Breakingviews - Rémy Cointreau tariff fix will leave long hangover
Rémy is not alone in ditching its longer-term sales guidance. In February, $60 billion Guinness-maker Diageo (DGE.L), opens new tab scrapped its 5% to 7% annual revenue growth target, citing uncertainty caused by possible tariffs imposed by the U.S. on Canada and Mexico, while $26 billion Pernod Ricard (PERP.PA), opens new tab also recently cut its sales guidance. Rémy had been promising a 'high single-digit' percent annual growth in revenue between 2025/2026 and 2029/2030, but now is not giving investors any steer.
On the face of it, these goals may have been too ambitious to begin with. In Diageo and Rémy's cases the punchy sales targets were set during the pandemic when spirits were enjoying an unprecedented boost. But in the past two years, inflation, a continued drop-off in drinking in younger consumers and the spectre of tariffs have dampened that trend. And with the U.S. and China, the two largest drink markets in the world, showing increased signs of weakness, analysts now expect Rémy to grow sales by less than 5% each year between 2025 and 2030, Visible Alpha data shows. That's one reason why the company's valuation has shrunk, even if it still enjoys a premium multiple to Diageo and Pernod Ricard.
To recover some of the lost fizz, Marilly needs to make tough choices. The new boss who will take the reins at the end of this month will have to increase spending on marketing to boost new products and gain market share. Back in 2022, the company spent 433 million euros on ad campaigns and promotions, but that figure is expected to be just 286 million euros this year, Visible Alpha data shows. Marilly will also need to cut Rémy's rising debt, which is currently equivalent to 2.4 times trailing EBITDA. To do both, he may need to scrap the company's dividend, expected to be around 80 million euros this year. That might rile shareholders, but if Marilly manages to reverse the rot, they will eventually thank him.
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