Remy Cointreau Braces for China's Worsening Market

As the global economy grapples with uncertainty, Remy Cointreau, the French spirits group, is bracing for a challenging 2024/25 fiscal year, with China's market conditions worsening. The company expects an organic sales decline at the lower end of its guidance range, reflecting the tougher environment in the Asia-Pacific region, particularly in China.



Remy Cointreau's sales in the first nine months of 2024-25 were down -17.8% on an organic basis, with a sharp contraction in the Americas and a decline in APAC, reflecting tougher market conditions in China. The company's cost-cutting plan and pricing strategy aim to protect its profitability and investment capacity in the face of declining sales and potential tariffs.

The company's cost-cutting plan, estimated at around €100 million in savings for the 2023-24 fiscal year, includes selectively reducing marketing and communications spend and significantly reducing other operating costs. Remy Cointreau has also maintained a firm pricing policy to protect its gross margin and maintain profitability despite inflationary pressures and destocking.

Remy Cointreau's CEO, Eric Vallat, has stated that the company would be able to handle a 10% tariff on foreign goods, mainly via cost cuts, if imposed by incoming US President Donald Trump. This demonstrates the company's commitment to protecting its profitability and investment capacity in the face of potential tariffs.



However, the company is concerned about the potential impact of the 38.1% additional duties on cognac imports from China, which could be confirmed in the 2024/25 fiscal year. Remy Cointreau has an action plan to mitigate the effects from 2025/26 onwards, likely including price rises.

In conclusion, Remy Cointreau is facing a challenging market environment, particularly in China, which is expected to result in a full-year sales decline at the lower end of its guidance range. The company's cost-cutting plan and pricing strategy aim to protect its profitability and investment capacity in the face of declining sales and potential tariffs. However, the company is concerned about the potential impact of additional duties on cognac imports from China and has an action plan to mitigate the effects in the following years. Investors should monitor the situation closely and consider the potential risks and opportunities that may arise.