How the shortage happened
Too much of a good thing can turn into a bad thing. Hennessy, which is owned by the world’s largest luxury good producer LVMH, has rapidly increased in popularity in recent years. According to Reuters, Hennessy already owns around half of the global Cognac market. Further growth put a strain on how much Cognac the brand has in reserves.
In April, LVMH announced in an earnings report press release that “Hennessy Cognac saw volumes increase significantly which could impact the availability of stocks for the rest of the year.” It grew between 15 to 20 percent over the past three years, mostly on the back of its entry V.S. bottling. In the U.S., more than 80 percent of Hennessy’s sales come from V.S., and those sales increased 30 percent in the measured three year growth period.
All of that made executives at the company realize that, according to reports on the website Cognac, “they can’t go further down in inventory.”
Adding to the strain, climate change has been rough on the Cognac region. Cognac is distilled from Uni Blanc grapes grown in the Cognac region of France. Frosts and hail in April did a number on the vineyards that Hennessy sources from. Climate change is a threat the region has prepared for, but it still impacts production, the vice president of the Bureau National Interprofessionnel du Cognac, Christophe Forget, said in a statement.
This is all happening at a time when Cognac as a whole is more popular than ever outside France. More than 98 percent of Cognac is exported, according to the BNIC, and 2017 had the highest volume and value of export ever. More than 40 percent of those exports went to North America, so when things scale back, it’s highly noticeable in the U.S.
What Hennessy is doing to fix this
There’s both good news and bad news here. The bad is that there’s no quick fix, because even Hennessy’s youngest Cognac is aged between 2 and 8 years. The good news is that Hennessy is well positioned to bounce back in the near future.
In October, the chairman and CEO of LVMH, Bernard Arnault, announced that the company “will try to boost the product for which we have the greatest demand to satisfy,” adding that he’s “certain that in a year or two we can do it.”
Hennessy will be planting more vines in areas that are under utilized in order to meet demand. The new vineyards will take up to six years to start producing usable grapes, but Hennessy CEO Bernard Peillon stated that Hennessy could release more of its reserve stocks if they know it’s going to be replaced by product from the new vineyards, according to Reuters.
What Hennessy lovers can drink now
First off, buy all the Hennessy you can find, because it might not be easy to snag until late 2019 or 2020. If you have the capital for it, you can buy some of the more expensive bottles of Hennessy like the V.S.O.P., the X.O. and Hennessy Black.
You can also branch out to other affordable Cognac brands using our list of the best Cognacs under $55.