HEALTHY COGNAC SALES MAKE GOOD RESULTS FOR REMY COINTREAU

Remy Cointreau logo

Source: Jefferies International Limited

Edward Mundy

September 27, 2018

We expect a continued strong performance in the Cognac division (c.80% profits) and expect 2QE group org sales +9.0% (vs 1Q 5.9%). We like Remy's category exposure and see upside as the CEO rolls out her vision for the co as a super-premium business. While we like Remy, trading at 29.9x cal 2019 PE, shares need upgrades to perform. We remain at HOLD.

What's new? Remy reports 1H sales on 17 October. We expect 1H org sales +7.6% with 2Q +9.0% vs 1Q 5.9%. The drivers of the acceleration in 2Q, we believe, are continued robust cognac demand (we model 2Q cognac org sales +12% vs 1Q +11.1%) with benefit of easier comps, as well as some positive impact from technical effects in Partner Brands. For full details of our expectations, refer to detail within this report.

Cognac (67% sales / 81% profits) - likely to remain robust. We model 1H cognac org growth +11.6% with 2Q +12% vs 1Q +11.1%. Within this, we expect US and Europe to be a bit stronger vs 1Q. Whilst Asia depletions (sell-out) momentum is likely to be unchanged vs 1Q (vols solid DD, sales strong DD), we believe shipments (sell-in) will be more normalised. In 1Q, China cognac shipments ran modestly ahead of depletions with some inventory replenishment after the strong CNY; we expect shipments to match depletions in 2Q.

MORE COGNAC SOLD IN USA IN 2018 THAN EVER

Cognac Economy is Up

Source: ShankenDailyNews

Cognac is enjoying a renaissance. Last year global volumes increased by a robust 5.5% to 15.4 million cases, with the U.S. at the forefront, accounting for nearly 40% of total consumption. After crossing the 6-million-case mark on 9.7% growth in 2017, Cognac has now expanded its U.S. volume by nearly 2 million cases in just the past three years. With demand skyrocketing—particularly for the VS segment—keeping adequate supply in the pipeline is now the major concern.

Hennessy continues to drive the market in the U.S., averaging an annual increase of 12.9% over the past five years. In 2017, the brand increased 7.4% to just under 4 million cases, and might have risen higher if not for its supply constraints.

Still, Hennessy is now nearly twice as large as it was in 2012, when it depleted 2.16 million cases. “Hennessy has plans for growth across all our qualities in the coming years; however, we do need to continue to manage our growth and supply carefully,” says Giles Woodyer, senior vice president for Hennessy at Moët Hennessy USA. “We’re continuously improving and building our supply development efforts including expanded relationships with growers, new plantations, and strategic investments such as our recent considerable investment in our packaging and logistics site, Pont Neuf, which opened last year.”

This new 280,000-square-foot Pont Neuf facility will allow Hennessy to produce around 10 million cases annually by 2020, up from 7 million cases currently.

Read more at ShankenDailyNews

BIG MONEY FOR MASSOUGNES COGNAC FROM 1805 IN THE UK

Massougnes Cognac from 1805

Source: https://www.thedrinksbusiness.com/

by Lucy Shaw

10th September, 2018 

A Napoleon era Cognac from 1805 has sold for over $260,000 at Hedonism Wines in Mayfair, making it one of the most expensive bottles of Cognac ever sold in the UK.

The bottle in question is a three-quarter gallon imperial of 1805 Cognac Massougnes and its sales price of over $260,000 makes it one of the highest value single Cognac sales in history.

The bottle was acquired by Hermitage Cognacs 20 years ago from Marie-Antoinette des Allées, Comtesse de la Bourdelière - a direct descendant of King Louis VII, whose family owns the former Cognac producing estate.

The imperial was snapped up at wine lover's delight, Hedonism in Mayfair, by an undisclosed buyer.

In 2016 a bottle of 1801 Cognac Massougnes acquired by Hermitage Cognacs was sold to an anonymous Asian buyer at Hedonism Wines for $300,000.

"In over 30 years of buying and selling Cognac, this 1805 is one of the oldest and rarest I have ever come across.

"Massougnes produced famous pre-phylloxera Cognacs and we have dated their records back to at least 1730, making them the oldest known growers and sellers of brandies," said Hermitage's managing director, David Baker.

