Rémy Cointreau: Building Value Through High-End Spirits

Rémy Cointreau is a leading producer of premium spirits with a portfolio of globally recognized brands, including Rémy Martin, Cointreau, The Botanist, Bruichladdich, and Louis XIII. Known for its heritage, craftsmanship, and focus on the high end of the spirits market, the company combines iconic brands with centuries of production expertise and a global distribution network. By investing in innovation, expanding into emerging markets, and strengthening its commercial execution through the RC Forward transformation plan, Rémy Cointreau aims to drive sustainable long term growth. The question remains: Does this premium spirits leader deserve a spot in your portfolio?

This is not a financial advice. I am not a financial advisor and I only do these post in order to do my own analysis and elaborate about my decisions, especially for my copiers and followers. If you consider investing in any of the ideas I present, you should do your own research or contact a professional financial advisor, as all investing comes with a risk of losing money. You are also more than welcome to copy me. 

For full disclosure, I should mention that I do not own any shares in Rémy Cointreau at the time of writing this analysis. If you would like to copy or view my portfolio, you can find instructions on how to do so here. If you want to purchase shares or fractional shares of Rémy Cointreau, you can do so through eToro. eToro is a highly user-friendly platform that allows you to get started on investing with as little as $50.

The Business

Rémy Cointreau was founded in France in 1724 through the House of Rémy Martin and has grown into one of the world's leading producers of premium and luxury spirits. Following the merger of Rémy Martin and Cointreau in 1990, the company today owns a portfolio of globally recognized brands across cognac, liqueurs, whisky, gin, rum, brandy, champagne, and other premium spirits. Its best-known brands include Rémy Martin, Louis XIII, Cointreau, Mount Gay, Bruichladdich, The Botanist, Metaxa, St-Rémy, Westland, and Champagne Telmont. Despite competing against much larger spirits companies such as Diageo, Pernod Ricard, and LVMH, Rémy Cointreau has deliberately chosen to focus almost exclusively on the premium and luxury segments of the market rather than pursuing volume. As management has stated, the ambition is not to become the world's largest spirits company but to own an exceptional portfolio of brands with strong long-term pricing power. The company remains controlled by the founding Hériard Dubreuil and Cointreau families, giving it a long-term perspective that emphasizes brand building, quality, and sustainable value creation over short-term results. Rémy Cointreau organizes its business into three segments: Cognac, Liqueurs & Spirits, and Partner Brands. Cognac is by far the largest and most important segment, led by Rémy Martin and Louis XIII. Rémy Martin produces only Fine Champagne Cognac, meaning its cognacs are made exclusively from grapes grown in the Grande Champagne and Petite Champagne crus, which are widely regarded as the best vineyards in the Cognac region because they produce eaux-de-vie with exceptional aging potential. The portfolio ranges from VSOP and XO to Louis XIII, one of the world's most prestigious luxury spirits, whose blends contain eaux-de-vie that have been aged for several decades and can sell for thousands of dollars per bottle. Rather than producing all of its own grapes, Rémy Martin relies on long-standing partnerships with hundreds of growers, many through the Alliance Fine Champagne cooperative, giving it access to high-quality supply while maintaining strict quality standards. The Liqueurs & Spirits segment includes brands such as Cointreau orange liqueur, Mount Gay rum from Barbados, The Botanist gin and Bruichladdich single malt whiskies from the Isle of Islay, Metaxa from Greece, Westland American single malt whiskey, St-Rémy French brandy, and Champagne Telmont. Each brand is produced in its country of origin using traditional production methods and local ingredients that reflect the heritage of its category. Partner Brands account for only a small portion of revenue and consist of third-party brands that Rémy Cointreau distributes in selected markets. In recent years, the company has deliberately reduced this business to focus more on its own higher-margin brands. Rémy Cointreau distributes its products through a combination of directly owned sales subsidiaries and selected distribution partners across the Americas, Europe, Asia-Pacific, and Global Travel Retail. By controlling much of its own distribution network, the company maintains greater control over pricing, brand positioning, and customer relationships while ensuring its products remain focused on premium retail outlets, luxury hotels, fine dining, and upscale bars. Rather than competing on price, Rémy Cointreau follows a strategy centered on value over volume by continuously increasing the desirability and exclusivity of its brands while benefiting from the long-term global trend toward premiumization, where consumers increasingly choose fewer but higher-quality alcoholic beverages. Rémy Cointreau's competitive moat is primarily built on its portfolio of luxury brands, protected geographic origins, decades of aging expertise, and long-standing relationships throughout its supply chain. The company's greatest competitive advantage is its brand equity. Brands such as Rémy Martin, Louis XIII, and Cointreau have been built over centuries and enjoy global recognition, allowing the company to command premium prices while maintaining strong customer loyalty. In the luxury spirits industry, heritage, craftsmanship, and authenticity are often more important than production scale, making these brands extremely difficult for new competitors to replicate. Another important advantage comes from the unique characteristics of cognac itself. By law, cognac can only be produced within a specific region of France using regulated production methods and approved grape varieties. Rémy Martin further differentiates itself by sourcing exclusively from the Grande Champagne and Petite Champagne crus, giving its products a reputation for exceptional quality and aging potential. This protected designation of origin creates a natural barrier to entry because competitors cannot simply produce similar products elsewhere. Time is another important source of competitive advantage. Many of Rémy Cointreau's highest-end spirits require years or even decades of barrel aging before they can be sold. Louis XIII, for example, contains eaux-de-vie that have matured for several decades. Building these inventories requires enormous amounts of capital, patience, and expertise, making it virtually impossible for new entrants to replicate the company's aged stock. Rémy Cointreau also benefits from long-standing partnerships with grape growers and other agricultural suppliers that have been developed over many decades. These relationships help secure consistent access to high-quality raw materials while reinforcing the company's reputation for quality. In addition, its directly controlled distribution network allows management to carefully manage pricing, marketing, and brand positioning across global markets while limiting discounting that could weaken the luxury image of its brands. Finally, the company's strategy of focusing almost entirely on premium and luxury spirits reinforces all of these advantages. By prioritizing value over volume, investing continuously in brand desirability, and preserving the authenticity of each spirit's place of origin, Rémy Cointreau has built a collection of heritage brands with meaningful pricing power that should remain difficult for competitors to challenge over the long term.

