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Rémy Cointreau - what's next? by Robert Stansfield, RSI

Recently a spokesman for Rémy Cointreau said that the company would return to profit in 1998-99 after reporting a net loss of US$112 million. Sales were up 3.5% in the first half of the year, helped by a recovery and improved margins on spirits and champagnes, which helped offset disappointing results in Cognac activities. In June, the company published a list of about US$200 million of non-strategic assets that it planned to dispose of by March 1999. Nearly half of those disposals have been completed to date. Among assets still to be disposed are Grands Vins de Gironde and Rémy Associates. The company spokesman said: "We have always said that owning 100 % of our distribution network was not a strategic imperative".

That is how a recent Financial Times article summarized current Rémy Cointreau situation. It is therefore, appropriate to ask: "What's next at Rémy?". They have been loosing money recently and mainly on the Cognac it seems. Interesting to see that they are waking up to outsourcing the things that are not their main competencies i.e. distribution and bottling. Ten years too late perhaps. So, the challenge in front of the Rémy management is how to extend the Rémy brand. I see absolutely no reason why they could not include Rémy champagnes, wines and Cointreau as a part of this exercise. Particularly if they sell non core brands, that would allow them to concentrate on fewer brands and put some capital behind extending and promoting Rémy brand, if that has the most potential. Their problem will be, what do they do when they have done all the cost saving exercises.

During a recent tasting a comment was made that 70% of Rémy Martin Cognac sales are from the VSOP, which at best came distant second against their Extra and Louis XIII Cognacs. It would be interesting to know if this delivers 70% of the profits. This is not a good advertisement for Rémy if they also wish to be associated with the highest quality.  I would have thought that the more expensive Cognacs would deliver much higher margins and would not be suprised if the other 30% of sales (presumably the top end) delivered 70% of the profits, particularly if they attribute the production, distribution and marketing costs. I'm sure that their accountants know if this is actually profitable enough for them.

But, what if Rémy were to go from covering the whole market, (low, medium and high end) and just go for the high end and concentrate their marketing and promotion efforts on building a brand at the top only. My impression is, they really prefer the top of the market anyway. I think that this strategy has some merit. They could extend their range into perfume. They know about colored, smelly liquid in expensive bottles. Look at all successful brands like Ralph Lauren, Calvin Klein, Chanel and Hermes all make more money from their perfume ranges than their fashion ranges. Rémy doesn't need to know how to make it, it can contract it out to Estee Lauder or someone else. Lauren and Klein's flag-ship stores are just big marketing exercises. Rémy should open flag ship stores in Paris, London, New York, Rome, Tokyo etc. and wrap themselves in the French Flag, selling all things French that can be associated with the qualities of Cognac; from perfume to cigars, from comfy chairs, to slippers, from smoking jackets to cut glass. They should have restaurants included with top internationally known French chefs. And forget about selling in supermarkets or the type of bars that do not give them the cache they actually looking for.

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