tariffs official: a whopping 32.2% duty on EU brandy, set to last five years.
Here’s the twist: The three big Cognac players—LVMH (Hennessy), Rémy Cointreau (Rémy Martin), and Pernod Ricard (Martell)—managed to negotiate a partial reprieve. They’re exempt from the new tariffs, but only if they sell at or above a minimum price. This “minimum price commitment” regime is less punishing than the full anti-dumping tax, but it’s still a step down from the open access they enjoyed before 2024. The BNIC (Cognac’s trade body) is calling it a “degraded situation,” so it’s not as bad as it could be, but definitely not business as usual.
What’s the impact? Even with the exemption, Cognac’s access to China is restricted. The minimum price means less flexibility on promotions and pricing, and smaller producers who didn’t get the deal are stuck with the full 32.2% tariff. The result: Cognac exports to China have plummeted and are down 65% in just four months earlier this year, with the value of shipments falling by over 10% in 2024 alone. The BNIC estimates the industry has been losing €50–60 million per month in China since the tariffs hit.
Travel retail is another casualty. Cognac has been locked out of China’s duty-free market since December 2024, which is a big deal. Travel retail accounts for nearly 20% of Cognac’s Chinese sales. There’s no sign yet of when, or if, that channel will reopen.
Bottom line: The big houses are still in the game, but on tougher terms, and the rest of the sector is hurting. The industry is pushing hard for a full political resolution, but for now, China is a much less reliable growth engine than it was just a couple of years ago.
U.S. Tariffs: A Moving Target and Persistent Uncertainty
If China is Cognac’s most valuable market, the U.S. is its largest by volume, and it’s not exactly smooth sailing there either. The U.S. tariff landscape has been a rollercoaster, with threats, delays, and last-minute deals keeping everyone on edge.
Here’s the current lay of the land:
- Standard import duties for Cognac are technically “free,” but that only covers customs duties. There’s still a federal excise tax of $13.50 per proof gallon (which equates to roughly $2 per 700ml bottle of Cognac at 40% alcohol), which is a fixed cost for importers.
- In April 2025, the U.S. announced a global 10% tariff on European goods, with a 20% rate for the EU. This was postponed, then reinstated, then delayed again. As of August 7, 2025, a 15% reciprocal tariff is in effect for EU alcohol imports, including Cognac.
- There have been repeated threats of much higher tariffs—up to 50% or even 200%—as part of broader U.S.-EU trade disputes (think steel, aluminum, and digital services taxes). These threats haven’t materialized yet, but the uncertainty alone is enough to spook importers and disrupt long-term planning.
What does this mean for Cognac? The constant back-and-forth makes it very challenging for producers and distributors to plan ahead. Even when tariffs are delayed or reduced, the threat of a sudden hike forces everyone to build in a “risk premium” : higher prices, more cautious inventory management, and less willingness to invest in marketing or new launches.
The impact on sales is real. U.S. imports of Cognac have dropped sharply since their 2022 peak ($2.1 billion), falling to $1.2 billion in both 2023 and 2024, with 2025 shaping up to be even worse. The French wine and spirits exporters group (FEVS) expects at least a 20% sales decline in the U.S. market. Entry-level and mid-range Cognacs (VS and VSOP) are especially vulnerable, since they’re more price-sensitive than the luxury segment. And let’s be clear that the US market is primarily a VS and VSOP market, with older qualities still relatively niche.
Recent developments: In late July 2025, the U.S. and EU struck a deal to cap the threatened tariff at 15%, down from the 30% that had been floated earlier. Industry groups are hopeful this will pave the way for a return to “zero-for-zero” tariffs, but nothing is guaranteed. The political climate is volatile, and trade policy can change overnight. And let’s face it, the current administration’s tone towards Europe has been rather frosty of late.
In short: The U.S. market is still open, but it’s a high-stress environment. The uncertainty is almost as damaging as the tariffs themselves, and many are bracing and holding in place.
The Russian Market: Gone, and Not Coming Back Soon
Russia used to be a solid, if not massive, market for Cognac, especially for certain brands and segments. That’s changed dramatically since 2022, when the Russian war led to sanctions and most major Cognac houses to pull out of Russia entirely.
What’s happened since?