"At its peak the property covered 346 hectares, and Marie-Antoinette, the last remaining descendant of this famous family, has written a charming note about the 'life' of this extraordinary Cognac, which was created the same year as the Battle of Trafalgar," he added.

Founded in 1987, Hermitage Cognacs specialises in the sale of old and rare Grande Champagne Cognacs from old family houses.

COGNAC EXPORTS HIGH TIME HIGH

Cognac exports in 2017-18 are valued at €3.2 billion, an increase of 8.2% in volume (250.9 million bottles) and 5.4% in value compared to 2016-17.

This is the fourth consecutive year of export growth, according to the Bureau National Interprofessionnel du Cognac(BNIC), the cognac trade body.
The American zone, with ALENA, was the largest export area, taking 89.8 million bottles, a increase of 9.4% in volume and 0.2% in value. The US was the largest ALENA export zone, with a ninth consecutive year of export growth.

The Far East, with 60.9 million bottles, was in second place with a growth of +13.5% in volume and +12.4% in value. Singapore (26.6 million bottles) and China (26.2 million) were the main export countries.

In Europe, exports were stable at 41.3 million bottles, down by 2% in volume but up 3% in value.
Source: Vinexpo Newsroom

86% OF REMY COINTREAU'S PROFITS COMES FROM COGNAC

Remy Cointreau's profits boosted by China's thirst for cognac

Source:

https://www.rte.ie/

7 Jun 2018

Remy Cointreau has reported higher-than-expected annual profits, helped by strong demand for its premium cognacs in China, and predicted more earnings growth this year.

The maker of Remy Martin cognac and Cointreau liqueur said its strategy of selling higher-priced spirits to boost profit margins was delivering strong results.

Remy has been focusing on selling spirits priced at $50 a bottle or more, as part of a strategy that has benefited from a rebound in Chinese demand.

Remy's strategy has differed from that of rival Pernod Ricard, which has launched less expensive brands in China.

The private consumption of drinks and spirits has been recovering in China, offsetting the impact from the country's anti-corruption crackdown over the past few years which had hit sales of premium brand drinks.

Remy Martin cognac, which makes 86% of group profits, achieved a margin of 26.9% of sales, representing an organic increase of 1.3 percentage points.

Remy Cointreau's stock market valuation is closer to that of many luxury good stocks, rather than food and drinks stocks.

RECORD SALES PRICE FOR A WINE BOTTLE

A bottle of Vin Jaune, meaning literally ‘yellow wine’ in French, has sold for a record price of over €100,000 to a Canadian buyer.

One of the oldest bottles of wine in the world was sold on Saturday, 26 May, at an auction in France, for €103,700 ($121,000).

The exceptional longevity of the yellow wine of Arbois comes from its particular mode of elaboration, which consists of raising the wines “under veil”; that is to say, with a form of oxidation which transcends perfumes and limits ageing.

The wines have been lovingly cared for by eight generations of heirs of Pierre Vercel (1694-1754), whose family is known to have made wine in Arbois since the 14th century and whose Grand Commander has maintained the tradition. He had remained discreet about the number of bottles he had carefully preserved, and their location.

Source: Vinexpo-Newsroom

COGNAC VINEYARDS PRICES ARE UP A LITTLE

French vineyard sales up 2.8% in 2017

Source:

https://www.vitisphere.com/

June 04 2018

The French market for vineyards is still buoyant with an increase in trade. Prices have risen irrespective of whether the vineyards are within an appellation area or not, or eligible to produce appellation brandies.

In 2017, the vineyard market was bullish with sales progressing well. A total 9,460 transactions (+2.8%) were finalised covering 16,900 ha (+7.9%) worth 1.3 billion euros (+59.9%). "Bought and sold acreage is at its highest level for the past 25 years," commented Loïc Jégouzo, from Terres d'Europe-Scafr, on 31 May in Paris at a press conference by the Safer network on land prices. The spectacular increase in values can be ascribed to the sale of several prestigious estates. "Ten transactions alone represent 31% of the total market value", said Jégouzo. But even if these transactions are excluded, value sales are still on the rise.

