The spirit cognac is distilled wine from the Charente area surrounding the city of Cognac, north of Bordeaux. Technically there's no difference between cognac and brandy, although brandy is a wider term since it includes any distilled wine, regardless of grapes. E.g.: Apricot brandy.  

In the 17th century, it was discovered that it was possible to distill the juice of the grapes twice. This produced a beverage that didn't need to be filtered before drinking it - this was a great improvement at the time. The product was also stronger in alcohol, so it was more suitable for export. This product was called eau-de-vie, "water of life". Later on, the producers started storing the beverage in oak casks during transports, and they discovered that this improved the quality of the spirit. After this discovery, they adapted the name cognac. The first cognac producers came from England; Jean Martell started in 1715 and Richard Hennessey in 1765. The first French producer was Remy Martin, 1724

Only spirit that is distilled within the area, and that use the alambic distillation method, can be called cognac. The wines used for cognac usually come from Grande Champagne, south of Cognac, but also the areas Borderies, Fins Bois, Bon Bois and Bois Ordinaries. After the second destillation, the alcoholic content is about 70%. When stored on the oak barrels, a large amount of the cognac evaporates through the wood. This is called "the angel's share". The cognac is stored for at least four years, but usually much longer. 

When the cognac has been stored long enough, the producer blends different types of cognac that he has in order to provide the exact taste he's after. In the blending, water, sugar and and color is added. Usually, the large producers buy finished distillates from smaller growers.

The quality of cognacs is often expressed by the following abbreviations - the further down the list, the better:

  • VO - Very Old
  • VS - Very Superior
  • VSOP - Very Superior Old Pale
  • VSEP - Very Superior Extra Pale
  • XO - Extra Old, often called Napoleon

source: ne.se, le-cognac.com

Co"gnac` (?), n. [F.]

A kind of French brandy, so called from the town of Cognac.

 

© Webster 1913.

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