PARIS

Annual cognac revenues dropped 13%, hit by a drop in demand for premium ranges of the French brandy and a slump in sales to China, according to industry data shared with Reuters.

After strong growth during the pandemic and a series of hefty price increases amid rising inflation, demand for cognac has been in decline for the past two years.

Extra pressure has come from an anti-dumping probe in China and tariff threats from the United States – the $3 billion industry’s two most important markets.

While the industry, led by LVMH’s Hennessy, Remy Martin and Pernod Ricard’s Martell cognac houses, headed off permanent Chinese import duties via a price pledge this summer, it has so far failed in its bid to escape a general 15% U.S. import levy.

Cognac shipments fell 4.2% by volume to 154.6 million bottles in the year to July 31, while revenues dropped 13.4% to 2.7 billion euros ($3.1 billion), according to the data compiled by France’s BNIC cognac industry body.

The steeper decline in value reflected a shift to younger, entry-level cognac, where shipments rose 2.6%, while the luxury VSOP and XO categories fell 11.3% and 12.9% respectively.

Exports to China plunged 24.4%, mainly hit by Beijing’s anti-dumping investigation, which took full effect from October when provisional duties were imposed. The BNIC said it was too early to tell whether a deal in July that suspended the duties for most cognac makers would reverse the trend.

North American revenues fell 4.6% despite a slight increase in volumes shipped to the U.S. as producers shifted to lower-priced bottles.

European revenues fell 11%.

Shipments to other countries rose 19.9% by volume as producers sought to reduce their reliance on the U.S. and China. But these markets remained relatively small, accounting for 17.5 million bottles exported in the period.