Champagne slowdown

From a price perspective, increases were posted across-the-board. In appellation or PDO vineyards, the average price is 143,900 euro/ha, a rise of 2.3% compared to 2016. "But if Champagne is excluded, the increase is much more marked: + 4.2% (Editor's note: at an average price of 69,300 euro /ha), because Champagne only rose by 0.8% in 2017", explained Jégouzo. All wine regions have progressed except Corsica. The highest increases were observed in Alsace (+7.2%), Burgundy (+4.9%), the Rhone Valley and Provence (+5.5%). "The most prestigious AOCs have continued to increase and are driving up the prices of intermediate AOCs," noted Jégouzo. The price of vines for appellation brandies has soared by 8.1% to 46,900 euro /ha. "The increase is due to record levels of Cognac exports", he said. The price of vineyards outside appellation areas increased by 3% to 13,800 euro /ha.

HUGE GROWTH OF COGNAC SALES IN THE US

 

Cognac Sales Image Logo Icon

Cognac market sales could surpass the 6 million case volume in the USA.
Cognac continues to thrive in the USA with category leader Hennessy leading the way. Or dominating would be a more proper statement.

Depletion was 17% up in 2016 compare to 2015, with over 1 billion USD sales which is 5 times more than 2011 in the US.

Hennessy makes 1.6 billion USD sales of cognac/year/world and it is looking at beaking the 2 billion USD sales soon which would be the new high.

Remy Martin plays well as a 2nd with +9% sales and a volume of  823,000 cases sold in 2016.  Remy Martin is in contrast to Hennessy in particular focusing on non-VS qualities such as VSOP and 1738 Accord Royal, noting sales from Jan-Sept to be +15% with $431m worldwide, and interest for higher end cognac in the USA.

Courvoisier (owned by Beam Suntor) is the third-largest Cognac in the U.S., and advanced by 6.2% to 470,000 cases in 2016.

Martell (owned by Pernod-Ricard) ranked fourth, and crossed 100,000 cases last year on 6% growth after starting a come back in the USA in 2016. They had left to focus on China but ...
Cognac d’Ussé (a Bacardi brand) launched in 2012, made in 2016 +48% with 86,000 cases sold. It is produced by Cognac Otard not sure why Bacardi is not interested in Otard!

Source: ShankenNews

COGNAC DOUBLE DIGITS GROWTH

 

Cognac Sales Image Logo Icon

In 2016-17, and for the third year in a row, cognac export figures showed increases , of 10.2% in volume and 15.2% in value. In total, 190.2 million bottles were exported this year, for a total revenue of 3.0 billion euros.

The NAFTA region was the leading market, with an increase of 9.3% in volume and 13.5% in value, helped by the US market, with an historic 78.7 million bottles shipped during the period.

Source: www.BNIC.com

SALES FROM REMY COINTREAU SHOW GROWTH

Remy Cointreau

After a strong third quarter, Rémy Cointreau’s sales were up by nearly 5% (and 6% on an organic basis) over the first nine months of its fiscal year. The company’s organic sales rose by 9% in the third quarter (ending December 31, 2016), as high-single digit growth in the U.S. market combined with a double-digit advance in China to produce significant progress.

Rémy’s third-quarter sales bump more than doubled analysts’ projections. Flagship brand Rémy Martin was the company’s growth engine over the first three quarters of its fiscal year. 

The Cognac brand’s sales grew by 11.2% on an organic basis. Meanwhile, in China, the brand’s depletions were up by high-single digits, in part because of the earlier Chinese New Year. Beyond Rémy Martin, Rémy Cointreau’s liqueurs & spirits unit (led by Cointreau) grew by 4.1% over the first three quarters, while its partner brands business fell by 15%, mostly due to the end of distribution contracts for Piper Heidsieck and Charles Heidsieck in several key markets.

Source: Shanken Daily News

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2016 MARKS A NEW HIGH FOR COGNAC SALES

The "Cognac Enterprise" is made up of about 16,800 active individuals, which accounts for over 50% of the active general agricultural population in France.

2014, 2015 and now 2016 mark a constant growth for the sales of cognac.

Image to Illustrate Cognac Sales in 500 years

That is growth +6% in volume and +6,8% in monetary value, still fueled by the USA which is making close to 42% of the overall sales for the past 25 years with 74,1 millions of bottles sold in 2016.

