The bank’s analyst pointed out that it is probable that the company will signal that its organic sales growth for FY25 may not align with its medium-term goal of 4-7%.

Deutsche Bank’s own estimate stands at 2.1%, with the Bloomberg consensus at 5.3%. This adjustment comes in light of persistent difficulties and excess inventory issues in key markets such as the United States and China.

China has become a bit of a farce market for Pernod Ricard over the last few years. Their attempt to create an elite, VIP club, to essentially milk the top 1% of Chinese society, quickly blew up in their face when casks sales for their Chinese distillery, The Chuan, were undermined when the first bottling from The Chuan was actually made with imported Scotch. Staff members from The Chuan were actually recorded on video talking about this (the video was originally released on YouTube and LinkedIn before Pernod Ricard’s lawyers got it taken down)

This left the elite VIP customers of Pernod Ricard China, wondering what was wrong with the new make spirit from The Chuan if it had to be smothered with imported Scotch to make it good enough to bottle. Needless to say, they aren’t buying any more casks from The Chuan.

As for retail on the product. Within weeks of its release at an RRP of ¥888 (US$122), distributors were dumping it at less than half the retail price, with some distributors throwing it out of their warehouse door for as little as ¥400 (US$55) per bottle.

The revised price target by Deutsche Bank suggests a lack of confidence in Pernod Ricard’s growth prospects. Investors often rely on such assessments to make informed decisions regarding their holdings in the company’s stock.

The Pernod Ricard Share Target slash from Deutsche Bank provides an insight into the anticipated trajectory of Pernod Ricard’s sales growth, which is a significant factor for the company’s strategic planning and investor relations.

Pernod Ricard are not the only French alcohol producer feeling the pain. There are considerably bigger problems going on over at Remy Cointreau, where their share price has taken a pounding. You can read more about Remy Cointreau and their struggle if you CLICK HERE.

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2023 was a record year for them, batting in €1.548 billion in sales, demonstrating literally a 50% increase in just two years. 2021 was €1.010 billion in turnover. Gross profits were in 2023 were €429 million, not far off double the €236 million in 2021. Profit margins sat at 27.7% (up from 23.4% in 2021) and the net profit was €293 million, up from €144.5 million back in 2021.

Remy Cointreau Share Price Chart

The numbers on the annual reports for the last three years seem to be going in the opposite direction to the share price. Hence our question, WTF is going on at Remy Cointreau?

Friday 28th June 2024, Remy Cointreau shares were trading at a 52 week low on the US markets, dropping as log as $8.15 a share,

On a 3 year chart, the stock is down 56.46%. But it’s worse than that. Taking a chart back to September 1988, when Remy Cointreau first listed, and we’re talking about a stock trading 70.56% lower than it did 36 yeas ago. It completely defies logic.

Analyst ratings on the stock are all on the downside. UBS reduced their target price on June 7th 2024, after lowering its rating on Remy Cointreau as recently as April. JP Morgan rates RemY Cointreau as a SELL, reiterating that sell rating on June 6th 2024. Barclays lowered their target price on 10th April 2024, and the only big name to rate it as a buy is Deutsche Bank.

So what’s going wrong?

Firstly, it’s the perceived over dependency on Cognac, which, in the 2023 annual report was responsible for 71% of the sales of the entire company. That’s 71% across just two products, Remy Martin and Louis XIII – with no doubt the lions share of that being on Remy Cointreau.

Add in the complexity of 50% of revenue being “The Americas” (read “the USA”) which is very much dominated by Hennessy, and the dominos start to stack up. Hennessy have a 60% market share in the USA, putting out over 4 million cases of product into the land of stars and stripes. In the on-trade, Hennessy takes up 85% of cognac sales in Union Venues and it’s probably fair to say that this is a general trend across the US. Remy Martin ranks third, with 4 brands taking up the remaining 15% of cognac sales in Union venues.

Next we have the 33% dependency on “Asia-Pacific” – which doesn’t take a genius to realise that this mostly means China. Sure, there are markets in Taiwan and Singapore and a few other key cities, but we all know, China is the future for most alcohol producers.

China is worlds largest consumer market, 1.3 billion people. It’s music to the ears of shareholders. Even when you strip off the 50% of people that don’t drink alcohol, plus the women, the children and the old folk – you still have one of the largest markets for alcohol in the world.

But when you factor in the possible anti-dumping case against French Brandy (of which cognac falls under) and a pretty limp effort at developing the market by the in country team in China, there’s no sunshine and moon beams for Remy Cointreau in the PRC. (We’ll no doubt do an article on Remy Cointreau’s disasterous adventures in China in the near future – watch out for it, it will be a great read!)