Management

Franck Marilly serves as the CEO of Rémy Cointreau, a role Franck Marilly assumed on June 25, 2025. Franck Marilly brings more than three decades of experience within the global luxury, cosmetics, fragrance, and fashion industries, with particular expertise in developing premium brands across international markets. The appointment of Franck Marilly reflects Rémy Cointreau’s strategic focus on strengthening the desirability of its brands, improving commercial execution, and restoring sustainable growth following several difficult years for the cognac industry. Franck Marilly is a graduate of EDC Paris Business School and has spent much of his career managing heritage rich brands across Europe, the United States, and other international markets. This experience appears particularly relevant for Rémy Cointreau, which competes through brand prestige, craftsmanship, innovation, and carefully controlled distribution rather than through production scale. Franck Marilly began his career in the luxury industry at Chanel in 1991 before joining Unilever in 1994. During seven years at Unilever, Franck Marilly held several management positions within the cosmetics business, including responsibility for cosmetics exports and leadership roles covering Spain, Portugal, France, and Belgium. Franck Marilly returned to Chanel in 2001 and went on to spend a total of 17 years with the company. Franck Marilly initially managed Chanel’s operations in Italy and France before becoming Senior Vice President of Fashion in the United States. In 2010, Franck Marilly returned to Europe to lead Chanel’s fragrance and beauty business across the region, a position Franck Marilly held until 2017. These roles gave Franck Marilly extensive experience in managing global luxury brands while balancing heritage and exclusivity with innovation and international expansion. In 2018, Franck Marilly joined Shiseido as President and CEO of its Europe, Middle East, and Africa operations and later served as Chairman of the region and the company’s global fragrance division. In these positions, Franck Marilly was responsible for developing Shiseido’s prestige beauty and fragrance portfolio while overseeing a complex organization spanning numerous countries, brands, and distribution channels. Franck Marilly also played an important role in the development of Shiseido’s fragrance brands and helped strengthen the group’s position within the premium beauty market. The experience of Franck Marilly at Shiseido provided further expertise in brand elevation, innovation, international management, and the development of culturally distinctive brands, all of which are closely aligned with Rémy Cointreau’s value over volume strategy. Beyond his executive roles, Franck Marilly has served as a director of the Fédération des Entreprises de la Beauté since 2011 and as a director of the Franco Japanese Exchange Committee since 2018. In February 2025, Franck Marilly was appointed as a Foreign Trade Adviser of France, reflecting the international business experience of Franck Marilly and knowledge of global markets. Franck Marilly has lived and worked in several European countries and in the United States, giving Franck Marilly direct experience in many of the markets that are important to Rémy Cointreau. Franck Marilly is also originally from the southwest of France and has expressed a strong personal attachment to the land, authenticity, and craftsmanship associated with the region where cognac is produced. Since becoming CEO, Franck Marilly has faced the challenge of leading Rémy Cointreau through a difficult period marked by weaker demand, changing consumer behavior, elevated inventories among distributors, currency pressure, and trade tensions in the United States and China. Cognac remains the company’s largest and most profitable business, making the recovery of Rémy Martin and the stabilization of these two key markets essential to the group’s long term performance. At the same time, Franck Marilly must develop the potential of the company’s smaller brands and reduce Rémy Cointreau’s dependence on economic conditions within the cognac market. Initial priorities under Franck Marilly included stabilizing the business, protecting profitability, improving cash generation, regaining market share, and maintaining investment behind the company’s brands. During the 2025 and 2026 financial year, Rémy Cointreau reported that its brands began regaining momentum in the United States, Rémy Martin strengthened its position in China, and Global Travel Retail started to recover. However, profitability remained under pressure, demonstrating that the turnaround remains at an early stage and that Franck Marilly still has significant work ahead. In April 2026, Franck Marilly launched the RC Forward transformation plan, which is intended to make Rémy Cointreau less dependent on macroeconomic cycles and create a stronger foundation for internally driven growth.  Franck Marilly also reorganized the company’s leadership structure to improve efficiency and accountability. The changes included establishing a smaller steering committee, appointing a Group Chief Markets Officer to oversee all geographic regions, creating a dedicated Prestige division for Louis XIII, Telmont, and Maison Psyché, and establishing an Innovation Lab focused on consumer trends and new growth opportunities. The leadership approach of Franck Marilly has been described by Rémy Cointreau as people focused, collaborative, and centered on building strong corporate cultures. Franck Marilly has emphasized the importance of combining discipline, accountability, and execution with an entrepreneurial mindset that gives employees the confidence to pursue new growth opportunities. This approach appears appropriate for a relatively small luxury spirits group that must use its resources more selectively than larger competitors such as LVMH, Pernod Ricard, and Diageo. Rather than seeking to become the largest spirits company, the strategy of Franck Marilly is focused on unlocking the potential of Rémy Cointreau’s existing portfolio and strengthening the distinct identity of each brand. Given the experience of Franck Marilly in managing global luxury and fragrance businesses, strengthening premium brands, and leading organizations through transformation, Franck Marilly appears well suited to guide Rémy Cointreau through its current challenges. The background of Franck Marilly aligns closely with the company’s focus on heritage, craftsmanship, innovation, and long term brand value.