More than 98% is exports with 179,1 millions of bottles sold in 2016, was 168,9 millions in 2015. I can still remember not long ago when we were saying that 120 million bottles was a lot!!

Total sales in 2016 equal 2,76 milliards d'euros compare to 2,6 milliards en 2015.

North America comprises 77,3 millions of bottles with +14,2% in sales volume, and 14,3% in value.

Asia is the second market with 51,1 millions bottles sold, that is +1% in volume and +3% in value. This situation confirms the stability recovered in 2015 after the 2014 decline period.

Africa and Oceania are showing great potential for growth with 11,3 millions of bottles sold, comprising 6,3% of the total sales, but with significant growth:
. +5,4 % in volume
. +5,1% in value

In contrast, the European market shows a slight decline of -1,2% in volume, and -1% in value. But still 39,4 millions of bottles were sold in Europe.

Looking at the sales in using the 3 basic qualities is interesting:

. VSOP sales are stable.

. VS = +9,6 % in volumee and  +13,0 % in value.

. XO and Older = +11,7 % in volume and +8,3 % in value which is a little scary because not sustainable.

Sources: Charente Libre, BNIC

+18% SALES TO DATE FOR 2016 FOR MARTELL IN THE USA

After posting a 4% sales increase to $1.8 billion in the U.S. market in its fiscal year ended in June, Pernod Ricard sees that progress continuing.

Pernod Ricard Logo

The U.S. accounts for 19% of the company’s global sales. Pernod Ricard cited the market’s overall premiumization progress.

Ultra-premium spirits ($42-$84) and the prestige segment ($85+), which have smaller shares, rose 13% and 17% respectively.

MARTELL COGNAC +18% IN THE USA for the first 52 weeks of 2016.

Sources: Shanken Daily News

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THE USA BEATS NEW SALES RECORD FOR COGNAC

Before the holidays seasons cognac sales are already showing a strong sales for 2016 in the

"Shipments of Cognac to the U.S., by far the global category’s largest market, crossed the 5-million-case mark on 13.5% growth last year, driven by the double-digit progress of Hennessy, Rémy Martin and Martell" says Shanken Daily News.

With growth continuing in 2016, U.S. depletions could hit 5 million cases and value could cross €1 billion ($1.1b) by year-end.

Impact Databank Cognac Sales in the USA, October 2016

1. Hennessy continues to dominate the category, accounting for 44% of worldwide volume and 66% of the U.S. Cognac market. With its global volume expanding by 55% since 2005, to 6 million cases, Hennessy has risen to become the world’s third most valuable spirits brand by retail sales, at $3.5 billion (trailing only Johnnie Walker and Smirnoff). “A significant portion of consumers drinking white spirits a few years ago have come over to Hennessy,” says Giles Woodyer, senior vice president, Hennessy at Moët Hennessy USA.
2. Rémy Martin remains a distant second to Hennessy in the U.S., but it too has been on an impressive run. In the 12 months through June, Rémy Martin posted a 15% increase in U.S. depletions, and in the first half of this year the brand’s VSOP jumped 20% in IRI channels.
3. Martell, which neared 100,000 cases in the U.S. last year, is getting increased focus in the market. Brand-owner Pernod Ricard is looking to leverage robust trends in both Cognac and Bourbon with a new hybrid product, Blue Swift ($50), which was finished in Kentucky Bourbon barrels.
4. Bacardi’s d’Ussé brand has also been making strides. Thus far in Bacardi’s fiscal year (beginning in April), d’Ussé’s revenues are up 20% compared with last year, led by its VSOP quality ($50). Meanwhile, senior brand manager Tyler Phillips tells SND that d’Ussé XO ($230), which continues to expand into new markets, is growing exponentially from a small base.
5. Beam Suntory’s Courvoisier brand sells about one-third of its volume in the U.S. market.

The Cognac category comprises about 4% of all spirits by dollar value in the U.S., according to Nielsen, but it’s growing at 19%, compared with total spirits category growth of 6%.

The whisky category revival has inspired greater consumer interest in brown spirits, specifically among multicultural millennial males. They are looking for premium brands that project success and sophistication, and so Cognac is well-positioned to get their attention. 