- Imports of French Cognac to Russia have collapsed. In 2023, France supplied just 7.4% of Russia’s imported Cognac, down from much higher levels in previous years. Armenia and Georgia have stepped in to fill the gap (for brandy imports, not Cognac), and Russian producers are ramping up domestic brandy production.
- Overall, Russia’s alcohol market is shrinking. In early 2025, total alcohol sales (excluding beer and cider) dropped by 12.2% year-over-year, with Cognac sales falling sharply. Vodka and other spirits are also down, thanks to tax hikes, anti-drinking campaigns, and a shift toward lower-alcohol beverages.
- Parallel imports and re-exports are muddying the waters. Some Cognac still finds its way into Russia via third countries, but it’s a shadow of what it used to be, and the premium segment has been hit hardest.
The upshot: For Cognac producers, Russia is basically a lost market for now. The impact is most acute for those who had a strong presence there, but the ripple effects are felt throughout the region, especially among smaller houses and suppliers who relied on Russian orders to balance their books.
Overproduction: Too Many Grapes, Too Much Cognac, Not Enough Buyers
Here’s where things get really tricky. For years, Cognac was riding high: booming sales in the U.S. and China, the wave of premiumization, and a global thirst for luxury spirits. Producers were responded by planting more vineyards, expanding chai (warehouse) capacity, and investing in new facilities, many of whom took out loans to do so. The region’s vineyard area ballooned to nearly 90,000 hectares, with 14,600 hectares of new plantings authorized between 2016 and 2024.
But then the music stopped. Sales started to slide in 2023, and the decline accelerated in 2024 and 2025. Suddenly, the region found itself with too much stock, too many grapes, and not enough demand to soak it all up.
Vineyard Plantings and the “Plan d’Arrachage” (Vine Pull-Out Plan)
To address the glut, the BNIC and French authorities have rolled out a “plan d’arrachage, ”a voluntary, temporary vine pull-out scheme. Here’s how it works:
- Growers can uproot part of their vineyards at their own expense, with no public subsidies. In return, they’re allowed to increase yields on their remaining parcels (up to 12 hectoliters of pure alcohol per hectare, compared to the legal limit of 8.64 hl/ha for 2024–2025).
- The plan is designed to help growers cut costs (fewer parcels to maintain) while keeping their overall production steady. It’s also meant to “neutralize” surplus volumes that have no commercial outlet, so they don’t flood other wine markets and depress prices further.
- The right to replant is preserved for five years, with negotiations underway to extend that to 8–11 years. The idea is to give growers flexibility to ramp back up if and when demand returns.
How big is the pull-out? The BNIC is considering a temporary reduction of 7,000–10,000 hectares (about 10% of the region), with a permanent uprooting of 3,500 hectares also on the table. Compensation is being discussed, with growers seeking €10,000–15,000 per hectare.
Chai Renovations and Storage Bottlenecks
Another headache: all those new chai (aging warehouses) built during the boom years are now underutilized. Worse, new regulations (post-Lubrizol fire) have made it much harder and more expensive to build or expand storage facilities. Projects are stalled, banks are reluctant to finance them, and the region is left with a mismatch between capacity and actual needs.
The new rules require:
- No internal retention for warehouses under 300 m² (contrary to local best practices).
- Full containment of fire-extinguishing water in external basins, which is often impractical or cost-prohibitive.
This has led to dozens of construction projects being blocked, with knock-on effects for the whole supply chain. The chai bottleneck is especially problematic during a downturn, when producers need flexibility to manage fluctuating stocks.
Yield Reductions and Stock Management
To prevent a market crash, the BNIC has slashed the authorized yield for Cognac production:
- 2022: 14.73 hl/ha (the boom year)
- 2023: 10.5 hl/ha
- 2024: 8.64 hl/ha
- 2025: 7.65 hl/ha (lowest since 2009)
This is a dramatic cut, down more than 40% from 2020 to 2025. The goal is to bring supply back in line with demand, but it’s a tough pill for growers, many of whom are struggling to cover their fixed costs. There’s real fear that some farms will go under, especially those who expanded aggressively during the boom.
The region also has built up “climatic reserves” : holding back surplus eau-de-vie in good years to buffer against future shortfalls. It’s a smart move, but it doesn’t solve the immediate problem of too much stock and not enough buyers.