The Numbers

The first number we will look into is the return on invested capital, also known as ROIC. We want to see a 10-year history, with all numbers exceeding 10% in each year. Rémy Cointreau has historically generated relatively modest returns on invested capital compared to many other premium consumer companies, and ROIC declined to its lowest level of the past decade in fiscal year 2026. While this is not an encouraging development, much of the weakness reflects the unique characteristics of the cognac business rather than a deterioration in the company's competitive position. Cognac is one of the most capital-intensive categories within the spirits industry because the eaux-de-vie used to produce premium cognacs must mature in oak barrels for many years before they can be sold. During this aging process, the inventory remains on the balance sheet without generating any revenue, tying up a significant amount of capital. As a result, Rémy Cointreau will almost always have lower returns on invested capital than many other luxury consumer companies that do not require decades of inventory aging. The sharp decline in ROIC during fiscal year 2026 was primarily caused by an imbalance between invested capital and profitability. While operating profits declined significantly due to weaker cognac demand, particularly in the United States and China, invested capital continued to increase. Management explained that employed capital rose because the company continued investing in aging inventories under long-term supply agreements signed during the years of exceptionally strong demand. Although Rémy Cointreau reduced purchases compared to previous years, these contractual commitments meant inventories continued to grow even as sales slowed. The combination of a larger capital base and lower earnings naturally pushed returns on invested capital lower. The effect was particularly pronounced in the Cognac division, which is both the company's largest business and by far its most capital-intensive. By comparison, the Liqueurs & Spirits division requires significantly less capital and therefore maintained a much healthier level of returns. Another factor weighing on ROIC has been the company's continued investment in its brands and production capabilities despite the cyclical downturn. Rather than cutting long-term investments to protect short-term profitability, management has continued supporting brand building, maintaining production quality, and investing selectively in capital expenditures. While these investments temporarily reduce returns on capital, they are intended to preserve the long-term strength of the business and avoid sacrificing future growth for near-term results. Looking ahead, I expect ROIC to gradually improve over the coming years. One reason is that many of the long-term purchasing commitments that increased inventories during the boom years are now ending, allowing the company to better align production with current demand. Management has also launched its RC Forward transformation program, which aims to improve profitability, strengthen commercial execution, simplify the organization, and increase capital efficiency. If demand in the United States and China recovers while inventories gradually normalize, both earnings and invested capital should move in a more favorable direction, supporting higher returns on invested capital. That said, I would not expect Rémy Cointreau to consistently generate ROIC far above 10% like some of the highest-quality luxury companies. The need to finance large inventories of aging cognac is a permanent feature of its business model and means the company will likely remain more capital intensive than most premium consumer businesses. Even so, if management successfully executes its strategy and the cognac market recovers, I believe ROIC should improve meaningfully from the unusually low level reported in fiscal year 2026.