There’s also the massive debt mountain they have stacked up over the last few years. They have been lashing out bounds like fun coupons, all of which are tradable for equity in the company – which either leads to non-trivial interest payments (which eats into profits and dividends) or share dilution. Either scenario isn’t nice for a long term investor.

What Can Save Them Now

Diversification! As everyone knows, you can’t put all your eggs in one basket – and currently Remy Cointreau has got pretty much all of it in just two. Cognac and the US of A. They need to develop other markets, faster (China for sure, but not with the current team) and other products, either by in house development or by acquisition.

More whisky – an American distillery or a new world distillery would be a really smart move right now. Hanging everything on Bruichladdich is too big a gamble. Sure, they have Westland, but that’s an American Single Malt whisky and way too new a category for the US market which is dominated by bourbon.

A journey “Back to the Future” with an investment in Waterford, led by Mark Reynier – one of the people that built up Bruichladdich to sufficient scale for Remy Cointreau to buy them out back in 2012.

Alternatively, a big bumper boost in growth by a merger or acquisition of another stable of brands. Campari would be too big (in fact, rumors are that Campari have been sniffing out a way to just swallow Remy Cointreau whole) but something like Camus could be a useful and strategic decision. Despite Camus being a tiddler, they have an amazing footprint in the China market, and put Remy Cointreau to shame. Putting Cyril Camus in the big seat to lead China, on a merged Remy Cointreau Camus would be the smartest move at the least cost.

No thanks needed Eric – you’re welcome to our free advice.

For more news about Remy Cointreau CLICK HERE.

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While we’re not really sure how a third anniversary warrants a bottling like this, we can understand the greed motivating a £10,000 ticket on a bottle. Oh, and of course, they need to recover some of the money spent on advertorials for this bottle.

This is the second limited edition bottling that has been released from Brora since it reopened, and this is only available for sale at the distillery itself. The 44 year old “Untold Depths” was distilled in 1977, aged in Warehouse 1, and it came into existence during the 12 years or so that Brora was using peated malt.

Brora 44 Marketing Blurb

“The second in a series of releases from the distillery, Untold Depths is a classic pairing of a gentle cask and medium peating, which explores the full depth of taste of which Brora is capable,” said Dr Craig Wilson, master blender.

“On the nose, the whisky holds waxy hints of fragrant incense and green grape skins drift through light peat smoke, then dried herb and scented oil slowly rising through a swirl of buttery toffee. Waxy-smooth, the sweet, lightly fruity taste reaches a long and fragrant finish with a pinch of white pepper.”

The launch of this bottling ties in with the fact that spirit produced when the distillery first reopened in 2021, is now 3 years old. It’s officially entitled to be called Scotch Whisky.

Although it won’t be bottled before there’s an age statement worth talking about, you can actually rock up to Brora for a tour and sample some of the whisky they have. If you’re feeling flush of course. Tasting isn’t just for anyone – it’s for those that shell out £900 for a 5 hour yawn fest entitled “Eras of Brora”. Yup – 900 quid to get a tinkle of 3 year old malt. Just to prove there’s no typing error there, we’ll just repeat that. £900 for a tour!!!

We aren’t really sure on what planet that makes sense, but it doesn’t here, on planet Earth.

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Just remember who broke the story that Bladnoch Slashes Production By 75% Thursday 27th June 2024, before anyone else steals it!

It’s been 9 years since Bladnoch was taken over by Australian entrepreneur, David Prior, after it was liquidated in 2014. Prior teamed up with Gavin Hewitt to form the new Bladnoch Distillery Limited on 9th December 2014.

It was originally called Pure Scott Limited, originally intended to be the vehicle to create the Pure Scott blended whisky for the Australian market, owned by the Australian parent company, Pure Scott Pty Limited, (registered in February 2014, ACN number 168 059 130). Hewitt came on board as a director on 25th June 2015, although later resigned on 14th September 2017 – only to get back on board on 1st January 2024. No, we don’t know what that’s all about either.

A quick skim around Companies House in the UK, and a gander at their last published accounts (20th December 2023, TOTAL EXEMPTION FULL ACCOUNTS is the interesting one) reveals a few items of concern. To make it easier, we have it for DOWNLOAD HERE.