Overproduction: Too Many Grapes, Too Much Cognac, Not Enough Buyers
Let’s talk marketing. For years, the big Cognac houses have leaned heavily on celebrity partnerships—think NBA deals, hip-hop stars, and glitzy collaborations with athletes and musicians. Hennessy’s partnership with LeBron James is just the latest example, not too mention the Bad Bunny partnership announced just one month later. Bold marketing moves or rather massive hail mary’s?
But there’s growing concern that this strategy has gone too far. The New York Times recently called out the sector’s “excessive reliance” on star endorsements, arguing that it’s become a distraction from what really matters: the product itself. The criticism is that while celebrity campaigns can move bottles in the short term, they don’t build lasting loyalty. In fact, they risk making the brand feel inauthentic or out of touch, especially if the celebrity gets caught up in scandal or the partnership feels forced.
Recent campaigns have backfired. The LeBron James “retirement” stunt, which turned out to be a teaser for a limited-edition Hennessy, was widely panned as “cringe” and “embarrassing.” The sense is that the big brands are running out of fresh ideas and are doubling down on glitz instead of substance.
Some producers are pushing back. They’re focusing on education, authenticity, and product storytelling, rebuilding the category “glass by glass, bar by bar, home by home.” The hope is that a more genuine, transparent approach will reconnect with consumers who are overwhelmed by endless limited editions and celebrity tie-ins. So let’s say a pivot toward savoir-faire, family tradition and heritage, and the artisanal quality found all over the region - and that no other region can boast.
On this very subject celebrity partnerships, we reached out to a few close producers to get their perspective. Their words are found just below.
Cognac Expert
What do you think of the trend among major brands to rely on celebrities? In 2025, does that help or does it blur Cognac’s image? Is it time for the big houses to instead take the path of authenticity, craftsmanship, terroir, transparency, and so on?
It’s the market that will regulate this trend, and I think the market right now is indeed demanding authenticity and real added value. But I’m not sure the big brands can succeed in that challenge, because authenticity cannot be bought. So here lies an opportunity for small independents like us, who work on products over time and with a focus on quality.
– Alice Burnez (Cognac Prunier)
The big houses are relying more and more on celebrities, which always brings visibility. That fits their international strategy and the strength of their brands, and it makes sense for their model, but the impact may be a little different than before. It gets people talking, that’s certain, but it’s not necessarily what all consumers are looking for today. On our side at Seguinot, we naturally move forward differently. Our strength is our Grande Champagne terroir, our family history, our vineyards, and our way of working. We feel that today there is a real audience that wants to understand, meet, and live a more direct relationship with producers. Both approaches coexist, but ours expresses itself differently, with more closeness and authenticity.
– Philippe Seguinot (Cognac Seguinot)
Broader Economic Challenges and the Global Cognac Slowdown
All of these issues—tariffs, overproduction, marketing missteps—are playing out against a backdrop of broader economic headwinds.
Global Sales Trends
- Cognac sales are down across the board. LVMH (Hennessy) reported a 12% drop in spirits sales for the first nine months of 2025, with Cognac singled out as the main culprit. Pernod Ricard (Martell) and Rémy Cointreau (Rémy Martin) have seen similar declines. Martell’s sales in China plunged 25% in H1 2025, and Rémy Martin’s Cognac division is down nearly 19%.
- The value of Cognac exports fell by over 10% in 2024, even as volume held steady or ticked up slightly. The reason? A shift toward younger, cheaper Cognacs (VS and VSOP) and away from high-end XO and collector editions, especially in China.
- Premiumization is still a thing, but consumers are more selective. Inflation and economic uncertainty have made shoppers more price-conscious, with many trading down to “affordable luxuries” instead of splurging on top-shelf bottles.
Currency and Pricing Pressures
- The euro has strengthened against the dollar in 2025, making Cognac more expensive in the U.S. and squeezing margins for exporters. A bottle priced at €50 that once landed in the U.S. at $55 now costs $60, simply because of exchange rate shifts. Producers face a tough choice each month: keep euro prices steady and risk losing American buyers to higher shelf prices, or cut their euro price to maintain competitiveness abroad and sacrifice margins at home. Pricing decisions are now a monthly headache, with companies having to rebalance their strategies every time the exchange rate shifts. The impact of these currency pressures, together with the tariff, cannot be understated, particularly in the USA.
