In under three weeks, former Shiseido and Chanel executive Franck Marilly will take the hot seat at Rémy Cointreau, joining a business where sales and profits have tumbled over the last 12 months.
Marilly is also taking the helm at a spirits group where Cognac, a category under significant pressure in recent quarters, accounts for around 70% of sales.
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It’s clear the new Rémy Cointreau CEO will have plenty in his in-tray and, while market watchers have a number of questions about the company’s near-term prospects, there are, it’s argued, some fundamental issues about the make-up of the business.
The group’s last financial year, which ran until the end of March, was another tough period for the Rémy Martin Cognac maker.
Net profit decreased 34.4% to €121.2m ($138.4m), or by 36.8% organically. Operating profit was down 27.6% at €211m. The Bruichladdich whisky owner posted an 18% decline in full-year sales to €984.6m.
It was the second successive year when sales and earnings declined. Rémy Cointreau was hit by falling Cognac sales amid a struggling category in the US – one of the two biggest markets for the spirit – and pressures in China, the other principal destination.
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By GlobalDataThe company has sought to point to positive signs for its Cognac business in both markets. In the Americas, fourth-quarter sales “rebounded sharply”, particularly in the US. Rémy Martin, the group added, had gained market share in China despite the “persistently challenging market conditions” in the country.
Marilly will take the reins as CEO as Rémy Cointreau nears the end of the first quarter of its new financial year and the market’s eyes this week were on the company’s thoughts for its 2025/26 fiscal period.
The Cointreau liqueur maker expects sales to return to “mid-single-digit growth on an organic basis”.
It said the recovery would be “driven primarily by a strong technical rebound in sales to the United States” starting in the first quarter.
However, in a sign of the macro uncertainty hanging over Rémy Cointreau’s Cognac business, its guidance for its “current operating profit” came with a caveat. Tensions over tariffs, not just on imports to the US but on EU brandy shipments to China, meant Rémy Cointreau’s projection for current operating profit was for growth “in the high single-digit to low double-digit range” – but “excluding any increase in customs duties in China and the United States”.
At the moment, the company’s “worst-case scenario” is for the potential increase in tariffs to amount to €100m gross.
Alongside the publication of Rémy Cointreau’s full-year profits yesterday, the company became the latest major distiller to withdraw mid-term guidance.
The group removed its objectives for 2030 – drawn up a decade ago – pointing to “the continued lack of macroeconomic visibility”, tensions over tariffs and uncertainty over when the US market would recover.
In February, Diageo pulled its medium-term guidance, citing “macroeconomic and geopolitical uncertainty”. The same month, Pernod Ricard cut its sales forecasts, saying “intense geopolitical uncertainties” were hitting the spirits sector.
Analysts expected the withdrawal of Rémy Cointreau’s guidance and more attention is on the near-term prospects of the company’s Cognac portfolio in the US and China and, more broadly, how tariffs could impact the business.
“Management provided a more nuanced view of US depletions, confirming that while volumes remain mid-single-digit negative, the trend is improving sequentially. Notably, VSOP depletions are nearing flat, supported by tactical pricing actions and smaller formats,” Barclays analyst Laurence Whyatt wrote in a note to clients. He added, however, that outgoing CEO Eric Vallat has “cautioned that it is still too early to declare a full sell-out recovery”.
Across the Pacific in China, market conditions for Cognac are challenging for all brands, even if Rémy Cointreau has been able to eke out some market share gains for part of its portfolio, though, as Bernstein’s Trevor Stirling says, it’s unclear whether that progress has been achieved across the range.
“The Chinese market remains very weak with no near-term upside visible,” Bernstein said yesterday. “However, Rémy has been consistently gaining share in XO, VSOP and e-commerce, though there was no mention of Louis XIII.”
Reflecting on a post-results call between Rémy Cointreau and analysts, Whyatt said the company’s management believes it can use the expected improvement in sales in its new financial year to bolster its position against any changes in tariffs.
“It clarified that the assumed €65m net tariff impact could be mitigated more aggressively than previously guided,” Whyatt said. “Management now believes mitigation could reach 50–60% – up from the 35% initially communicated – if top-line momentum improves. This would reduce the net impact on current operating profit to €25–30m, suggesting a less severe downside scenario than originally feared.”
The need to broaden Rémy Cointreau’s business
It all adds to the impression that Marilly is walking into a pretty tough job. There are attributes of Rémy Cointreau’s business that provide grounds for optimism. Its Cognac portfolio has a more premium bent that a few years ago, while its Liqueurs & Spirits division – home to brands like Bruichladdich, Cointreau and The Botanist gin – has seen its organic sales jump by more than a third over the last five years (even if they fell by 9% in 2024/25).
However, perhaps Marilly’s fundamental task is to make Rémy Cointreau a broader business, one less reliant on Cognac.
“His big challenge is to further de-risk the company, diversify away from Cognac and diversify away from the US and China. Rémy Cointreau is just too dependent on those two countries and on the Cognac category,” one analyst who wished to remain anonymous said.
That, of course, will take time – and require the company to be active in the M&A market.
Last year, Rémy Cointreau set out plans to find €50m in costs during the fiscal period. Rémy Cointreau said yesterday it had extracted €85m over the last 12 months – and €230m over the last two years. It described more than half over those cuts as “structural savings”.
The group’s net debt to EBITDA ratio stands at 2.4 times, providing, the unnamed analyst suggests, some room for manoeuvre. “The balance sheet is not too stretched and doesn’t allow for massive acquisitions but there’s ways around that if needed,” they said. “It is important to make a clear step towards a more diversified structure from a category perspective and geographically.”
Elsewhere in spirits, the likes of Diageo, Pernod Ricard and Campari have either sold assets in recent months, or have signalled more will follow. Those brands, however, have tended to be away from the more upmarket products Rémy Cointreau has tended to reach for in the past.
The conundrum for the new Rémy Cointreau CEO will be finding the right kind of ‘premium’ asset, which more often than not are either small – so may not immediately help in any attempts to diversify – or be pricey.
“It would have to do something with what they call terroir, preferably, with ageing, with a good story behind it,” the analyst says. “That could be in Tequila, that could be in whisk(e)y, where I also would see probably the best fit with the company, probably the best growth opportunities.
“It would make sense to some extent to make perhaps a little bit of a bolder move, because, if you buy smaller brands, it’s going to take a long time before you actually shift the balance a bit towards less Cognac. I know there’s probably less opportunities when you think about bolder moves but it’s definitely something that I think the board should consider.”
Plenty, then, for Rémy Cointreau’s new CEO to mull over as we move through 2025 and beyond.
