China security boost drives Travel Retail woes - Remy Cointreau
Remy Cointreau has blamed pressure in Travel Retail on factors including currency fluctuations and Chinese border security
Remy Cointreau's CFO has said stricter border controls helped drive down Travel Retail sales this year as the channel failed to match strong growth elsewhere for the company.
Luca Marotta told analysts yesterday that Travel Retail "remained very weak" in Remy's latest first-half results despite solid gains across other regions, particularly the US and China. The CFO said currency fluctuations and the political environment were behind the weakness, on top of increased security at Chinese borders dampening demand for "expensive purchases".
Marotta explained: "Controls, not only Chinese borders, have become more and more strict," Marotta said. "And because there are lot of travellers they spend less. And when we are in a dramatic and global environment, which is shaking, you have less time."
A number of spirits producers have reported pressures on Travel Retail this year, including Brown-Forman, which has blamed "a reduction in the historic price gap between Travel Retail and the local economy" for sales declines. Last month, Pernod Ricard's CFO, Gilles Bogaert, forecast a tough 2017 to add to a difficult 2016 for global Travel Retail.
Remy's Travel Retail problems were one of the few dark spots in an otherwise bright H1, in which sales increased by 4%, well ahead of analysts' expectations. However, Marotta warned that his company's buoyant Q2, which drove the first-half figures, should not be taken as reflective of the rest of the year.
Remy also performed better than expected in China, but Marotta said the real surprise was in Russia.
"Strangely enough, in Russia, we are overperforming on the entry level and in very superior level," he said. "So, outperforming in the extreme clusters and underperforming on the centre one."
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