Page 2 highlights include almost £33 million in short term debt (debt that has to be repaid within one year), another £14 million due after 1 year. There’s £1.5 million in a bank loan at a horrifying 7.49%, a “directors loan” of £11.7 million, a £12.1 million ABL facility (which has actually been increased to £16.5 million) and another £12.6 million from PFF (Prior Family Foundation) which rakes in a nice 7.49% per year earner, PLUS forex provisions.

£47 million, assuming it’s all around the 7.49% mark, is £3.5 million a year down the drain before Team Bladnoch even gets out of bed.

Here’s where the problems are:

On page 10, they have £15.2 million in stocks (raw materials, work in progress and finished goods) and £6.6 million in debtors. The stocks likely have a gross profit of £3 million and the debtors likely have gross profit of £1.5 million. Factor in the circa 40 headcount even at a modest average salary of £20K per year per head, and that’s £800K, plus basic running costs of the facility – there’s just not enough money left over to even repay the interest on their debt mountain – let alone to invest in casks, grains, yeast, and production costs to fill barrels. Now it’s logical to understand why Bladnoch Slashes Production. They don’t have enough pennies to produce anything!

There’s a whiff in the air…….that whiff of smoke, that usually hides a few mirrors.

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We’ll be coming back to update this post.

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While Remy Cointreau have a number of different alcohol brands, we’re only interested in their whisky brands, which currently consists of Bruichladdich and Westland.

They have a website HERE for the parent company. There is a website for Bruichladdich HERE. There is a website for Westland Distillery HERE.

For other news about Remy Cointreau – CLICK HERE.

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Seeing its potential, Walter Scott bought the up the name and the site in 1852, and rebuilt the distillery into its current condition. Later on in the Glendronach story 1920, Charles Grant, the youngest son of William Grant of Glenfiddich, bought it. It remained in the Grant family for 40 years when it was sold to Wm Teacher & Sons in 1967. Investment from Teachers saw the installation of a second pair of stills in 1967.

It passed into the ownership of Allied Distillers in 1976 when that firm purchased the Teacher’s estate. In 1991 it became a single malt brand and it was released as two 12-year-old expressions – one aged in ex-Bourbon, one in ex-Sherry. Considered a real innovation for the time, but the brand never received any serious uptake from malt lovers at that time.

The distillery was mothballed between 1996 and 2002, ending up with Pernod Ricard, who later sold it in 2008 to The BenRiach Distilling Co.

Since then, a new visitor’s centre has been opened and a new range of single malts has been released. It is fast becoming a favourite with Sherried malt lovers globally and has built a considerable following in Taiwan.

Glendronach is now under the ownership of Brown-Forman since 2016 along with its acquisition of The BenRiach Distillery Company from Pernod Ricard.

Glendronach Distillery Facts

Circa 1.4 million LPA, a 4 still setup (2 wash stills and 2 spirit stills – all with a 9,000 litre charge) and 9 wash backs believed to be 18,000 litres in capacity. It’s believed that there is a range of fermentation of between 60 and 96 hours, with malt from Optic and Concerto that is peated to less than 2 ppm. Fermentation comes from Mauri and is supplied in a liquid state.

The Range

Despite it being believed that only 20% of the whisky produced at Glendronach is actually used for single malt, there is a broad range of offerings. 4 age statements: 12 year (“Original”), 15 year (“Revival”), 18 year (“Allardice”) and a 21 year (“Parliament”).

As of (updated 27th Feb 2023) today, there are two travel retail bottlings. A 10 year old (“Forgue”) and a 16 year old (“Boynsmill”). There are also a number of special editions. A peated NAS whisky, a port wood NAS whisky, a cask strength NAS, a number of different small batch bottlings released under the name of Grandeur (typically 24 to 31 years old), and a 50 year old bottling.

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The Macallan History

Founded in 1824, The Macallan has been through 7 owners and a stock market listing to get to where it is today.  Starting with Alexander Reid in 1824, Priest and Davidson in 1847, James Stuart in 1868, Roderick Kemp (former owner of the Talisker distillery) in 1892, Roderick Kemp Trust in 1909, The Kemp Trust becoming a private limited company in 1966, a listing on the London Stock Exchange in 1968, Suntory mopping up 25% of the business in 1986, Highland Distillers buying the remainder of the business in 1996, then finally Edrington and William Grant and Son’s buying out Highland Distillers in 1999.

History in Scotch Blends

Macallan was almost entirely a whisky for blending.  In fact, it wasn’t until the 1980’s that Macallan even bothered to market their product as a single malt, primarily because there wasn’t even a market to sell their whisky for blends.

The 16% Cut

Macallan is marketed (heavily) as having the smallest cut of any Scotch whisky.  In fact, it’s claimed that only 16% of the spirit that comes out of the still actually goes into casks, with the other 84% magically vanishing.

