This interview was published for Global Drinks Intel subscribers in October. For details on how to join them, click here.
Earlier this month, Global Drinks Intel sat down with Rémy Cointreau’s CEO, Eric Vallat, at the TFWA World Exhibition & Conference in Cannes. During our time together, we heard more about the trials and tribulations that come with assuming the helm as a global pandemic looms on the horizon.
[Rémy Cointreau will report its results for the three months to the end of September on 27 October. Consequently, Vallat was not able to comment on the company’s current performance]
Global Drinks Intel: You started as group CEO in December 2019, just before the pandemic spread worldwide. Have you felt like you’ve been in permanent crisis mode since then?
Eric Vallat, CEO of Rémy Cointreau: It shaped the beginning, for sure. Like everybody else, we really weren’t expecting it, so we had to reinvent the ways we were working and organising ourselves. I recall in April [2020], the order book was at -75% and we had years of stock. Three months later, things were booming again and we were short of stock. So, it was quite an interesting first few months.
The Covid pandemic also didn’t allow me to visit the countries that I was meant to, so I started my first travel tours by video.
GDI: Did those tumbling sales in your first year in charge give you sleepless nights?
EV: Yes, but when it’s due to totally unexpected external factors – and the whole industry is in the same position – it’s a bit different. The world felt like it was collapsing at the time – all of everybody’s factories were closed at the same time. I didn’t feel like I was responsible for it, plus I had only just joined the company. The question is, how do you fight against this to protect your P&L, to protect your teams and to prepare the future?
I’m fortunate to work for a family shareholder, who has a very long-term view of the business. The first thing they told me was that whatever happened, they wanted me to keep working on my ten-year vision. That helped. When you’re overwhelmed by 300 topics per day to deal with, having this ambition to still look to the future is a good driver.
GDI: Can you tell us more about your ten-year plan?
EV: The plan is designed to dream. As Oscar Wilde once said: “Shoot for the moon. Even if you miss, you’ll land among the stars.” We aim to be the leader in exceptional spirits.
This isn’t a new approach – It’s been 100 years since the great grandfather of our current shareholders chose to go for the most prestigious Champagne cru for his Cognac – they’re the most expensive but also the ones that age the best. Then, their grandfather chose to stop VS to focus on VSOP and above. At that time, VS was 80% of the business, so that was a very daring move.
While I’m not the one who said we’re going to be the leader in exceptional spirits – it’s been there for a while and that’s the beauty of being a family group – I’m the one who’s meant to turn it into a concrete project and translate it into a strategy.
Initially, the idea had been to achieve 65% of our sales from products above US$50. We removed this because the price is only the consequence of being exceptional. You end up being expensive, of course, because everything you do pushes prices up. But it’s not meant to be the driver as such – it’s the consequence. We removed this threshold because we wanted to include all brands in the strategy. Cointreau will never be above $50, for example, but it’s got a great gross margin and it’s one of our weapons for the future. We have a specific strategy by group of brands – our global priority brands, regional power brands and incubator brands. This is something that was new.
We’ve had great products for decades, but it’s also about having aspirational brands. It goes beyond the rationale of buying a product because the liquid is great. It’s also that the brand speaks to the consumer. That’s what unlocks pricing power for real, because it’s more emotional, and then you have the experience.
We believe we have the brands that can help us grow further than anyone else on these levels. For example, Louis XIII is probably the only true luxury brand in the spirits industry.
Our strategy allows for a retail approach that can take the expense to the next level. Cartier did this for jewellery in the 1960s, by progressively turning its wholesale business into more of a retail business. I’m not saying we’ll ever not be wholesale, I’m just saying we’ll push retail much further. We’ve opened stores on fashion floors next to Vuitton and they do well, because we share the same clientele. We’d like to go more direct with Louis XIII as the spearhead, while also improving in portfolio management. We’re very Cognac driven and we want to sell across the whole portfolio.
We also want to grow the value per case, obviously. I don’t really like the wording of ‘value per case’, but that’s basically it.
I’ve been formulating ten-year plans for decades and this is the first time that I’m ahead of my plan.
GDI: Are you looking to make Remy Cointreau recession proof?
EV: Like in every business, the lower the consumer’s purchasing power, the more they’re impacted by inflation. So, high-priced spirits resist better than low-priced spirits.
In our portfolio, we also have some entry price points that are expensive for some other companies. VSOP is high-end, for example, but it’s not luxury.
The economic context does have an impact, but it doesn’t challenge the ‘drink less but better’ trend, which is going to last for a long time. That may be driven by health concerns – I’ll drink less, but I’ll treat myself better – or by CSR topics – Regenerative agriculture, for example, is going to cost more and probably deliver less in volume.
There might be ups and downs on the road, but it’s the right strategy. It has been for 100 years, and I still think it is now.
GDI: We’ve seen a lot of movement at the chief executive level this year in beverage alcohol. Why do you think that is?
EV: I can’t speak for every one of them. Obviously, the unfortunate passing of Ivan [Menezes, former Diageo CEO], which was a shock, was very different from the others.
I don’t think they’re linked. Each company has its own story and some of these CEOs have been there for a long time. They’re also at varying ages. All I can say is I hope that you and I can still speak about Rémy Cointreau in ten years’ time.
GDI: With your current ten-year project, will you and I be reviewing it in 2029 or saying goodbye?
EV: I fully expect we’ll review! This business is about passion; the people you meet in the vineyards and in the plantations are passionate. I came from the fashion business and I must say, once I dived into this industry, I think I fell in love.
The family has a long-term view on the business. The only risk is they get tired of me, which could happen! Apart from that, I don’t see any reason why I cannot go on for longer. I’m still young!
This interview was published for Global Drinks Intel subscribers in October. For details on how to join them, click here.
