Rémy Cointreau sees US Cognac sales rebound despite global headwinds

Rémy Cointreau has reported a sharp recovery in US Cognac sales for the first quarter, lifting its shares in Paris. But challenges remain in China and Europe, with trade tensions and leadership change looming. A glimmer of hope in Rémy Cointreau’s sales for the first three months of this year. It says US sales of Cognac “rebounded sharply” and its shares rose by almost 2% in Paris this morning. That, of course, reflects a disastrous period in the same quarter last year and was in sharp contrast to the group’s fourth quarter fall in overall sales. Group sales fell 19%, compared with analysts' predictions of a 17.9% decline.

Chinese market pressure continues to weigh on performance

Cognac accounts for about 70% of overall sales, and it is also facing difficult times in China, where, as the leading seller, the Rémy Martin brand has been hard hit by China’s import deposit scheme and the effective closing of the duty-free market. That is the result of being an innocent victim of the trade dispute between Brussels and Beijing over electric cars and components. China set up a review of whether European brandies (effectively Cognac) were being imported on unfair terms. That has been paused but remains a heavy threat to the category especially as there are reports of widespread faking of leading brands by Chinese gangs.

Cost-saving strategy and margin discipline show early results

While Rémy Cointreau has stuck steadfastly to protecting its margins and refusing to apply heavy discounts in the US market (as opposed to LVMH’s Hennessy stable), it says its action plan for the cheapest version of Rémy Martin Cognac, the most popular in the US, was having a positive impact. Last year the company launched a €50 million (US$57 million) cost saving programme to protect margins. As a result of the latest figures, Rémy Cointreau has left unchanged its annual and longer-term guidance up to 2029-30. It expects to resume progress towards high single-digit sales growth from its next financial year onwards.

Trade tensions and counterfeiting pose long-term threats

Despite the US sales improvement, Cognac could still be the victim of the trade war between Washington and Brussels. President Trump has threatened 50% tariffs, which have been stalled for 90 days. That said, some analysts believe that even with the difficulties in its two largest markets, Rémy Cointreau may have reached the bottom of its decline over the past two years. One said that these early signs of recovery "could have legs" if the consumer environment in the U.S. does not deteriorate further.

CEO departure adds uncertainty amid fragile recovery

A further hurdle to be overcome is the replacement of CEO Eric Vallat, who has resigned and will leave the company in the summer.