Rémy feels impact of Chinese austerity
Rémy Cointreau is feeling the effect of the Chinese slowdown as the spirits group reported a 6.3% sales decline for the six months to 30 September.
Despite “strong momentum” in the US and Europe, Rémy Cointreau saw sales slip from to €558 million from €595m during the same period last year. This was accompanied by a net profit slide of 20%, a marked contrast to its performance in 2012, when the group enjoyed 18% growth.
Within its portfolio, Rémy Martin sales fell by 11.7%, which the company attributed to “the unfavourable situation in the Chinese market for imported spirits.”
It was a happier picture for the group’s other brands, including Cointreau, Metaxa, Mount Gay and Bruichladdich, which are less relient on China and were therefore able to achieve combined growth of 10.2%, thanks primarily to the Americas and “key” European markets.
Rémy Cointreau is not the only drinks group to be affected by the slowdown in China as a result of the austerity measures that followed the country’s change in government at the end of last year.
However, while the group’s flagship Cognac brand Rémy Martin is outstripped in volume terms by rival Hennessy, top expression Louis XIII is the most highly prized imported spirit among Chinese millionaires, according to the Hurun Report Chinese Luxury Consumer Survey 2013. As a result, the brand has proved particularly vulnerable to the government crackdown on lavish spending.
Looking ahead, Rémy Cointreau predicted that “an uncertain economic environment” in Europe combined with “high inventory levels in distribution and poor short-term visibility” in China would create “less favourable” conditions for the second half of the year.
As a result, the company warned: “This situation will adversely affect the full-year current operating profit, which is expected to record a substantial double-digit decline at the end of the financial year, following many years of sustained, steady growth.”
Despite this setback, Rémy Cointreau insisted that it was “resolutely pursuing its strategy of developing its upmarket brands and creating long-term value.” As part of this assurance, the group confirmed that Rémy Martin’s “temporary slowdown” in China would have no impact on the brand’s “strategic and targeted investment in this region.”