Cynics see this as marketing fluff.  The theory is that the 84% goes into the next charge on the still, and the real meaning of the 16% is that consumers only get 16% of VALUE from what they actually paid for.

This is further underpinned by the mass of NAS (non-age statement) whiskies cranked out by Macallan, and their range extended into many alternatives from cheaper casks, such as virgin oak and ex-bourbon, abandoning their legacy of age statement, 100% sherry cask matured whisky.

The Macallan’s New Distillery

In 2013 The Macallan announced a new distillery.  Taking inspiration from Teletubbies and Hobbits, their partially underground design was a first in many ways – most of them being memes and jokes.

The initial budget of £100 million became £140 million.  We can’t quite work out what the money was spent on.  Can you?

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The site grew into a small community with housing, a hall, greenhouses, a bowling green and a school for 100 pupils.

Like most distilleries it took the pains of the recessions in the 1920, but it was kept open until eventually becoming part of the DCL and Hiram Walker. Production increases in the 1960’s and 1970’s, when blends started to grow again in popularity. Demand for Ardbeg malt outstripped its capacity to malt and dry its own malt, resulting in peated malt being bought in from Port Ellen maltings from 1974.

Hiram Walker took full control in 1979, buying out DCL’s 50% share for £300,000, and everyone else’s holdings at the same time. By that time, blends were once again on the slide and, to compensate for the drop in demand for smoky malt, an unpeated single malt (Kildalton) began to be produced.

Just 2 years later, in 1981 the distillery was mothballed, but restarted again in 1989, albeit on an intermittent basis, by which time it had joined Laphroaig in the Allied Distillers stable.

In 1996, it was silent once more, but saved a year later by Glenmorangie, who paid £7m for the distillery and stock. By this time, Ardbeg had built its reputation as one of the cult single malts. Glenmorangie’s task therefore was both to manage expectations, eke out the remaining stock, and start recreating the brand.

Under Glenmorangie, the first age statement release was a 17-year-old. It wouldn’t be until 2008 for its own Ardbeg 10 to appear. From 2004, however, there had been incremental releases: ’Very Young’, ‘Still Young’ and ‘Almost There’ showed the work in progress.

Ardbeg Distillery Facts

Circa 1.1 million LPA of production capacity, a 3 still setup, 2 wash stills (18,000 litre capacity) and 1 spirit still (16,900 litre capacity), with 6 wash backs believed to be around 23,000 litres in capacity. It is believed that fermentation is somewhere between 50 and 56 hours with malt from a number of sources but primarily Islay concordat (from Port Ellen) peated to between 50 and 65 ppm. Fermentation yeast source is unknown.

The Range

Ardbeg distillery cranks out a standard core age statement bottlings, but the vast majority of production is dedicated to ultra premium limited edition bottlings.

There is an 8, a 10, a 19 and a 25 as the core range (although it’s likely that the 5 year will become a regular thing). Other offerings are bottlings that started as limited editions and are now a regular thing – An Oa, Uigeadail and Correyvreckan.

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Now into his third decade in the alcohol industry, Bonnington served time at Bass, Scottish and Newcastle, Whyte and Mackay, and Fior Brands, before clocking up almost a decade with Edrington.

In recent years, Bonnington has been doing a few side gigs including Founder/Owner of The Whisky Cellar Limited and, director and co-owner of Colonsay Beverages Limited.

In his own words:

“Following 18 successful years working within the drinks industry, I decided to go into self employment specialising in building value growth for small start up drinks businesses. This is a real passion of mine and my directorships at Colonsay Beverages and The Whisky Cellar have already demonstrated my ability to create and implement highly effective brand strategies that deliver exponential growth.

My breadth of experience coupled with a hunger to see products and small businesses grow and a passion for every brand within my influence is a formidable combination.

Specialties: Brand management, brand strategy, export management, route to market, new company set up, business development, branding, new product development, P&L management.”

So the question we have here at Whisky Galaxy is simple. Why are Bladnoch going into the bulk spirits market? Are they stuck with loads of product that they just can’t sell, and are looking to dump it? Equally important, why does this role only warrant what is essentially a part-time contractor, no doubt on a commission only deal? Is there really that little confidence in the quality of the product for it to even sell as bulk?

These are questions that will no doubt end up with some answers over the coming months.

You can connect with Keith on LInkedIn if you CLICK HERE.

To read more about Movers and Shakers – CLICK HERE. To read more about Bladnoch, CLICK HERE.

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