Breakingviews - Rémy Cointreau tariff fix will leave long hangover
DUBLIN, June 4 (Reuters Breakingviews) - Rémy Cointreau (RCOP.PA), opens new tab requires a stiffer cure for its tariff woes. On Wednesday, the $3 billion cognac maker revealed it had scrapped its 2030 sales guidance, citing trade war uncertainty and weakness in China. The group is cutting costs, but incoming CEO Franck Marilly's best hope will be to spend more to win customers and develop new products, even if it means sacrificing shareholder rewards.
Rémy is not alone in ditching its longer-term sales guidance. In February, $60 billion Guinness-maker Diageo (DGE.L), opens new tab scrapped its 5% to 7% annual revenue growth target, citing uncertainty caused by possible tariffs imposed by the U.S. on Canada and Mexico, while $26 billion Pernod Ricard (PERP.PA), opens new tab also recently cut its sales guidance. Rémy had been promising a 'high single-digit' percent annual growth in revenue between 2025/2026 and 2029/2030, but now is not giving investors any steer.
On the face of it, these goals may have been too ambitious to begin with. In Diageo and Rémy's cases the punchy sales targets were set during the pandemic when spirits were enjoying an unprecedented boost. But in the past two years, inflation, a continued drop-off in drinking in younger consumers and the spectre of tariffs have dampened that trend. And with the U.S. and China, the two largest drink markets in the world, showing increased signs of weakness, analysts now expect Rémy to grow sales by less than 5% each year between 2025 and 2030, Visible Alpha data shows. That's one reason why the company's valuation has shrunk, even if it still enjoys a premium multiple to Diageo and Pernod Ricard.
To recover some of the lost fizz, Marilly needs to make tough choices. The new boss who will take the reins at the end of this month will have to increase spending on marketing to boost new products and gain market share. Back in 2022, the company spent 433 million euros on ad campaigns and promotions, but that figure is expected to be just 286 million euros this year, Visible Alpha data shows. Marilly will also need to cut Rémy's rising debt, which is currently equivalent to 2.4 times trailing EBITDA. To do both, he may need to scrap the company's dividend, expected to be around 80 million euros this year. That might rile shareholders, but if Marilly manages to reverse the rot, they will eventually thank him.
Follow Aimee Donnellan on LinkedIn, opens new tab.
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
2 days ago
- Reuters
Diageo India buys maker of 'Greater Than','Hapusa' gins
June 19 (Reuters) - India's United Spirits ( opens new tab said on Thursday it is buying the maker of popular craft gins 'Greater Than' and 'Hapusa' in a deal valued at 1.3 billion rupees ($15.2 million), including debt, in a bid to boost its premium portfolio. The Indian arm of spirits maker Diageo (DGE.L), opens new tab added that the company, NAO Spirits, has been part of the portfolio of its investment arm, Ventures. NAO was launched in 2017. Its brand 'Greater Than' was India's first craft gin, said United Spirits. The deal comes at a time when rising disposable income among the upper middle class and richer Indians has led to higher demand for more expensive liquor, in tandem with more openness towards casual drinking and experimental offerings. Local and authentic craft-oriented brands are well placed to cater to these trends, said United Spirits. Hapusa, for example, can be priced at more than 3,000 rupees and according to United Spirits, is one of the few craft gins in the world made with foraged Himalayan juniper and other botanicals. Demand for premium liquor helped boost United Spirits' standalone profit in the fourth quarter by 17% to 4.51 billion rupees ($52.72 million). Net sales value in the segment rose faster than overall sales growth.
Reuters
3 days ago
- Reuters
Exclusive: Pernod Ricard launches restructuring plan as spirits sales slide
PARIS/LONDON, June 18 (Reuters) - Pernod Ricard ( opens new tab is streamlining its business by grouping brands into two main divisions, according to internal presentation slides seen by Reuters on Wednesday, as European spirits makers grapple with a downturn in sales. The French spirits maker told Reuters it had announced an "internal project to create a more agile and simplified organisation". "These changes imply the launch of local consultation processes with our social partners and employees where necessary," Pernod Ricard said. It did not comment on the number of jobs affected or the plan to group brands into two units.
The Herald Scotland
5 days ago
- The Herald Scotland
Scotch whisky society reveals investment in Vietnam
The Society, which was established in Edinburgh in 1983, has more than 42,000 members who can access single malt whiskies from a vast collection of casks from distillers around the world based on a direct-to-consumer model, primarily through e-commerce, which generates 90% of its revenue. It has member rooms in Leith, Edinburgh, Glasgow and London, in addition franchises and partner bars in multiple locations across the globe. The investment in Vietnam comes despite a challenging period for the Scotch whisky industry, which has been feeling the impact of geopolitical tensions and economic slowdown in key markets and is now dealing with fresh import tariffs in the US introduced by President Donald Trump. In early April, shortly before Mr Trump announced a sweeping round of reciprocal tariffs on 'Liberation Day', Artisanal reported earnings before interest, tax, depreciation, and amortisation of £1.1 million for the year ended December 21, marginally ahead of forecasts, against a 'backdrop of uncertain economic conditions in some markets', including the US and China. Read more: Since then, major industry players Diageo, Pernod Ricard, and Remy Cointreau – owner of the Bruichladdich Distillery in Islay – have signalled the impact of global uncertainty, including US tariffs, on their financial prospects. Early this month, Remy cited the volatile backdrop as it scrapped a key long-term objective, stating that the 'conditions required to maintain its 2029-2030 targets are no longer in place'. Despite the tough backdrop, there remains excitement within the industry in certain energy markets, including Vietnam. Artisanal said this morning that the launch of its new franchise in the country allows the SMWS to serve members in one of the world's top 10 markets for ultra-premium Scotch whisky, with an estimated total addressable worth $239 million, according to drinks industry research analysts IWSR. Scotch whisky exports to Vietnam were worth £22.7 million in 2024, according to the latest figures from the Scotch Whisky Association, with the equivalent of 2.5 million 70cl bottles shipped to the destination. Andrew Dane, chief executive of Artisanal, said: 'The addition of the new market in Vietnam further expands our footprint in Asia and gives us direct access to one of the top 10 ultra-premium Scotch whisky markets, helping us to capture demand for our unique combination of ultra-premium and limited-edition whiskies and outstanding experiences and knowledge.' Artisanal is not along in recognising the promise of Vietnam. Scotch whisky industry veteran Billy Walker, owner of the GlenAllachie Distillery on Speyside, spoke recently about the potential of the industry in the market. In an interview with The Herald, Mr Walker highlighted the emergence of Vietnam and recovery of Japan as encouraging developments for the distiller as he declared that Asia was the 'fastest-growing' market for GlenAllachie. He said: 'I see Japan, actually, as being quite an exciting market now. It flatlined for a long time but it appears to be in significant recovery mode. I popped into Vietnam, [and] it is going to be a great market.' Asked if his enthusiasm for Vietnam can be explained by growing affluence in the country, Mr Walker said: 'I think that is part of it, for sure. People have got more disposable income. I think they are also more educated and aware of what Scotch whisky is about and the differentials between blended Scotch and single malt, and indeed the varietals within both of these categories.' He added: 'We like to connect with informed, educated, inquisitive, curious customers and see quite a lot of that activity within an emerging market like Vietnam. It won't happen overnight, but it is going to be an exciting development.' Shares in Artisanal were trading up nearly 2.5% at 50p around 1pm.
