Remy moves into new era
Having overseen an impressive corporate turnaround at Remy-Cointreau, Dominique Heriard Dubreuil is stepping aside as chairman. Chris Brook-Carter examines the changes Heriard Dubreuil has made during her tenure and what kind of shape she leaves the group in going forward.
Last week, the French wines and spirits group Remy Cointreau announced a significant overhaul of its management structure, the latest step in one of the drinks industry's most successful corporate turnarounds in recent years.
At the end of the 1990s, Remy Cointreau was at the forefront of a handful of international drinks groups hit particularly hard by the crash in the Asian "tiger" economies. Costs were spiralling and profitability tumbling. When current chairman, Dominique Heriard Dubreuil, took hold of the reins in January 1998, a significant turnaround of the group's financial performance was needed.
Within a matter of three years, a tough and unsentimental approach to the business saw a strategy that has quelled fears that Remy's downward spiral was terminal and returned the company's leading brands to levels of significant growth.
The latest chapter in this rescue act will see Dubreuil move aside to become executive chairman. Although she will maintain a role in investor relations and strategy, the day-to-day reins as chief executive will be handed over to Jean-Marie Laborde.
Dubreuil said: "Rémy Cointreau is embarking upon a new phase in its development. By adopting this new structure, the group will ensure that it retains dynamic management and that it is well placed to face new challenges."
Dubreuil can move on with her head held high. Part of the family that owns a controlling stake in the business, she has overseen a period in which Remy has returned to profitability, by reducing debt and cutting costs, as well as refocusing investment and effort behind key brands.
Although the company's most recent results were disappointing - profits for the year to March were down 25% at €76.3m (US$94.5m) - the fall was precipitated by events almost entirely out of the company's control, including the outbreak of war in Iraq and the spread of the SARS virus in a difficult first half.
More encouraging however was the outlook for 2004-2005. Dominique Hériard Dubreuil said at the time: "The trends are positive for the beginning of the financial year with double-digit sales growth. A number of marketing initiatives currently being undertaken support our determination, on a like-for-like basis, to deliver double-digit organic growth in EBIT."
And the market seemed none to concerned by what should prove to be a blip in a recent trend of steadily improving results. French broker CAI Cheuvreux recently upped its rating on Remy's shares to 'outperform' from 'underperform'. It argued that foreign exchange effects have been clearly outlined by the management and are now priced in, adding that the group's strategy remains focused and key brands look set to register good growth in Asia and the Americas.
Certainly results prior to March 2004 bear that out. "In the year ended 31 March 2003, Rémy Cointreau saw its net sales decline by 1.9% to €1,000.2m. However, on a like-for-like basis this represented an increase of 5.1%, and the company expressed satisfaction at its ability to react to market changes against an unfavourable and difficult economic background," said Natasha Cazin, alcohol analyst with research group Euromonitor.
"In unfavourable market conditions, sustained margins, a maintained pricing policy and the optimisation of the company's distribution network enabled all its operations to achieve a satisfactory performance, " Cazin continued. "The group's refocus on key brands/markets enabled it to meet the challenges of an uncertain and increasingly competitive global environment."
This focus on a number of key, profitable brands has included the sale of assets deemed to be of less strategic importance. "Remy's divestment of wine businesses of marginal importance to group performance have freed up resources for its more profitable product lines. Broadly, it is feasible that by disposing of its marginal wine brands the company has strengthened its surviving wine brands," said Cazin.
She continued: "Whilst wine business disposals may have meant lost opportunities for the company's presence in a growth market, such disposals are more likely to prove fortuitous for the value enhancements to the company's core champagne brands, Charles Heidsieck and Piper-Heidsieck."
But the company has also acquired wisely, the most significant example of which is Bols, which it bought in 2001. Remy now plans to spend around €25m a year promoting Bols on its way to making it a top-15 global spirit brand by 2006.
"The Bols acquisition significantly expanded Rémy Cointreau's portfolio and underpinned its geographic expansion, particularly in Eastern Europe, where Bols vodka gave the company a strong presence in the important Polish market" said Cazin.
She added: "Rémy Cointreau's success in vodka will largely be dependent on the success of the geographic expansion of its Bols vodka brand."
But perhaps the defining feature of Dubreuil's tenure, and Remy's recovery, has been the savvy development of its distribution channels. Remy has conducted an aggressive and selective policy of partnerships and alliances designed to reduce selling costs and achieve a complete portfolio of well-known and complementary brands.
Its worldwide distribution network Maxxium, with JBB, Highland Distillers and Sweden's V&S has made a significant impact on the French group's recovery.
"The Maxxium Worldwide distribution joint venture is likely to leverage Rémy Cointreau's regional presence in its existing markets and facilitate entry in new markets at lower costs," said Cazin.
However, the company has refused to be compromised by this success and has remained surprisingly flexible in terms of distribution, seeking out the best options in individual markets.
"It is clear from recent developments that Remy Cointreau does not intend to be totally reliant on the development of the Maxxium distribution arrangement, particularly in areas where the company believes it can negotiate a better deal," said the drinks analyst, Canadean, in its most recent company report on Remy.
"September 2003's announcement of an agreement to distribute Bols vodka throughout the entire Russian Federation via Cristall, a Russian spirits producer, demonstrates clearly that Remy Cointreau is prepared to capitalise on local or regional opportunities," it added.
It has been this pragmatic attitude to joint ventures, cost-cutting, disposals and acquisitions that has helped turn Remy round. And with projected fast growth in the brandy and Cognac sectors and rising disposable income among consumers, particularly in developing markets, there should be ample opportunity for the company to maintain its march forward.
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