Rémy Cointreau Group

Rémy Cointreau Group

21, Boulevard Haussmann
Paris, 75009
France
Telephone: (+33) 01 44 13 44 13
Fax: (+33) 01 45 62 82 52
Web site: http://www.remy-cointreau.com

Public Company
Incorporated: 1724 (Rémy Martin), 1849 (Cointreau)
Employees: 1,945
Sales: EUR 905.3 million ($1.08 billion) (2005)
Stock Exchanges: Euronext Paris
Ticker Symbol: RCO
NAIC: 312130 Wineries; 312140 Distilleries

Acclaimed the world over for its Rémy Martin cognacs, the group Rémy Cointreau Group is also a leading producer and distributor of liqueurs, spirits, wine, and champagne. The company's VSOP, XO Excellence, top-of-the-line Louis XIII, and other cognacs are enjoyed throughout the world. Rémy Cointreau produces and distributes fine champagnes under the Piper-Heidsieck and Charles Heidsieck labels. Rémy Cointreau's family of liqueurs and spirits include the famed Cointreau, a white liqueur based on orange peels, as well as the passion fruit-based Passoä, and rums under the Mount Gay, Metaxa, and St. Rémy brands. Rémy Cointreau also built up an impressive worldwide distribution network.

ORIGINS

Founded in 1724, Rémy Martin would hold a prominent place in the growth and definition of the cognac category. Established near the town of Cognac, in the Charentes region north of Bordeaux, Rémy Martin developed a reputation for the singularity of its brandy. This singularity would soon be recognized by law. In 1850, a direct correlation was made between the Cognac region's soil and the quality of the area's "eaux de vie." This correlation would lead to the official delimitation of the Cognac region, into six zones surrounding the city of Cognac itself, in 1909. From there, the law fixed the various cognac appellations, beginning in 1936. Rémy Martin, purchasing from some 2,000 vineyards in the region, concentrated on the highest appellation of "fine champagne Cognac," which required that at least 50 percent of the cognac's contents came from the Grande Champagne zones immediately bordering Cognac.

Rémy Martin remained focused on its line of cognacs until well into the 1960s; the company had remained relatively small, however, ranking only 25th among the region's cognac houses. The death of André Renaud, inheritor of the Rémy Martin tradition, in 1965 would lead the company to the next phase in its growth, that of developing a worldwide distribution network. Renaud's will bequeathed the company to his daughters, with 51 percent going to oldest daughter Anne-Marie Hériard Dubreuil, and 49 percent going to her younger sister Geneviève Cointreau. This development would also represent a first step in the later merger between the Rémy Martin and Cointreau families—and set the stage for a long-running family feud: Geneviève Cointreau was married to Max Cointreau, one of the heirs of the popular French liqueur. André Hériard Dubreuil, husband of Anne-Marie and majority shareholder, was named president of the company, taking active control of operations, while Max Cointreau was named director-general.

The Cointreau company had been founded by Edouard Cointreau and his brother Adolphe near the town of Angers in 1849 to produce a white liqueur, flavored with orange peel, that would grow to become one of France's most popular specialty drinks, particularly with its ready status as a mixer in cocktails. Cointreau, too, would remain entirely a family-run operation. In 1948, a new generation of Cointreaus took over the company's leadership—brothers Robert and Max, and their cousin Pierre—dividing the running of the company among them, with Pierre overseeing the Angers factory, Robert in charge of developing international development, and Max in charge of the distribution network.

Max Cointreau's marriage to Rémy Martin heir Geneviève in 1946 would lead the two companies to a combining of forces in the late 1960s. Both companies were seeking to expand their operations, if only to maintain their independence in an industry that was beginning to show signs of consolidation. In 1969, Cointreau and Rémy Martin joined together to form a distribution network to develop both companies' brands worldwide. In the 1970s, both Cointreau and Rémy Martin would begin expanding their product offerings, acquiring brands and production and distribution agreements to offer a more extensive line of alcoholic beverages.

