Remy Cointreau sees drinkers’ taste for premium cognac driving profits

The logo of Remy Cointreau SA is pictured at their headquarters in Paris, France, January 21, 2019. REUTERS/Benoit Tessier

PARIS, Jan 25 (Reuters) – Remy Cointreau (RCOP.PA)is confident that demand for its premium cognac in China, the United States and Europe will underpin profit growth this year after the French spirits group beat third-quarter sales forecasts.

The pandemic has boosted Remy Cointreau’s drive towards higher-priced spirits to boost profit margins long term, accelerating a consumer shift towards premium drinks, at-home consumption, cocktails and e-commerce.

Group sales for the three months to Dec. 31 came in at 440.5 million euros ($498.1 million), an organic rise of 21%, beating a company-compiled consensus from 18 analysts for a 15.1% increase.

Sales at the Remy Martin cognac division, which makes 90% of group profits, rose 19.4% to 332.7 million euros, also above analysts’ estimates of 14.9%.

“Remy’s beat sets the tone for solid spirits earnings season. We expect low-to-mid-single-digit consensus upgrades,” Citi analysts said in a note.

The consensus currently forecasts full year 2021-22 organic current operating profit growth of 38%.

By 0702 GMT, Remy shares were up 0.7% at 192.40 euros.

For the Chinese New Year that starts on Feb.1, Remy Cointreau said it was “cautiously optimistic considering COVID restrictions which will lead to market share gains.”

“This wording suggests the market could be impacted by lockdowns, however Remy is confident it will outperform,” Credit Suisse analysts wrote.

The company said the third-quarter performance reflected “remarkable” sales growth in China led by demand for its Club cognac and strong e-commerce sales during the Singles’ Day online shopping bonanza.

Cognac demand in the United States also remained strong in the third quarter, with high-end brands such as Louis XIII cognac that sells for more than $2000 a bottle, Remy Martin XO and 1738 Accor Royal outperforming.

For the 2021/22 full year, Remy Cointreau kept a forecast of “very strong” organic growth in current operating profit and strong organic sales growth, and reiterated it was confident in its ability to outperform the premium spirits market.

Due to higher marketing and communication spending and a tougher comparison base in the second half, full-year profits will be driven solely by first-half growth, the group reiterated.

The French company’s fiscal year starts on April 1 and ends on March 31.

($1 = 0.8843 euros)

Reporting by Dominique Vidalon; Editing by Sudip Kar-Gupta, Shounak Dasgupta and Jane Merriman

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