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Rémy Cointreau to ramp up marketing efforts in US and China
Rémy Cointreau tried to put a positive slant on its poor first-half results by pointing to plans to increase marketing investment in the US and China, the two biggest markets for Cognac.
Together the US and China account for some 70% of Rémy Cointreau’s revenues.
Chief executive Eric Vallat said the programme would begin to support peak sales periods and “we can look forward to the future with confidence” as the company presses ahead with its cost-cutting programme designed to save €50 million a year.
That programme is underway and contributed to operating profit falling less than some analysts feared in the six months to the end of September.
Vallat said, however, that the US recovery would be “very slow”, while market conditions in China were worsening due to the ‘anti-dumping’ tariffs on Cognac.
The group predicts that its organic sales will decline between 15% and 18% in the full-year, while operating profit margin will stand between 21% and 22% on an organic basis.
Rémy reported operating profit of €147.3 million for the half year, a like-for-like fall of 17.6% compared with 2023 but not as poor as the 20.6% decline predicted by a consensus of observers.
Despite its travails, Rémy Cointreau has managed to achieve organic sales marginally ahead of those in 2019-20 (before the coronavirus pandemic) despite organic sales of Cognac being 9.1% lower.
Rémy Cointreau’s sales have been badly hit in the US especially as inflation and high interest rates prompted consumers to look for alternatives to Cognac and retailers and wholesalers consequently slashed their stocks and orders.
Heavy discounting
In addition, there has been heavy discounting led by Hennessy which Rémy Cointreau refused to follow in its bid to maintain its margins and quality status.
In China, where it is market leader, Vallat said it had increased its market share despite demand being sluggish.
In both its key markets, however, RémyCointreau faces big headaches from tariff wars.
Beijing has slapped tariffs on its imports of Cognac in retaliation for Brussels raising a tariff wall against Chinese-produced electric vehicles and components.
Rémy said it had” taken note” of the provisional decision by China’s commerce ministry to apply additional duties of 38.1% on Cognac imports from October 11, 2024.
“If this decision is confirmed, the impact would be marginal for the 2024/25 fiscal year and the group would activate its action plan to mitigate the effects from 2025/26,” it said.
Effectively it confirmed that it would not embark on price discounting.
US President-elect Donald Trump’s election promise to slap tariffs of 10% on all imported foreign products would deliver a further blow to Rémy’s American business.
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