Remy Cointreau faces slump in first quarter sales

Remy Cointreau reported a steeper-than-expected first-quarter sales drop on Wednesday, with its troubles in the United States now encompassing the liqueurs and spirits division and its Asian operations beginning to falter. The maker of Remy Martin cognac and Cointreau liqueur had organic sales slide 15.6 per cent in the quarter, beating the 13.6 per cent fall analysts forecasted. The company left its full-year guidance unchanged.

Remy had already said the first half would be tough, as it still struggles with weak demand in the United States and a slowing economy in China — two of its key markets for cognac. Cognac makes up around 70 per cent of Remy's sales. Although a 12.2 per cent organic sales decline at the cognac division was better than analysts expected, the liqueurs and spirits business saw a 20.4 per cent organic sales drop, more than twice what analysts had predicted.

The entire spirits industry is seeing a significant slowdown in sales following a post-pandemic surge when consumers, flush with cash, indulged in high-end liquor and producers raised prices. However, Remy has been hit harder in the United States, where cognac has seen poor demand, than elsewhere. Retailers and wholesalers have reduced stock, and rivals are engaged in heavy promotional activity.

These trends continued to press heavily on the cognac business of Remy and more firmly than in the last quarter on its liqueurs and spirits division. The unit houses brands such as Cointreau, The Botanist gin and Bruichladdich whisky.

This was also affected by European sales being significantly down owing to high inflation and heavy promotions by rivals, reduced demand in Southeast Asia, and a whisky destocking in China.

At the group level, Remy referred to the Chinese market as "sluggish." Although cognac sales were surprisingly brisk during the fourth quarter of last year, executives warned that this may not last. More broadly, sales in the Asia Pacific region edged down.

The outlook for Remy Cointreau is increasingly difficult, with sales falling more precipitously than expected, driven by a mix of specific market and sector dynamics. How well it navigates these challenges will be important in stabilising operations worldwide and sustaining investors' confidence.