Hence, non premium cognac brands such as Salignac and Ansac are seeing negative growths in comparison.

Source: Shanken Daily News

HENNESSY IS KEEPING UP WITH GROWING GLOBAL DEMAND MOSTLY IN THE US

Moët Hennessy’s flagship  brand, namely, Hennessy Cognac continues to see sales increases in its U.S. market.

With a 64% share of the U.S. Cognac market, Hennessy’s accelerated pace helped drive the category’s total U.S. depletions to just under 4 million cases on a 7.7% increase last year.
Hennessy is trying to (1) widen Cognac’s audience and (2) cognac's consumption occasions.

Hennessy Cognac is a leader in the category to invest in reaching out to mixologists and have significantly built up on this momentum. But also through its campaign "never stop.never settle" and the inspiration from the "wild rabbit", Hennessy has drawn a great deal of positive attention.

The breadth Hennessy's product line allows the brand to cover wider market segments: VS ($32), Black ($40) and VSOP Privilège ($50-$60) tiers. In a Upward stretch the range also includes Hennessy XO ($160), Paradis ($250), Paradis Impérial ($3,000) and the deluxe model Hennessy Richard ($4,800).

With Hennessy's limited edition Artist Series bottles, such as with with OS GEMEOS, FUTURA, SHEPARD FAIREY, KAWS, KESH BURROWS, and more recently RYAN MCGINNESS.

The brand is able to provide experiential marketing views so important to millennial consumers as emotional references. This target is very focused on the pleasurable and meaningful aspects of brand interaction.

Hennessy Product Line 2015

To keep up with growing global demand, Moët Hennessy recently broke ground on a new 26,000-square-meter (280,000-square-foot) shipping and bottling facility in Cognac. The Pont Neuf facility will have a production capacity of about 10 million cases a year when it becomes operational, expected by 2017.

Source: Shanken News, Hennessy Cognac

SPIRITS SALES ARE ONLY 1.5% UP IN 2014

Overall, 2014 is not going to be remembered as a great year for sales of spirits with only 1.5% increased sales in the USA.

Only a few brands particularly a few brands of vodka have recorded a nice growth such as Amsterdam vodka (+24.7% to 2.5 million cases) and Cîroc vodka (+9%).

Hennessy Cognac's sales have also significantly increased with +7.5%.

Sources: Shanken Daily News

SCOTCH WHISKY INTERNATIONAL DECLINE OF SALES

Cognac is not the only brown spirit to suffer from a world sales decrease. Scotch whisky saw it worst sales decrease this year from January to June in 15 years, and this is not over.

Cognac and Scotch Sales Decline

According to the Scotch Whisky Association, exports fell 11% to £1.77 billion in the six months through June.
Major markets saw double-digit shipment decreases like the U.S. (-16% to £328 million/$538m), Germany (-22%), South Africa (-10%), Brazil (-19%), and Mexico (-27%). In Asia the drop was the worst with  China (-35%) and a key re-exporter to the Chinese market, Singapore (-46%) but also South Korea (-12%).
Still, a host of key markets enjoyed solid growth—such as France (+6%), Taiwan (+39%), United Arab Emirates (+26%), India (+31%), Australia (+4%) and Japan (+18%).

This declined is attributed to slowing down economies, China's grip on conspicuous consumption and a stronger currency exchange rate of the Pounds.

Source: Scotch Whisky Association

DECLINING COGNAC SHIPMENTS IN 2014

Global Cognac shipments declined markedly by volume and value in the year through June, with growth in the U.S. unable to offset continuing woes for the category in China. According to the Bureau National Interprofessionnel du Cognac (BNIC), shipments fell 7% by volume to 156 million bottles in the 12 months through June, with value down 10% to €2.2 billion ($2.85b).

Bureau National Interprofessionnel du Cognac BNIC Logo

A 19% slump in sales to the Far East—where shipment value amounted to €1 billion ($1.3b)—was blamed primarily on the ongoing government austerity drive in China. Cognac sales to Europe also declined, falling 12%, even as Eastern Europe posted volume progress. Meanwhile, shipments to North America—led by top Cognac export market the U.S., which accounted for 54 million bottles—delivered 6% growth by both volume and value.

Source: http://www.shankennewsdaily.com