Introducing Rémy Cointreau

Rémy Cointreau (RCO: EPA, Market Capitalisation €8.25b) is a company that provides investors with exposure to the growth of luxury markets worldwide. Increasing global income inequality continues to benefit brands at the low end of markets and brands at the top. Rémy sells some of the finest Cognacs in the world, with a full range of brands that serve all the segments between premium and upper luxury. Rémy also sells liqueurs, whiskey, gin and rum, but with a more limited range. In sum, Rémy has a set of global brands which are nearly impossible to replicate, some in excess of 300 years old. This is a vital and insurmountable moat that Rémy can lay claim to; no amount of money can replicate Rémy’s business.

Rémy is well positioned to benefit from an increasingly discerning consumer base situated in high-value, fast-growing categories, which offer the potential for greater margin expansion as Rémy’s substantial operating expenditure (OpEx) abates in the coming years. Compared to its peers, Rémy is far more conservatively leveraged, a symptom of majority family ownership that further separates it from its peers.

Rémy’s valuation has fallen significantly over the last two years, faster than the broader industry and has also faced the same headwinds, an uncertain macro outlook, rising inflation and highly restrictive Chinese lock-downs, which have hit revenues. Despite the ultimately short-term issues that have plagued the industry, we take a longer-term view of Rémy’s potential as a well-run family-controlled company that provides unique exposure to growing affluence, particularly in Asia.