Controlling half of all cognac production, Hennessy can no longer produce enough of its fine brown liquor. Record revenues in the first quarter of 2017 for Hennessy owners LVMH Möet Hennessy Louis Vuitton (LVMH) prompted the company to warn investors of a possible shortage by the end of the year. Reports by Pilot Online, Forbes, and Super Call were used as references for this article.

Big announcement

LVMH made the following statement in a press release containing their first-quarter earnings on April 10, 2017, "Hennessy cognac saw volumes increase significantly which could impact the availability of stocks for the rest of the year." The first quarter yielded massive Revenue increases in Asia (20 percent) and Europe (14 percent), and though revenue increases in the United States were lower at nine percent, the shortage has had the greatest impact in the States, with sales skyrocketing.

The shortage ended up materializing during the third quarter, during which multiple areas of the country were already affected.

Shortage causes

Thanks to the massive online trends, such as Harvey J's #HennyChallenge, their popularity has sharply risen in the past three years and the product hit record sales in 2016. Much of this rise in popularity is attributed to a growing number of icons in popular culture being associated with freely promoting the brand. With large revenue increases highlighting lofty demand of the cognac, LVMH simply cannot produce enough. Further impacting production is climate change in the Cognac region of France, the area in which the Uni Blanc grapes, which are distilled to make the cognac, are grown.

Areas in the US began noting shortages as early as May 2017, only a month following LVMH's press release. The most jarring report of a shortage instance was later in the beginning of October, in which there were only 10 remaining 750mL bottles of Hennessy available for purchase in the entire city of Philadelphia. Around this time, there was only one single bottle in all of Delaware County.

Bartenders and liquor store owners have been attempting to deal with this situation by suggesting alternatives and hiking up costs, but increasingly have to disappoint customers.

Replenishing stock

According to Forbes, Hennessy would need to increase its shipments by 14 percent to meet demands. Hennessy can fill some shortage through its reserves, but long-term solutions are needed and those will not be quick to implement.

For one, cognac needs at least two years of aging. According to the industry trade body, better farming and expanding vineyards can only increase supply three to four percent per year, while still taking into consideration the hindering weather conditions that have disturbed production in recent years.

Bernard Arnault, the CEO of LVMH, announced in October plans to boost the supply of cognac and expressed certainty it can be done in a year or two, mainly through vineyard expansion. Until then, Hennessy lovers will have to stock up on what remaining bottles they can find, try alternative brands, and wait for their beloved brown liquid to regularly return to the shelves in a few years.
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