In 1973, Cointreau acquired Picon, an orange-peel and quinine-based aperitif invented in 1837, as well as the rums of Saint James de Martinique. In the early 1980s, Cointreau would also add the Scotch whiskey Glenturret and the Izarra and Clé des Ducs lines of liqueurs; the company was also preparing new products, including a peach-flavored liqueur Péché Mignon, introduced in 1983, and the passion fruit-flavored liqueur Passoä, launched in 1987. For its part, Rémy Martin focused on expanding its cognac distribution, while acquiring the first of its champagne labels, Krug, in 1977, and diversifying into Bordeaux wines, acquiring the De Luze wine purchasing and exportation firm in 1980. In the mid-1980s, Rémy Martin added two new champagne labels, Charles Heidsieck and Piper Heidsieck, and toward the end of the decade added the Italian liqueur Galliano and the Barbados-based Mount Gay brand of rum. By the late 1980s, Rémy Martin, under André Hériard Debreuil's leadership, had raised itself to the position of the third largest cognac house. By then, Rémy Martin's sales had topped FRF 4 billion.

LEADERSHIP CHALLENGES BEGIN IN 1978

Trouble was brewing in the Cointreau family, however. In 1973, Max Cointreau installed son André as head of the newly acquired Picon label. Yet André Cointreau's leadership was called into question by other members of the Cointreau family, in particular by Robert Cointreau. With 40 percent of the company's stock against the 20 percent each held by Max and Pierre, Robert Cointreau called for an audit of the company's operation in 1978, and restructured the company under a holding company—ending the three-member governance of the company—in which he took majority control. At the same time, Robert instituted an amendment in the company's charter restricting sales of the family-held shares to a third party. While Pierre was named president of the new holding company, Max Cointreau was named president of Cointreau S.A., which continued to represent some 70 percent of the company's sales of FRF 1.6 billion.

COMPANY PERSPECTIVES

Rémy Cointreau offers the connoisseur a unique and rare range of premium wine and spirit brands, known and recognised throughout the world. Rémy Cointreau is committed to constant improvement and innovation. The Group continues to add value to its brands, while remaining true to its long term in goals. Rémy Cointreau stands out as a "quality benchmark" in the wines and spirits market and anticipates and interprets the demands of contemporary consumers. The success of the Group's brands is due to a unique mix of prestige and pleasurable discovery, the demand for perfection and contemporary aspirations, and their excellence.

Max Cointreau would not remain long as president of Cointreau—in 1982, Robert and Pierre joined together to relieve their relative of his position. Max Cointreau, in turn, threatened to sell off his 20 percent of the company to a third party, leading Robert and Pierre and the other family shareholders to harden the restrictions on stock sales to third parties. Max Cointreau was effectively forced out of all control of the company. The feuding within the family ranks was dampening the position of the otherwise healthy company. As the battle for control raged on, the company's distribution activities fell into disarray. In 1985, however, the company moved to improve its distribution position, forming a partnership with IDV and Cinzano.

Max Cointreau, meanwhile, was faring no better on the Rémy Martin side. Tensions between the two sisters—and their husbands—flared by the early 1970s. In the late 1960s, Max Cointreau was already suggesting a combination of the Cointreau and Rémy Martin operations—envisaging himself at the lead of the combined groups, a vision that undoubtedly ran counter to those of Robert and Pierre Cointreau on one side, and André Hériard Debreuil on the other. By 1973, Max Cointreau, running for local office, reportedly suspected his brother-in-law André Hériard Debreuil of backing an opposing candidate. Cointreau won the election, but the tension among the family was mounting. The death of Anne-Marie and Geneviève's mother added to the simmering battle for succession of the family operation, with Max and Geneviève chafing under their minority position. The tension finally erupted into an all-out feud in the early 1980s, when the Hériard Debreuils sought to increase the company's capitalization, a move opposed by the Cointreaus. A flurry of court battles—some 22 or more—ensued, lasting until the end of the decade.

