Remy Cointreau in trouble because of the United States
Sales down to -22.2%, profit collapses by 46%: the problem is the unsold cognac
Sales decreased by -22.2% on an organic basis, due to the continuous and strong destocking in the United States and operating profit of 169.1 million Euros, which fell by 43% on an organic level. These two not-so-brilliant figures from the 2023-2024 half-year period are enough to understand the concerns that are hanging over Remy Cointreau, the cognac producer Remy Martin and the liqueur Cointreau.
In the first six months of the year, sales fell to 636.7 million Euros from 867.1 million a year earlier. Sales have fallen since The high levels of unsold stocks in the United States have become the fundamental problem for the French company: on the other hand the United States and China are the two key markets of the group, at least as far as cognac is concerned.
Now Remy Cointreau aims to close the year with a level of stocks "solid" in the United States, but it is not clear when this trend will start to move. Ceo Eric Vallat also said that the group still has about five months of stocks in the United States. Although demand is improving, it is not clear when sales from wholesalers to retailers will resume. "The objective is that to close the year with solid stocks", Vallat has restated, adding that the company ago account to have approximately three or four months of total stocks.
Sales in the United States have fallen as retailers and wholesalers try to dispose of high stocks after Remy’s post-pandemic boom. But while some rivals are heavily discounting their low-end products, Remy is not going to cut the prices of his cheaper cognacs. At least according to Vallat who, however, also confirmed that some promotions are planned. In China, the ad points out that sales are increasing "very quickly": but, he adds, from Remy cognac the company expects a sharp reduction in stocks in the third quarter, before a recovery in the fourth.
"Our half-year results -Vallat explained- were strongly influenced by the U.S. market, which is facing cyclical headwinds: high levels of stocks linked to a strong normalization of consumption, unprecedented promotional intensity and rising interest rates. In this context, we remain on course, convinced that our value strategy continues to be guided by favourable trends in the medium and long term".
"For this reason -adds the ceo- we decided to implement cost reduction measures to mitigate short-term effects. Although visibility in the coming months is still limited, we are adopting a longer-term vision, focusing on desirable brands of three hundred years with a unique heritage. Today we are fully determined to pursue our roadmap by implementing our four strategic priorities and we are confident that we can achieve our medium-term goals for 2029-30".
In more detail, sales of the Cognac Division decreased by 30,1% on an organic basis with a drop in volumes of 39%. The recurrent operating profit of the segment fell 47,2% on an organic basis to 145.3 million Euros, resulting in an organic deterioration of the recurrent operating margin of 11.5 points to 34,9%. " This performance -reiterates the company’s statement- reflects, on the one hand, the significant decline in sales in North America, where the group is aiming at a reduction in inventory levels and is facing a normalization of consumption in a context of greater promotions, and, on the other hand, a solid dynamic in the rest of the world".
Regarding the field of liqueurs and distillates, it has recorded stable sales (+0,1%) on organic base included a decrease of the volumes of the -6,5%. The profit on recurring activities was 30,3 million Euros, down by 3,5% on an organic basis: the operating margin on ordinary activities was 14,7% (down by 0.5% on an organic basis). "The division -continues the note- benefited from a strong acceleration in sales in the second quarter (+12.1% in organic terms) in the wake of the strong recovery expected in the United States. At the same time, the rest of the world continued to enjoy a good momentum".
Of the cost reduction plan of 100 million Euros announced in october, Remy said it has reached 25 million Euros so far. As confirmed by the ceo, Remy reiterated his predictions for the entire year, stating that the United States will not see sales growth before the next financial year.
EFA News - European Food Agency