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Swedish“Highest End Cognac Sales” from Rémy Martin Drive Overall Sales Increase in First Quarter 2019/2020 at Rémy Cointreau.
Rémy Cointreau (RC) announced its financial results last week for its first quarter for the period of April-June 2019. Overall revenues were €223.2 million in the first quarter, leading an organic revenue increase of 3.3% from the comparable quarter of April -June 2018. Revenues at RC were negatively impacted by a decrease of 2.6% in the groups liquor and spirits business.
It was the House of Rémy Martin revenues that were the standout again. Rémy Martin Cognac sales grew 5.5% in the first quarter from the comparable first quarter of 2018/2019, led by prices increases on its high end Cognac products.
Over 90% of Rémy Martin global cognac sales are derived from Grand Champagne Cognacs and an even higher percentage of revenues are attributable to their aged cognacs like Rémy Martin V.S.O.P., 1738 Accord Royal and X.O. Excellence. In contrast, Rémy Martin’s main competitor and world’s largest Cognac House, Hennessy derives its revenues evenly among V.S., V.S.O.P and X.O. cognacs. The American market accounts for the bulk of the Hennessy V.S. sales and older cognacs are sold predominately in China and the rest of Asia.
RC noted that their “the VSOP quality has proved resilient to the significant price increases that occurred at the beginning of the year”. Rémy Martin is a producer of Fine and Grand Champagne Cognacs and generally does not compete at the V.S. designation, choosing instead to utilize its Petit and Grande Champagne eaux-de-vie to make longer-aged cognacs like 1738 Accord Royal, its V.S.O.P., XO Excellence and Louis XIII cognacs. Rémy Martin also produces the ultra-upscale cognac, Louis XIII.
RC indicated that the Cognac sales growth occurred in the first quarter despite the “unfavorable impact of the price increases, particularly in the United States”, but added “Trends remain favorable for the House’s highest-end qualities, particularly in South East Asian Countries, Japan and Africa.”
The increased focus on higher-end Cognacs and marketing those Cognacs in Asia seems to have insulated the group from any price push back on its Cognacs in the United States. Rémy Martin’s high-end strategy is paying off as sales and profits are increasing. Cognac sales in China in recent years had fallen off as the country cracked down on conspicuous consumption. Rémy Cointreau has noted, however, that the situation appears to be changing as its Chinese sales have picked up sharply.
During the first quarter Rémy Martin also opened Cognac airport popups at the Hangzhou Airport in China and at the Hong Kong International Airport.
RC is also the owner of Rémy Martin Cognacs, Cointreau, Metaxa, Mount Gay Rum, St. Rémy French brandy and Progressive Hebridean Distillers.
Forward Guidance
Rémy Cointreau indicated that its first quarter results were in line with expectation and projected an expected acceleration of growth in the second quarter based on the first quarter performance.