A 1989 MERGER

The parallel feuds with Max Cointreau had, perhaps, another effect: forging closer relations between Cointreau, led by Robert and Pierre, and Rémy Martin, led by André Hériard Debreuil. Faced with the growing consolidation of the beverage distribution industry, and competition against such industry giants such as Guinness, Seagrams, and Grand Metropolitan, Cointreau and Rémy Martin reinforced their joint distribution activities, forming partnerships especially focused on the Far East and the U.S. markets. The agreement would provide a boost to Cointreau, which had had only limited success in these markets. For Rémy Martin, which had based much of its growth on conquering these markets—carrying the company to the number three position in cognac sales—the addition of the Cointreau labels enabled it to present a full line of beverages. In 1988, the two companies further strengthened their links when Robert and Pierre Cointreau purchased 10 percent of Rémy Martin's stock.

That link proved to be a bridge in November 1989 when Rémy Martin and Cointreau announced their agreement—kept secret from Max Cointreau and sons—to merge the two companies. Effected in 1990, the merged operations soon adopted the new name of Rémy Cointreau. Soon after the merger, Max Cointreau and his family sold off their shares—19 percent of Cointreau and 49 percent of Rémy Martin—to competitor Grand Metropolitan.

KEY DATES

1724:

Establishment of the Rémy Martin House of Cognac.

1849:

Establishment of Cointreau & Cie by Adolf and Edouard-Jean Cointreau in Angers.

1924:

Acquisition of E. Rémy Martin & Cie by André Renaud.

1965:

André Hériard Dubreuil succeeds his father-in-law André Renaud.

1970:

Beginning of worldwide distribution under the network Rémy Associés.

1980:

Rémy Martin acquires the merchant house De Luze in Bordeaux.

1985:

Rémy Martin acquires the Charles Heidsieck Champagne house.

1988:

Rémy Martin acquires the champagnes Piper-Heidsieck Champagne houses.

1989:

Rémy Martin acquires the brands Galliano and Mount Gay Rum.

1990:

Merger of Rémy Martin & Cie and Cointreau SA.

1991:

Creation of the Rémy Cointreau Group.

1998:

Dominique Hériard Dubreuil becomes chairman and CEO.

2000:

Acquisition of the vodka and spirits group called Bols NV.

2004:

Dominique Hériard Dubreuil steps down as CEO and remains as chairman.

2006:

Rémy Cointreau sells Bols to focus on its key brands.

The merger created a company with more than FRF 6 billion in annual sales, and an extensive worldwide distribution network boasting many of the industry's most respected brands. The first half of the 1990s proved difficult years for the company: the recession of the early years of the decade, and its lingering effects on Europe, helped dampen sales of the company's luxury-oriented products. The slipping Japanese economy—an important market for Rémy Cointreau's cognacs—also hurt sales of the company's core revenue generator. Nevertheless, the company's overall revenues would post steady growth toward the middle of the decade, rising from FRF 6.4 billion in 1994 to FRF 6.8 billion in 1996. Rémy Cointreau's sales dropped FRF 622 million in 1998 as Asia's "tiger" economies continued to suffer. Industry analysts were suggesting that if something was not done soon to stop the company's rising costs and spiraling revenues, it would not survive.

1998 AND BEYOND

Salvation came in the form of Dominique Hériard Dubreuil, the daughter of André Hériard Dubreuil who took the helm as Rémy Cointreau's chairman and CEO in January 1998. Famous for her tough management and unwavering vision, along with her ability to transcend above family politics, Hériard Dubreuil began selling her company's less profitable subsidiaries to reduce debt. She also bolstered advertising for Rémy Cointreau's already successful key brands. In 1999 Hériard Dubreuil sold Krug Champagne for about $176 million, Bordeaux negociant Grands Vins de Gironde for $156 million, and the company's 40 percent stake in the barrel maker Seguin Moreau. To expand distribution she aligned Rémy Cointreau with Highland Distillers and Fortune Brands' Jim Beam to create a distribution joint venture called Maxxium Worldwide BV. Maxxium would grow to include Sweden's V&S Vin & Spirit AB, the makers of Absolut vodka, and distribute spirits globally to 35 countries excluding the U.S. and the Caribbean.

