Rémy Martin sales plummet after China crackdown

Rémy Cointreau has seen a double-digit decline in sales for its Rémy Martin Cognac as a result of China’s crackdown on luxury spending, but insists the hurdle is a “temporary slowdown”.

The Chinese government’s crack down on conspicuous spending has seen Remy Martin suffer double digit loss

A 10.4% decline in organic net sales for Rémy Martin in the first half of the French drinks group’s financial year is being blamed on a slowdown of premium Cognacs in China.

Sales of the brand, which has achieved momentum in the US and Europe in the six months to 30 September 2013, in fact declined by 8.3% in the second quarter.

The slowdown significantly impacted the group’s overall organic sales for the period, which were down 3.6% to €558 billion, compared to the 13.3% increase achieved in the same period in 2012.

Rémy Cointreau however claims the decline “does not in any way detract from the brand’s fundamentals (and) did not constrain Rémy Martin’s strategic and targeted investment in this region.”

The group said in a statement: “In the third quarter, Rémy Martin is expected to remain adversely affected by certain measures taken in China and by the level of retail inventories.  Nevertheless, the group remains confident in the brand’s exceptional fundamentals in Asia, and in its long-term development in China.”

It claims some movement in the exchange rate of foreign currencies against the Euro also negatively impacted sales by 2.7%.

The group’s liqueurs and spirits division however recorded organic growth of 10.2%, with triple sec Cointreau delivering “good growth” in the US, Latin America and key European markets such as the UK and France.

While Metaxa continued its growth in Greece and Eastern Europe, Mount Gay rum has benefitted from the roll-out of its new range in the US, its primary market.

Bruichladdich, the single malt Scotch whisky purchased by Rémy Cointreau in September 2012, continued its introduction to the group’s network following the termination of its distribution deals with Blavod Wines & Spirits and Gordon & MacPhail in July to bring its supply network in-house.

“As a result of sustaining its targeted investment, pursuing a policy of innovation, continuing to expand its distribution network and maintaining strict cost control, the group is confident in the ability of its value creation strategy in order to return to steady growth,” the statement summarised.

Rémy Cointreau saw sales soar to €1.19bn in the year to 31 March 2013, although its spirits and liqueurs division shrank by 10.8% to €239.1m.