The next numbers are the book value + dividend. In my old format this was known as the equity growth rate. It was the most important of the four growth rates I used to use in my analyses, which is why I will continue to use it moving forward. As you are used to see the numbers in percentage, I have decided to share both the numbers and the percentage growth year over year. To put it simply, equity is the part of the company that belongs to its shareholders – like the portion of a house you truly own after paying off part of the mortgage. Growing equity over time means the company is becoming more valuable for its owners. So, when we track book value plus dividends, we’re essentially looking at how much value is being built for shareholders year after year. Rémy Cointreau has increased its equity in nearly every year over the past decade, with fiscal year 2020 being the only exception. This reflects the company's ability to remain consistently profitable despite operating in a cyclical industry. Most years, the company generates more profit than it distributes through dividends, allowing retained earnings to accumulate on the balance sheet and gradually increase shareholders' equity. Unlike many other consumer companies, Rémy Cointreau has also made only limited use of share repurchases, meaning equity has not been significantly reduced by returning capital through buybacks. The decline in fiscal year 2020 was primarily a consequence of the COVID-19 pandemic. The closure of restaurants, bars, hotels, airports, and duty-free stores reduced demand for premium spirits, particularly in the travel retail and hospitality channels where Rémy Cointreau has meaningful exposure. Lower earnings reduced retained profits, while unfavorable foreign exchange movements, particularly the strengthening of the euro against the U.S. dollar, also weighed on reported equity. Despite these headwinds, the company remained profitable and quickly returned to growing equity in the following years. The steady increases in equity between fiscal years 2021 and 2025 reflected the company's ability to remain profitable despite increasingly challenging market conditions. Following the strong post-pandemic recovery, Rémy Cointreau continued to generate positive earnings while retaining a portion of those profits within the business. Although demand for cognac weakened during the later years of this period, particularly in the United States and China, the company remained profitable enough to continue building shareholders' equity. At the same time, management continued investing in its brands and aging inventories to support the long-term strength of the business, allowing equity to reach its highest level by the end of fiscal year 2025. Growth slowed significantly in fiscal year 2026, when equity increased by only 0,2%. This was mainly because demand for cognac weakened in the company's two largest markets, the United States and China, leading to much lower profitability than in previous years. Although Rémy Cointreau remained profitable, the weaker earnings meant the company added very little value to shareholders' equity during the year. Looking ahead, I expect Rémy Cointreau's equity to continue increasing over the long term, although probably at a more moderate pace than during the exceptional post-pandemic recovery. The company remains profitable, follows a relatively disciplined dividend policy, and is not expected to undertake large share repurchase programs that would materially reduce equity. As demand gradually recovers in its key markets and the RC Forward transformation plan improves profitability and cash generation, retained earnings should once again become the primary driver of equity growth. While individual years may be affected by economic conditions, currency movements, or temporary earnings weakness, I believe the long-term trend of gradually increasing shareholders' equity is likely to continue.

Finally, we will analyze the free cash flow. Free cash flow, in short, refers to the cash that a company generates after covering its operating expenses and capital expenditures. I use levered free cash flow margin because I believe that margins provide a better understanding of the numbers. Free cash flow yield refers to the amount of free cash flow per share that a company is expected to generate in relation to its market value per share. Rémy Cointreau's free cash flow has been quite volatile over the past decade due to the nature of its business. Unlike most consumer companies, Rémy Cointreau produces premium spirits that often need to age for many years before they can be sold. This means the company must invest heavily in eaux-de-vie and other spirits long before they generate any revenue, causing cash flow to fluctuate depending on how much inventory is being built for future demand. As a result, free cash flow can vary significantly even when the underlying business remains healthy. The sharp decline in free cash flow between fiscal years 2022 and 2025 was primarily driven by two factors. First, Rémy Cointreau continued investing heavily in aging inventories after demand for premium cognac surged during the pandemic, tying up significant amounts of cash. Second, demand later weakened considerably in the company's two largest markets, the United States and China, reducing profitability while inventory investments remained elevated. This combination of lower earnings and continued investment in future supply put significant pressure on free cash flow. Despite the difficult operating environment, free cash flow improved meaningfully in fiscal year 2026, reaching its highest level in several years. This improvement did not come from stronger profitability, as earnings actually declined further, but rather from management's deliberate actions to protect cash generation. During the year, Rémy Cointreau reduced its commitments to purchase additional eaux-de-vie after renegotiating long-term supply contracts, lowered inventory investments, reduced capital expenditures by focusing only on essential projects, and managed its cash more efficiently throughout the business. Together, these actions more than offset the decline in earnings and allowed free cash flow to recover. Management has emphasized that protecting cash generation and strengthening the balance sheet have become key priorities while market conditions remain challenging. Looking ahead, I expect free cash flow to remain positive and gradually improve over time, although it is unlikely to increase in a straight line. Management expects cash generation to strengthen as the company adjusts production to better match demand and the benefits of the RC Forward transformation plan begin to take effect. That said, fiscal year 2026 also benefited from several one-time improvements that are unlikely to occur every year, so free cash flow may remain somewhat volatile in the near term. Over the longer term, if demand recovers in the United States and China, profitability improves, and the company continues to manage its investments carefully, I believe Rémy Cointreau should be able to generate stronger and more consistent free cash flow than it has during the recent downturn. Rémy Cointreau primarily uses its free cash flow in three ways. First, it reinvests in the business by purchasing eaux-de-vie and other spirits for future aging, maintaining its production facilities, and supporting its portfolio of premium brands through marketing and product development. Second, the company uses free cash flow to strengthen its balance sheet by reducing debt, which has become an even greater priority during the current downturn. Finally, Rémy Cointreau returns part of its cash to shareholders through dividends, while maintaining sufficient financial flexibility to continue investing in its brands and long-term growth opportunities. The free cash flow yield suggests that the shares are trading at a premium valuation. However, we will revisit the valuation later in the analysis.