In 2000 Rémy Cointreau ventured into the vodka market when it acquired the Netherlands-based Bols NV, a distillery that made mostly vodkas but also gin and other drinks, including the popular Blue Curaçao liqueur. After the acquisition of Bols, Rémy Cointreau stopped acquiring and began consolidating. This strategy differed from the industry trend but helped narrow Rémy Cointreau's champagne and wine portfolio and tripled the operating profits of its four key brands in just two years. Although Rémy Cointreau was becoming more efficient, an industry analyst by the name of Canadean noted in a November 8, 2005, publication of the beverage industry news source Just-Drinks that by reducing its size, Rémy Cointreau had opened itself up to be acquired by a larger group.

In 2004 Hériard Dubreuil restructured the company's upper management. Jean-Marie Laborde became CEO. Hériard Dubreuil continued her tenure as executive chairman but no longer handled the day-today operations. She also continued supporting Rémy Cointreau's investor relations and ongoing business strategy. Even though sales had dropped at the start of the year, they had rebounded by July. Analysts were giving Hériard Dubreuil credit for reviving a company of which she also held a considerable stake. In March 2004 the Hériard Dubreuil family owned the company Androméde, which possessed 88.7 percent of Orpar SA, a company that owned 44.29 percent of Rémy Cointreau's capital. Other Rémy Cointreau shareholders included the General Public (30.69 percent), Arnhold and Bleichroeder (9.99 percent), and France's treasury (1.41 percent.)

Streamlining the company even more, in June 2005 Rémy Cointreau sold the rights to distribute and produce Bols vodka in Russia and Poland. Six months later it put the entire Bols brand up for sale. Hidde van der Pol, the international brand director for Bols, said in Just-Drinks, "Rémy Cointreau has stated that its main strategy is to focus on its very premium brands and that's where they're focusing right now." In March 2006 Rémy Cointreau announced that it had completed the sale of not just Bols but also its other Dutch brands, including Bokma, Coebergh, Corenwyn, and Pisang Ambon. It had also sold off its two Italian liqueurs, Galliano and Vaccari. Rémy Cointreau's key brands—Heidsieck Champagne, Piper Heidsieck, Cointreau liqueur, and Rémy Martin cognac—continued to grow. In April 2006 the company reported that its consolidated sales jumped 6.4 percent for the fiscal year in 2006 over the previous fiscal year. By focusing on its top-shelf cognacs, champagnes, and wines that had made Rémy Cointreau famous, the enterprise had become one of the largest drink groups in Europe.

                                        M. L. Coben

                                      Updated, Kevin Teague

PRINCIPAL DIVISIONS

Spirits; Liqueurs; Champagne; Partner Brands.

PRINCIPAL COMPETITORS

Allied Domecq plc; Diageo plc; Constellation Brands, Inc.; LVMH Moët Hennessy Louis Vuitton S.A.; Pernod Ricard S.A.; Bacardi & Company Ltd.; Beam Global Spirits & Wine, Inc.

FURTHER READING

"ABN Amro Unit Buys Liqueur Brands From Remy Cointreau," Dow Jones International News, March 9, 2006.

Barjonet, Claude, "Cointreau Contre Cointreau," L'Expansion, December 19, 1986, p. 71.

"First-Half Profits Soar At Rémy Cointreau." Just-Drinks, December 8, 2005.

Gallois, Dominique, "Une Querelle 'Quinze Ans d'Age,'" Le Monde, November 11, 1989, p. 44.

Iskandar, Samer, "Remy Cointreau Sees Return to Black." Financial Times, December 16, 1998, p. 26.

"Keep It In the Family—Part Four." Just-Drinks, November 8, 2005.

"Rémy Cointreau Nine-Month Sales Up—Just." Just-Drinks, January 18, 2006.

"Remy Sales Up But Core Brands Flat." Just-Drinks, October 20, 2005.