Rémy Cointreau surprises with sales figures

Rémy Cointreau has surprised analysts by reporting stronger than expected fourth quarter sales.

In the three months to the end of March at its revenues were just 0.7% below those in the same period last year against expectations of a 3.5% fall.

For the full year its organic sales were €1.19 billion (£1.02 billion), a 19.2% slump from the same period last year.

But following the group’s gloomy profits warning last October, when it predicted that a full recovery would not be achieved until after Christmas this year, the figures show the potential for a speedier return to growth and the shares put on 4%.

Rémy will report its profits for the year later in the spring.

Pandemic

The company pointed out that despite the weak sales figures for the year overall, they were 16% ahead of the final full year before the Covid pandemic (2019-20).

A key factor in the improving figures was “significant growth” in China which helped to drive performance at its Cognac division well above expectations.

Rémy Cointreau leads the market for Cognac in China, where it is the largest category of imported spirits.

Consensus predictions were that Cognac sales would rise by just 0.5% in the quarter but they grew by 15.4%.

That came as a pleasant surprise as both Pernod Ricard and LVMH, the significant competitors in China’s market for Cognac, had both recently reported “soft” sales during the key season of Chinese New Year.

Cognac

Worldwide the group’s sales of Cognac were still 25% below the 2022/23 level and the Chinese market remains marred by youth unemployment and the enormous overhang of a housing market crisis on the economy.

Cognac producers also remain threatened by Beijing’s suggestion that it will impose tariff penalties on all brandy imports from Europe as part of a trade war with the EU.

Rémy, which makes over 70% of its sales from Cognacs such as Rémy Martin, has also been grappling with significant problems in the United States.

U.S. retailers and wholesalers have been limiting their orders of premium and ultra-premium spirits as they seek to contain their own exposure to high interest rates and consumers restructure their purchasing patterns following unprecedented sales during the “revenge hospitality” boom.

As household budgets are squeezed by inflation, drinkers are trading down the price spectrum with many switching back to beer.

US

Rémy said it saw more “major destocking” in the US in final quarter, which was heightened by the continuation of strong promotions from competitors, notably Moet Hennessy.

Rémy has vowed more than once not to be dragged into a discounting spiral, remaining determined to protect its margins and the premium image of its Cognacs.

Overall, full-year sales in the Americas were down 39.6%, but the group achieved 2% growth in the Asia Pacific region and 0.7% in Europe.