Rémy Cointreau To “Stay The Course” As Cognac Headwinds Persist

Rémy Cointreau saw organic sales fall 22% in its fiscal first half through September to €636.7 million ($693m) as the Cognac category continues to be under pressure in the U.S. Operating profit was also down on an organic basis, decreasing 43% to €169.1 million ($184m). The company said the declines were largely owing to the challenging market in the U.S., where Impact Databank projects that the Cognac category will slip to just over 6 million cases this year, down from 8.5 million cases in 2021.

Rémy Cointreau’s largest division, Cognac, was hit particularly hard in its first half, seeing a 47.2% decline in sales to €145.3 million ($158m). The company’s Liqueurs & Spirits division was more resilient, seeing a drop of 3.5% on an organic basis to €30.3 million ($33m).

Rémy Cointreau believes the U.S. downturn to be cyclical and not structural. The company points to inflation and the current promotional environment as exacerbating factors in the current struggles, heightened by some Cognac consumers migrating to the Tequila category. In addition, Rémy notes that it operates in the higher-end of the category, with “no entry price point below $50,” making it more susceptible to volume declines when competitors lower prices in the VS segment. Rémy Martin VSOP in particular has been subject to high levels of price pressure from competitors.

Still, the company says it will “maintain a strict and uncompromising pricing strategy,” to buttress brand equity while reducing costs. To combat the downturn, it plans to integrate Rémy Martin VSOP into the wider Rémy Martin advertising plans, while keeping long-term focus on 1738, XO, and Louis XIII. The company has more than 500 activations planned for its fiscal second half.

“Our half-year results were heavily impacted by developments in the U.S. market, which has faced cyclical headwinds including high inventories linked to a sharp normalization of consumption, an unprecedented promotional environment, and rising interest rates,” said CEO Eric Vallat. “Against this backdrop we are staying the course, convinced that our value-driven strategy remains underpinned by favorable medium- and long-term trends.” For its full fiscal year, Rémy is expecting sales to fall 15% to 20%, but says that by the end of the year its U.S. Cognac inventories will be at healthier levels.—Shane English

Tagged : Louis XIII, Remy Cointreau, Remy Martin

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