Debt

Another important factor to consider is debt. It's crucial to assess whether a company can repay its debt within three years, which I calculate by dividing total long-term debt by earnings. Rémy Cointreau currently has the equivalent of 8,5 years of earnings in debt, which is above the three-year threshold I generally consider manageable. However, this figure should be viewed in the context of the company's unusually weak earnings in fiscal year 2026. Profitability was negatively affected by the downturn in the cognac market and by several one-time charges, making the ratio appear higher than it would under more normal conditions. Management has made reducing debt a key priority and expects cash generation to improve over the coming years. While debt increased only modestly during fiscal year 2026, the company has taken steps to strengthen its financial position by reducing purchases of eaux-de-vie, limiting investment spending, and temporarily lowering its dividend. While I would prefer to see a lower debt level, I do not currently view it as a major concern. Rémy Cointreau remains profitable, continues to generate positive free cash flow, and has made reducing debt a key priority. If earnings recover as demand improves, the debt ratio should gradually move back toward a more comfortable level.

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Risks

Supply chain is a risk for Rémy Cointreau because many of its products can only be produced in specific regions using local raw materials and traditional production methods. Unlike most consumer goods companies, Rémy Cointreau cannot simply switch suppliers or move production elsewhere if disruptions occur. Many of its most important brands are closely tied to their place of origin. For example, Rémy Martin can only be produced from grapes grown in the Grande Champagne and Petite Champagne crus within the Cognac region of France, while The Botanist gin and Bruichladdich whisky are produced on the Isle of Islay in Scotland, Mount Gay rum is produced in Barbados, Metaxa is made in Greece, and Champagne Telmont is produced in the Champagne region of France. The authenticity of these products is an essential part of their value, meaning production cannot easily be relocated without compromising the brands themselves. This dependence on specific regions also makes Rémy Cointreau vulnerable to factors outside its control. Extreme weather, climate change, disease affecting vineyards or crops, natural disasters, or changes in agricultural conditions could reduce the quantity or quality of grapes, barley, sugar cane, oranges, or other ingredients used to produce its spirits. Since premium products rely on consistent quality rather than simply sufficient volume, even relatively small disruptions could affect future production and profitability. The Cognac business is particularly exposed because it relies on long-term partnerships with hundreds of growers in the Cognac region. Rémy Martin sources most of its eaux-de-vie through long-standing agreements, many of them with members of the Alliance Fine Champagne cooperative, which represents a large share of the vineyards in the Grande Champagne and Petite Champagne crus. While these long-term relationships help secure supply and maintain quality, they also reduce the company's flexibility. If harvests disappoint or growing conditions deteriorate, Rémy Cointreau has limited ability to replace those supplies from other regions because doing so would violate the strict rules governing Cognac. Another challenge is the long production cycle. Many of Rémy Cointreau's premium spirits require years or even decades of aging before they can be sold. This means the company must make production and purchasing decisions many years before it knows what future demand will be. If demand turns out to be stronger than expected, additional supply cannot be produced quickly because the spirits first need to mature. Conversely, if demand weakens, as it has in recent years, the company can end up with large inventories that tie up capital for extended periods. Finally, Rémy Cointreau also depends on maintaining high standards throughout its supply chain. The company works closely with growers, distillers, and other partners to ensure they meet its quality, environmental, and ethical standards. Any failure by suppliers to meet these standards could damage the reputation of the company's luxury brands, where authenticity, craftsmanship, and consumer trust are among the most important competitive advantages.

Macroeconomic and geopolitical factors are a risk for Rémy Cointreau because the company generates most of its profits from premium and luxury spirits, which are discretionary purchases that consumers can easily postpone during periods of economic uncertainty. Unlike everyday consumer staples, products such as Rémy Martin and Louis XIII depend on consumers having both the willingness and the ability to spend on premium experiences. When inflation rises, consumer confidence weakens, or economic growth slows, people often become more selective with their spending, which can reduce demand for high-end spirits. This has been particularly evident since the strong post-pandemic recovery, as consumers in many markets have become more cautious and increasingly focused on value rather than premium products. Rémy Cointreau is also more exposed than many competitors because a large share of its business depends on just two key markets: the United States and China. Both countries are among the company's most profitable markets for cognac, meaning weaker consumer spending in either market can have a significant impact on sales and profitability. In the United States, consumers have become more selective with discretionary spending following the post-pandemic boom, while in China, weak consumer confidence, the ongoing real estate downturn, and slower economic growth have reduced demand for luxury goods, including premium spirits. Because of this concentration, the company has less diversification than larger competitors with broader product portfolios and more balanced geographic exposure. Geopolitical developments create an additional layer of risk. Rémy Cointreau sells its products globally but produces many of its most valuable spirits in specific regions protected by strict geographical rules. For example, Cognac can only be produced in the Cognac region of France. While this protected origin is one of the company's greatest competitive advantages, it also means production cannot be moved elsewhere if trade barriers are introduced. As a result, Rémy Cointreau is particularly vulnerable to tariffs, trade disputes, and protectionist policies between major economies. In recent years, French cognac has been directly affected by trade tensions. China imposed anti-dumping measures on European brandy during its trade dispute with the European Union, while the United States introduced tariffs on European wines and spirits. These measures increase prices for consumers, reduce competitiveness, and can significantly pressure both sales volumes and profit margins. Macroeconomic uncertainty can also affect Rémy Cointreau indirectly through its distribution partners. Higher interest rates and weaker economic conditions encourage distributors and retailers to reduce the amount of inventory they hold, resulting in fewer orders from Rémy Cointreau even if consumer demand has not changed significantly. This can create periods where sales temporarily decline as inventories across the distribution network are adjusted.

