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With US$80,000 cognac, Remy defies China's war on extravagance
[LONDON] If China's thirst for luxury goods is on the wane, nobody's told Remy Cointreau SA.
The distiller has opened its first-ever store dedicated entirely to Louis XIII cognac, the most expensive variant of the company's Remy Martin brand, which comprises 60 per cent of its revenue. It comes in crystal decanters ranging from tiny US$600 5-centilitre miniatures to an US$80,000 six-litre vessel dubbed a "methuselah".
The boutique in Beijing's Shin Kong Place mall also offers pairings of cognac with caviar and iberico ham.
"It's a changing landscape in China," said Louis XIII brand director Ludovic du Plessis, who expects slower but more sustainable growth after the government's four-year campaign against graft dented sales.
"It's now about self-indulgence, we need to reinvent the dialogue with our client and really get to know who can afford our product." He declined to provide specific sales projections or data for the 142-year-old brand.
The move comes as ebbing demand for luxury goods - particularly in China - has forced companies such as Cartier owner Richemont, clothier Burberry and Kelly bag maker Hermes to abandon sales and profit forecasts.
A slump in pricey cognacs and Scotch has sent Remy's peers going in the other direction: Pernod Ricard SA, the maker of Martell cognac, said this month that China's growing middle class offers better opportunities for growth.
Shipments of cognac to China began to decline from a record high in 2012 after the government crackdown on extravagant gifting, data from trade body BNIC shows. Volumes recovered last year as distillers promoted less-expensive variants.
"The high-end of the cognac business has been a flaming dumpster fire for the past four years," Tony Bucalo, an analyst at HSBC, said in an interview.
In response, France's Pernod has created two separate teams in China, one targeting well-heeled customers and one for mainstream drinkers, chief executive officer Alexandre Ricard said in an interview this month.
The volume of spirits sold to China's middle class will offset any profit shortfall from a slowdown in sales of high-end brands, he said.
It doesn't get much more high-end than Louis XIII, a blend of 1,200 cognacs between 40 and 100 years old. The 427-square-foot Louis XIII store, located near Fendi and Louis Vuitton boutiques in the Beijing mall, was designed by RDAI, a French architectural firm that's worked with Yves Saint Laurent and Hermes.
China accounts for about 20 per cent of Remy Cointreau's sales, and its performance there could use a boost as revenue across the Asia-Pacific region fell in the first quarter.
"I wish it would have happened five, ten, twenty years ago," Mr du Plessis said.