Spirits maker Remy Cointreau sees weak U.S. demand deep into 2023

By Dagmarah Mackos

(Reuters) -Remy Cointreau said on Friday it expected U.S. demand for cognac to weaken well into 2023, after the French spirits maker posted lower third-quarter sales as positive effects from the coronavirus pandemic fizzled out.

This echoed comments from the world’s largest spirits maker Diageo on Thursday that robust demand for its drinks as people made pricey cocktails at home may be slowing in some parts of the world, particularly North America.

Sales of the Remy Martin cognac division fell 11% in the quarter against a tough 2021 comparison as high U.S. consumption seen during lockdowns eased, leaving stores with fuller inventories.

“The level of inventories in the U.S. and market normalisation … may raise questions about the near-term outlook for Remy,” UBS analysts said in a note to clients.

Remy’s shares, which shed a quarter of their value last year, were down more than 3% in midday trade.

The company expects U.S. weakness to persist in the first half of the 2023/24 financial year, affected by “extremely high” comparisons, but a rebound should follow in the second half, finance chief Luca Marotta said in an earnings call.

To counter the slowdown, he said Remy planned to focus on the “very dynamic” Chinese market that is bouncing back after the country lifted its zero-COVID policy.

“The magnitude of (China’s) reopening … will be massive,” Marotta said.

Third-quarter sales in China, which accounts for 25% of Remy’s profits, were driven by a steep rise in shipments ahead of the Lunar New Year holiday.

The group’s revenue fell 6% organically to 437.6 million euros ($475.6 million) in the third quarter, coming in slightly ahead of analysts’ 433.3 million euro forecast.

The beat was helped by strong sales of Cointreau liquer and Bruichladdich whisky, Marotta said. The group still hopes to close the year to the end of March with strong organic sales growth.

($1 = 0.9200 euros)

(Reporting by Dagmarah Mackos in Gdansk; Editing by Milla Nissi and Jan Harvey)