Changing consumer preferences are a risk for Rémy Cointreau because the company's success depends on consumers continuing to value premium spirits and the occasions on which they are traditionally consumed. While premiumization has been a powerful growth driver for many years, consumer tastes and lifestyles continue to evolve. Changes in demographics, health awareness, social habits, and recreational preferences could reduce demand for traditional spirits over time, particularly among younger generations. One of the biggest long-term trends is the growing focus on health and wellness. Consumers are becoming more conscious of what they eat and drink, and many are trying to reduce their alcohol consumption as part of a healthier lifestyle. This has contributed to the rapid growth of low-alcohol and alcohol-free beverages, while movements such as "sober curious" have become increasingly popular. Although many consumers continue to enjoy premium spirits, drinking occasions have become less frequent for some groups, creating a headwind for companies whose portfolios are concentrated in traditional alcoholic beverages. The growing use of GLP-1 medicines such as Ozempic and Wegovy could reinforce this trend. While these medicines were developed to treat diabetes and obesity, an increasing number of studies suggest they may also reduce cravings for alcohol. Many users report drinking less while taking these treatments, and researchers continue to investigate whether the medicines directly affect the brain's reward system. If GLP-1 therapies become widely adopted over the coming decade, they could contribute to a structural decline in alcohol consumption, particularly in markets where these medicines become broadly available. Changing recreational habits also represent a potential risk. Cannabis has become increasingly legal and socially accepted in several countries, particularly among younger consumers. For some people, cannabis is becoming an alternative to alcohol for relaxation and social occasions. At the same time, younger generations such as Gen Z generally consume less alcohol than previous generations and are often more interested in experiences, moderation, and overall well-being than heavy drinking. If these habits persist as younger consumers age, long-term demand for premium spirits could be lower than in previous generations. Public health initiatives may further influence consumer behavior. Governments around the world continue to introduce stricter alcohol regulations through advertising restrictions, higher excise taxes, health warning labels, and campaigns encouraging lower alcohol consumption. While these measures are intended to improve public health, they can also reduce demand for alcoholic beverages over time and make it more difficult for premium spirits companies to attract new consumers.

Reasons to invest

The RC Forward plan is a reason to invest in Rémy Cointreau because it is a comprehensive transformation program designed to make the company more efficient, more agile, and less dependent on favorable market conditions. Rather than simply waiting for the cognac market to recover, management is taking proactive steps to improve how the business operates. The goal is to simplify the organization, accelerate decision-making, strengthen commercial execution, and create a company that can deliver stronger growth and profitability across different market environments. One of the most important objectives of RC Forward is to improve sales execution. Management believes Rémy Cointreau has significant opportunities to generate higher sales without relying solely on stronger consumer demand. The company is working to improve how its products are distributed, how it collaborates with distributors, how it manages pricing, and how effectively it converts consumer demand into actual sales. In key markets such as the United States, management also plans to strengthen its route-to-market strategy and expand into smaller bottle formats that appeal to a broader range of consumers. These initiatives should help the company gain market share while supporting long-term revenue growth. The program also aims to improve profitability by making the organization more efficient. Management expects to generate approximately €100 million of additional value over the next three years through better commercial execution, procurement savings, and a simpler operating model. Procurement will become more centralized, allowing the company to negotiate better terms with suppliers, improve spending discipline, and create efficiencies across its brands. At the same time, internal processes are being simplified so employees can spend less time navigating organizational complexity and more time focusing on customers and growing the business. Another attractive aspect of RC Forward is its focus on capital allocation. Management has repeatedly emphasized that the program is not primarily about reducing costs but about freeing up resources that can be reinvested into the company's strongest brands and most attractive growth opportunities. By improving efficiency, Rémy Cointreau expects to generate more cash that can be invested in marketing, brand building, innovation, and expanding its global presence. This approach should strengthen the long-term competitiveness of brands such as Rémy Martin, Cointreau, and Bruichladdich while also supporting higher profitability. RC Forward also places greater emphasis on accountability and faster decision-making. Management is simplifying the organizational structure, reducing internal silos, and giving employees clearer responsibilities. This should allow the company to respond more quickly to changes in consumer demand, competitive dynamics, and market conditions. For a premium spirits company operating across many regions and brands, greater agility can become an important competitive advantage. Finally, I appreciate that management is taking action rather than relying on an eventual recovery in the cognac market. While a rebound in demand would certainly benefit Rémy Cointreau, RC Forward is designed to improve the business regardless of the broader economic environment. By strengthening execution, improving efficiency, generating additional cash flow, and creating a more agile organization, the program has the potential to make Rémy Cointreau a stronger and more resilient company over the long term.

