Cognac Contrasts: U.S. Rebound vs. China Slump – Remy Cointreau’s Strategic Crossroads

In early 2025, Rémy Cointreau, the French luxury spirits giant, highlighted starkly divergent performances in its two key markets: a sharp rebound in U.S. cognac sales contrasted with a steep decline in China. While the U.S. market stabilized after years of volatility, China’s struggles with tariffs, supply chain disruptions, and shifting consumer behavior underscore the complexity of global luxury goods demand. This article dissects the drivers behind these trends, evaluates Rémy Cointreau’s strategic responses, and assesses the implications for investors.

The U.S. Recovery: Favorable Bases and Brand Resilience

Rémy Cointreau’s Q4 2024-25 (Jan–Mar 2025) results showed a dramatic turnaround in the U.S. cognac market, with sales rebounding due to a “favorable base of comparison” and improved volume depletions. The flagship Rémy Martin VSOP stabilized after an action plan targeting inventory corrections and distributor rebalancing. Sequential improvements in sales to retailers signaled a return to equilibrium after years of destocking, which had dragged annual Americas sales down by 20.2% in fiscal 2024-25.

The rebound was bolstered by strong performances in liqueurs and spirits, including brands like Cointreau and The Botanist, which grew 17.7% reported in the quarter. Analysts, including Jefferies, noted this recovery “could have legs” if consumer confidence holds, though lingering risks like U.S. tariffs and interest rates remain.

China’s Cognac Decline: Tariffs, Timing, and Trade-offs

In contrast, China’s cognac market faced a 32.8% organic sales decline in Q4 2024-25, driven by:
1. A high base of comparison from 2023 sales.
2. The abrupt closure of duty-free channels (a key distribution route) starting December 2024.
3. A negative calendar effect from the timing of Chinese New Year.
4. Broader economic pressures and cautious distributor behavior.

Despite these headwinds, Rémy Martin maintained market share gains and recorded a slight uptick in depletions during the New Year period through e-commerce channels like T-Mall and JD.com. However, the imposition of 38.1% provisional tariffs on cognac imports by China in October .2024 threatens future growth, with mitigation efforts delayed until fiscal 2025-26.

Strategic Adjustments and Mitigation Plans

To navigate these challenges, Rémy Cointreau implemented a €50 million cost-reduction plan, protecting its Current Operating Margin (COP) at 21–22% organically—a key target. The company also framed 2024-25 as a transition year, expecting destocking in the Americas to conclude by early 2026. Beyond 2025-26, management reaffirmed its long-term goals: high single-digit annual sales growth and a 33% COP margin by 2029-30.

The Liqueurs & Spirits division emerged as a bright spot, growing 16.1% organically in Q4, driven by demand for premium brands like Cointreau in both China and the U.S. This resilience offers a partial offset to cognac’s struggles.

Risks and Uncertainties

1. Trade Tensions: China’s tariffs and U.S. retaliatory measures (including a 10% minimum tariff on EU goods) could disrupt supply chains and pricing.
2. Economic Volatility: Elevated interest rates and inflation in the U.S. may curb luxury spending, while China’s economic recovery remains uneven.
3. Geopolitical Risks: Ongoing negotiations between the EU and U.S. over tariffs add uncertainty to Rémy Cointreau’s transatlantic operations.

Conclusion: A Volatile Path to Long-Term Growth

Rémy Cointreau’s early 2025 results paint a mixed picture. The U.S. rebound and cost discipline offer hope for margin stability, while China’s struggles and tariffs demand strategic agility. With a ~18% organic sales decline in fiscal 2024-25 and a 21.9% drop in Cognac sales, the company must navigate these challenges to reignite growth.

Investors should monitor:
- Stock Performance: RCO.PA’s recovery hinges on whether the U.S. rebound and Liqueurs division gains outweigh China’s headwinds.
- Tariff Mitigation: The effectiveness of Rémy Cointreau’s planned strategies to offset China’s 38.1% duties.
- Margin Targets: Achievement of the 21–22% COP margin and progress toward the 33% long-term goal.

While risks remain elevated, Rémy Cointreau’s focus on premium branding and cost controls positions it to capitalize on rebounding demand if macroeconomic conditions stabilize. For now, the path to long-term growth remains narrow but navigable.

Data as of fiscal 2024-25 (April 2024–March 2025).