Dive Brief:
- Remy Cointreau said its net profit fell a whopping 62% to $84.89 million in the fiscal year ending March 31.
- The maker of Remy Martin cognac, Cointreau liqueur, and other champagne and spirits brands, blamed an anti-corruption campaign in China for the drop. Remy Martin cognac had become a preferred gift for civil servants in China until the government announced initiatives to halt gift-giving and the hosting of elaborate dinners to grease the wheels of commerce.
- The company's operating profit fell 39% as the company sought to reduce its inventory in China.
Dive Insight:
The good news here is that China's anti-corruption campaign might be working. And over the long term, that would be for the best for everyone who wants to do business globally.
Over the short-term, however, the makers of luxury goods are getting crushed by the move to clean up China. Companies like Louis Vuitton and Cartier have done quite well in China as their brands became preferred methods of paying off officials.
But the fact that China is cleaning up its act doesn't mean that there's no room for luxury good sales there. As rival cognac maker Pernod said this week, the evidence suggests China is becoming a "normal" emerging market with normal growth.