Innovation is a reason to invest in Rémy Cointreau because the company continuously develops new products, formats, and consumption occasions that help keep its brands relevant and support long-term growth. Consumer preferences and drinking habits continue to evolve, particularly among younger generations, making innovation increasingly important for premium spirits companies. Rather than relying solely on the strength of its heritage, Rémy Cointreau is investing in new products and experiences that attract new consumers while remaining true to the premium positioning of its brands. One important area of innovation is expanding the occasions on which consumers enjoy the company's products. Historically, cognac has often been associated with formal celebrations or after-dinner drinking. Management believes there are significant opportunities to broaden its appeal by positioning cognac as a more versatile spirit that can be enjoyed in cocktails, social gatherings, and casual occasions. By creating new ways for consumers to enjoy its products, Rémy Cointreau can increase both the frequency of consumption and its addressable market. The company is also innovating through new product formats. Consumer demand has increasingly shifted toward convenience, mixology, and ready-to-drink beverages, particularly among younger consumers. Rémy Cointreau has expanded its innovation pipeline to include ready-to-drink products, new serving formats, and innovations across both its Cognac and Liqueurs & Spirits portfolios. These initiatives allow the company to participate in some of the fastest-growing categories within the spirits industry while introducing its brands to consumers who may not have previously considered traditional premium spirits. Innovation also plays an important role in recruiting new consumers. Management has announced that it is developing a breakthrough Rémy Martin innovation scheduled for launch in the United States that is specifically designed to attract new drinkers and create additional consumption occasions. While management has shared few details, it has indicated that the product will draw on Rémy Martin's nearly 300-year heritage while offering a more accessible entry point into the brand. Beyond Cognac, Rémy Cointreau continues investing in innovation across several of its other brands. Cointreau remains well positioned to benefit from the growing popularity of cocktails and home mixology, while The Botanist continues expanding within the premium gin category through new consumer experiences and brand activation. Bruichladdich also benefits from ongoing product innovation alongside a more flexible pricing strategy that allows the company to adapt more effectively to changing market conditions. Perhaps most importantly, Rémy Cointreau is changing how innovation is developed. Management has established a dedicated Innovation Lab and has made innovation a strategic priority across the organization. Product development is becoming increasingly consumer driven, with closer collaboration between global brands, regional teams, and local markets to better understand changing consumer preferences. Rather than launching a large number of incremental products, management is focused on creating fewer but more impactful innovations that strengthen brand desirability, attract new consumers, and generate meaningful long-term value. I believe this disciplined approach to innovation is particularly attractive because it allows Rémy Cointreau to preserve the heritage and exclusivity of its brands while adapting to changing consumer preferences. If the company successfully creates new consumption occasions, enters faster-growing product categories, and continues recruiting younger consumers, innovation could become an important driver of long-term growth while reducing its dependence on traditional cognac consumption.

Emerging markets are a reason to invest in Rémy Cointreau because they offer the company a significant opportunity to diversify its business and generate long-term growth beyond its traditional markets. While the United States and China remain its largest and most important markets, management believes many emerging markets are still significantly underpenetrated. This means Rémy Cointreau can grow by introducing its existing portfolio of premium brands to a larger number of consumers as incomes rise and demand for international luxury products increases. To capture this opportunity, management has made emerging markets a key pillar of its long-term strategy and is establishing a dedicated business unit to accelerate growth across these regions. China remains the company's largest long-term growth opportunity. Although the Chinese economy has been challenging in recent years, Rémy Martin has continued to strengthen its competitive position. During 2025, the brand gained an additional three percentage points of market share, driven primarily by the strong performance of Rémy Martin CLUB. At the same time, the company further strengthened its leadership position in e-commerce. Management believes there is still considerable room for expansion because imported spirits account for only a small share of total spirits consumption in China. The company also plans to expand beyond its traditional stronghold in Guangdong into other provinces, allowing it to reach a much larger customer base over time. Rémy Cointreau also sees opportunities to broaden its business in China beyond cognac. Cointreau is expected to benefit from the growing popularity of cocktail culture and more casual social occasions, while Bruichladdich is well positioned to capitalize on the increasing interest in premium whisky among Chinese consumers. By growing these brands alongside Rémy Martin, the company can diversify its Chinese business and reduce its dependence on a single product category. India represents another attractive long-term opportunity. The country has a rapidly expanding middle class with growing purchasing power and increasing interest in premium international brands. To strengthen its position, Rémy Cointreau introduced a new route-to-market model that should improve distribution and commercial execution. While India remains a relatively small contributor today, management believes it has the potential to become an important growth market as premium spirits consumption continues to increase over the coming decades. Management also sees attractive opportunities across Africa, Latin America, the Middle East, and Southeast Asia. In Africa, the successful launch of Rémy Martin VS in South Africa provides a foundation for expanding the brand over time. In Latin America, markets such as Brazil and Mexico are benefiting from growing demand for premium spirits, and management has increased its focus on the region by creating a dedicated commercial organization. The Middle East offers opportunities through luxury hospitality, tourism, and duty-free retail, while Southeast Asia continues to benefit from rising incomes and increasing demand for premium international brands. What makes this opportunity particularly attractive is that it is not dependent on creating new brands. Rémy Cointreau already owns globally recognized premium brands with strong heritage and pricing power. The challenge is primarily expanding distribution, increasing brand awareness, and creating new drinking occasions in markets where the company is still relatively underrepresented. If management executes successfully, emerging markets could become an increasingly important driver of both growth and diversification over the coming years.

