Rémy Cointreau has seen a more than 10 percent decline in organic net for its Rémy Martin Cognac as a result of China’s crackdown on luxury spending.
Organic sales are the product of internal processes of a firm and are generated solely within the firm. Revenue streams resulting from mergers, takeovers, acquisitions and borrowing do not count towards organic sales since they are tied to activity outside the firm's internal finances.
The austerity plan, instituted last December by the Chinese government to fight corruption and bribery, is reducing the amount of luxury goods the Chinese are buying, and slowing the expansion plans of global luxury good brands in China.
Rémy Cointreau however claims the drop in sales “does not in any way detract from the brand’s fundamentals (and) did not constrain Rémy Martin’s strategic and targeted investment in this region.”
In a statement released by the company. “In the third quarter, Rémy Martin is expected to remain adversely affected by certain measures taken in China and by the level of retail inventories. Nevertheless, the group remains confident in the brand’s exceptional fundamentals in Asia, and in its long-term development in China.”
Sales of Remy Martin Cognac, which achieved momentum in the US and Europe in the six months to 30 September 2013, in fact declined by 8.3% in the second quarter.
The slowdown significantly impacted the group’s overall organic sales for the period, which were down 3.6% to €558 billion ($902 billion) compared to the 13.3% increase achieved in the same period in 2012.