- Input costs are up across the board—glass, cork, barrels, energy, and compliance with new environmental regulations. Producers have responded by raising prices, but there’s a limit to how much the market will bear, especially in a downturn.
Supply Chain and Cost Pressures
- Inflation is still biting, especially in mature markets like the U.S. and Europe. While overall consumer spending is holding up better than feared, there’s a clear shift toward value and smaller bottle sizes where available.
- Production costs are rising, and smaller producers are feeling the pinch.
Local Economic and Social Impacts
- The Cognac industry is a huge employer in the Charente region; up to 70,000 jobs depend on it, directly or indirectly. The current crisis has already led to layoffs, canceled contracts, and a general sense of unease. Some distilleries and cooperages are on short-time work, and hundreds of temporary workers have lost their jobs.
- The ripple effects are being felt throughout the local economy: real estate, construction, tourism, and all the ancillary businesses that support the Cognac ecosystem. There’s real concern that if the downturn drags on, some small domaines and suppliers won’t survive.
Shifts in Consumer Preferences and the Search for New Markets
It’s not all doom and gloom. There are some bright spots and opportunities on the horizon.
- France is rediscovering Cognac. There’s a “pendulum swing” as young, curious, and educated French consumers embrace Cognac as part of a gastronomic, terroir-driven experience. Festivals and events are drawing big crowds, and there’s hope that the domestic market can pick up some of the slack from China and the U.S. though it won’t be a quick fix.
- Emerging markets are showing promise. Southeast Asia, India, and parts of Africa are embracing Cognac, especially in cocktails and as a status symbol. Growth in these regions won’t replace the losses in China or the U.S. overnight, but they offer a path to diversification.
- Travel retail outside China is recovering, and there’s renewed interest in Cognac-based cocktails and mixology, especially among younger drinkers.
How the Major Houses Are Responding
The big three—LVMH (Hennessy), Rémy Cointreau (Rémy Martin), and Pernod Ricard (Martell)—are all feeling the pain, but each is taking a slightly different approach:
- LVMH: Focused on cost control, innovation, and maintaining brand desirability. They’re betting on a rebound once trade tensions ease, but for now, Cognac is the weakest link in their portfolio.
- Rémy Cointreau: Tightening costs, reaffirming long-term strategy, and looking to Southeast Asia for growth. They’re also investing in sustainability and direct-to-consumer channels.
- Pernod Ricard: Pivoting to innovation (new grape varietals, eco-certification), focusing on emerging markets, and managing through the China slump. U.S. sales are stable, but China remains a challenge.
All three are lobbying hard for political solutions to the tariff disputes and are investing in new product launches, collaborations, and digital marketing to keep their brands top-of-mind.
The Road Ahead: Risks, Opportunities, and What to Watch
Risks:
- Prolonged trade tensions with China and the U.S. could lock Cognac out of its two biggest markets for years.
- Overproduction and high stock levels could force prices down, especially if the global economy slows further.
- Over-reliance on celebrity marketing could backfire, especially if consumers crave authenticity and transparency.
- Rising costs and regulatory hurdles could squeeze margins, especially for smaller producers.
Opportunities:
- Diversifying into new markets (India, Southeast Asia, Africa) and new segments (cocktails, younger consumers).
- Leaning into sustainability, innovation, and digital experiences to differentiate brands.
- Reconnecting with domestic and European consumers through education, storytelling, and tourism.
- Using the current crisis as a chance to reset, right-size the industry, and build a more resilient future.
Additional Producer Perspective
Cognac Expert
Do you have any thoughts or reflections on the current challenges Cognac is facing (tariffs in China and the United States, the Russian market almost disappearing, overproduction in Charente, sluggish sales, competition from other spirits, changing consumer behaviors, etc.)?
All these points are really important and very current, and it’s above all the synergistic combination that is complicated. I think the eventual resilience of the small players (merchants, distillers, or winegrowers) will come from diversification. But it remains complicated and costly to launch a new product.