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Valuation

Now it is time to calculate the share price. I perform three different calculations that I learned at a Phil Town seminar. If you want to make the calculations yourself for this or other stocks, you can do so through the tools page on my website, where you have access to all three calculators for free.

The first is called the Margin of Safety price, which is calculated based on earnings per share (EPS), estimated future EPS growth, and estimated future price-to-earnings ratio (P/E). The minimum acceptable rate of return is 15%. I chose to use an EPS of 1,50, which is from fiscal year 2026. I have selected a projected future EPS growth rate of 14%. Finbox expects EPS to grow by 14,3% in the next five years. Additionally, I have selected a projected future P/E ratio of 28, which is twice the growth rate. This decision is based on Rémy Cointreau's historically higher price-to-earnings (P/E) ratio. Finally, our minimum acceptable rate of return has already been established at 15%. After performing the calculations, we determined the sticker price (also known as fair value or intrinsic value) to be €38,49. We want to have a margin of safety of 50%, so we will divide it by 2. This means that we want to buy Rémy Cointreau at a price of €19,24 (or lower, obviously) if we use the Margin of Safety price.

The second calculation is known as the Ten Cap price. The rate of return that a company owner (or stockholder) receives on the purchase price of the company essentially represents its return on investment. The minimum annual return should be at least 10%, which I calculate as follows: The operating cash flow last year was 91, and capital expenditures were 37. I attempted to analyze their annual report to calculate the percentage of capital expenditures allocated to maintenance. I couldn't find it, but as a rule of thumb, you can expect that 70% of the capital expenditures will be allocated to maintenance purposes. This means that we will use 26 in our calculations. The tax provision was 31. We have 52,3 outstanding shares. Hence, the calculation will be as follows: (91 – 26 + 31) / 52,3 x 10 = €18,36 in Ten Cap price.

The final calculation is called the Payback Time price. It is a calculation based on the free cash flow per share. With Rémy Cointreau's Free Cash Flow Per Share at €1,03 and a growth rate of 14%, if you want to recoup your investment in 8 years, the Payback Time price is €15,54.

Conclusion

I believe Rémy Cointreau is an intriguing company with good management. It has built a moat through its portfolio of luxury brands, protected geographic origins, decades of aging expertise, and long-standing relationships throughout its supply chain. Rémy Cointreau's ROIC is lower than I would ideally like, reflecting both the capital intensive nature of the cognac business and the recent downturn in demand. While I expect ROIC to improve as inventories become better aligned with demand and the RC Forward transformation plan supports higher profitability and greater capital efficiency, I do not expect the company to consistently generate the double digit returns achieved by the highest quality premium consumer businesses. Rémy Cointreau's free cash flow has historically been volatile because the company must invest in spirits that often age for many years before they can be sold. While I expect free cash flow to improve as inventory investments become better aligned with demand and the RC Forward transformation plan strengthens cash generation, I also expect it to remain more volatile than that of most premium consumer companies because of the long aging process required for cognac. Rémy Cointreau's supply chain is inherently difficult to replicate because many of its products can only be produced in specific regions using local raw materials and traditional methods. While this strengthens the authenticity and exclusivity of its brands, it also leaves the company more vulnerable to disruptions such as poor harvests and climate change. Rémy Cointreau is highly exposed to macroeconomic and geopolitical risks because premium spirits are discretionary purchases that consumers often reduce during periods of economic uncertainty. The company's reliance on the United States and China, combined with its exposure to tariffs and trade disputes, makes its sales and profitability particularly sensitive to changes in consumer spending and global trade policies. Changing consumer preferences are a risk because growing health awareness, moderation trends, and shifting social habits could reduce long term demand for premium spirits. In addition, the increasing adoption of GLP 1 medicines, the rising popularity of low and no alcohol beverages, and changing preferences among younger consumers could further pressure alcohol consumption over time. The RC Forward plan is a reason to invest because it aims to improve Rémy Cointreau's profitability, cash generation, and capital efficiency through better commercial execution and a simpler, more agile organization. Rather than relying solely on a recovery in the cognac market, management is taking proactive steps to build a stronger and more resilient business. Innovation is a reason to invest because Rémy Cointreau continuously develops new products, formats, and consumption occasions that help keep its brands relevant and attract new consumers. By expanding beyond traditional cognac occasions while preserving the heritage of its brands, the company can support long term growth and adapt to changing consumer preferences. Emerging markets are a reason to invest because they provide Rémy Cointreau with a long runway for growth beyond its traditional markets. By expanding the distribution of its existing premium brands in underpenetrated regions such as China, India, Latin America, Africa, and the Middle East, the company can drive long term growth while becoming less dependent on any single market. I believe there are many things to like about Rémy Cointreau, and if you are looking for exposure to the premium spirits industry, it is one of the highest quality companies available. Buying shares at the Margin of Safety price of €19 could prove to be an attractive long term investment.

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