Analysis - Remy Cointreau adds Edrington loss to damage report
Edrington's deal with Remy ended in March
Interim CEO François Hériard Dubreuil has said he's looking to the new fiscal year “with confidence” and remains fully expectant of a return to growth. But, Remy's well-known problems with declining Cognac sales in China is not the only headwind the company is facing.
Last June, just-drinks was the first to confirm that Famous Grouse and The Macallan owner Edrington was to end its US distribution deal with Remy and take operations in-house.
A few days later, Nomura's Ian Shackleton estimated Remy was in line to lose EUR1.5m in profits from the termination, which took place on 31 March.
In a note this week, however, Shackleton appears to have revised his estimate - the analyst now believes the damage will be EUR14m. It is, Shackleton flags, “a significant profits loss”.
There is an upside for Remy, as it can now focus on US sales for its own Scotch brands. The greatest beneficiary will be Bruichladdich, the small Scotch company Remy acquired in 2012. It has since gone on a global expansion project that has required 24-hour shifts at its Islay production site.
But, Bruichladdich labels do not yet have the same penetration as Edrington's, especially in the US where The Macallan, according to CEO Ian Curle in a just-drinks interview last year, is “the brand that gives us permission”.
This loss for Remy, coupled with the on-going situation in China that, according to Shackleton, won't stabilise until at least next year, looks set to shroud the company's future in uncertainty. As Dubreuil said in a call with analysts: “We have an uncertain crystal ball.”
They may have talked of confidence this week, but it will be interesting to see how positive Remy's executives sound in 12 months time.
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