– Alice Burnez (Cognac Prunier)
It’s true that the sector is going through a particular period. Between customs tensions in China, uncertainty in the United States, the disappearance of the Russian market, and overproduction in Charente, the environment is more unstable than a few years ago. Volumes are declining and the entire sector has to deal with this reality. At the same time, consumer behavior is evolving: people want more meaning, origin, and transparency. And competition from other spirits has never been so strong. This profoundly changes the way we talk about Cognac and what is expected of it.
– Philippe Seguinot (Cognac Seguinot)
Alice Burnez (left) and Claire Burnez
Gérard Seguinot and Philippe Seguinot (right)
Cognac Expert
With the general slowdown in sales, how are you adapting on a daily basis?
On our side, we have had to review all expenses and make strategic choices. We reworked the presentation and blends of the Prunier range to strengthen our appeal and distinctiveness. We also completely redesigned the packaging of Calvados Ménorval and Armagnac Sauval. Finally, last month we relaunched a Pineau Prunier with new packaging and a new blend. This still reflects a desire for momentum and investment, despite the context.
– Alice Burnez (Cognac Prunier)
Like everyone, we feel the current slowdown. But that doesn’t stop us from continuing to move forward. We remain focused on the quality of our eaux-de-vie, on the consistency of our stocks, and on relationships with our partners, trying to work over the long term and stay true to our identity. Being an independent, family-run house also allows us to be agile: less heavy structure, more ability to adjust. And we continue to develop new projects and new launches, always in this spirit: sobriety, elegance, mastery, and a constant link with our vineyards. This allows us to move forward without deviating from what defines our line.
– Philippe Seguinot (Cognac Seguinot)
Cognac Expert
What opportunities or positive points do you see for the future of Cognac?
It’s hard to say, but I hope this crisis will at least eliminate all the superfluous or even harmful aspects, such as certain constraints in the specifications, certain BNIC bodies, certain rules on new construction of aging cellars, etc… in order to make the sector more productive and more competitive internationally.
– Alice Burnez (Cognac Prunier)
Despite the context, I remain rather optimistic. Cognac retains a strong identity, a terroir unique in the world, and a know-how that many envy us. As consumers increasingly seek origin and sincerity, I think family houses like ours have a real card to play. We see growing interest in very old eaux-de-vie, in small-batch cuvées, and in a more direct relationship with producers. This is a field that suits us perfectly. Cognac has here a huge card to play, and will no doubt help refocus the sector on the essentials.
– Philippe Seguinot (Cognac Seguinot)
After thirty years of crisis (1975–2005), the most daring managed to get through, not without difficulty. But we must admit that these periods of crisis are more beneficial for the future, with minds becoming creative again, combative, and true producers finally recognizing themselves and expressing their know‑how.
Crises have always allowed intelligence to prevail over mere instruction. Periods of idleness prepare us for what lies ahead… I believe courage and know‑how still have their place—though not without difficulty—but what joy when efforts are rewarded.
Every problem has its solution; one must remain creative, and the bright days of Cognac will return.
– Jean Pierre Grateaud (Vignoble Grateaud)
The image shows Taylor together with Jean Pierre Grateaud while we were visiting the producer in 2024.
Final Thoughts
It’s a tough moment for Cognac, no question about it. The combination of trade wars, overproduction, shifting consumer habits, and economic uncertainty has created a limbo land where everyone is waiting for the next shoe to drop. But the region has weathered storms before, and there’s a strong sense of solidarity and adaptability among producers, growers, and négociants.
The key will be staying agile, monitoring policy shifts, managing stocks carefully, and being ready to pivot to new markets and new strategies as the landscape evolves. If the industry can balance tradition with innovation, and authenticity with smart marketing, there’s every reason to believe Cognac will come out the other side stronger.
Even in the face of these recent challenges, there is real cause for optimism in Cognac. Many small producers—the very artisans we have always championed at Cognac Expert—are finally seeing their voices heard. Their terroir, their generations of tremendous know‑how, their family traditions, and their broader story of Cognac are resonating more than ever. As consumers begin to look beyond the heavily branded big houses, they will discover the authenticity and richness they seek in the hundreds of small producers across the region.
This is precisely why we continue to push and promote such producers: they are the fabric of Cognac, and we remain steadfast in our fight to support them and we hope you will join us in that effort as well.
