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Investing.com -- The former director of Rémy Cointreau, in a recent interview with In Practise, revealed that Louis XIII, a premium cognac in their portfolio, is the highest contributor to the company’s profit. The gross margin for Louis XIII is reported to be between 80% and 90%, a figure that’s typical in the dark spirits industry.
The former director also spoke about the high absolute value of Louis XIII, stating that the high net worth target market constitutes about 15% to 20% of the brand’s business. The company manages this segment through a worldwide network of around 15 people, who use agents to establish connections with high net worth individuals. He recalled a conversation with a contact in Miami who had partnerships with yacht and private jet dealers. As part of the agreement, Louis XIII is offered to clients each time they rent a yacht, initiating the first contact, and then the company aims to build relationships with these yacht or private jet owners.
The former director also touched on the barriers to entry in the cognac market. He stated that entering this market requires long-term planning, with the right eau de vie set aside decades in advance to create the cognac. He mentioned Richard Hennessy, a cognac that was born in the 1990s, and how it has been gradually approaching the quality of Louis XIII. However, he added that they still lack sufficient quantity of eau de vie set aside, which is a process that takes time to build.
Like Birkin bags, Louis XIII bottles appreciate over time, with some buyers purchasing around 10 decanters, consuming one, and retaining the rest for future use. The reason behind this behavior is that Louis XIII holds and even increases its value over time. Prices rise between 5% and 10% annually due to scarcity, inflation, and other factors. Over a period of five to ten years, the product’s value can increase by 20%, 30%, or even 50%.
Lastly, the former director highlighted the family’s long-term focus on the brand. The family’s primary objective is not to increase the value of their shares or make money, but to pass the business on to the next generation. Dominique, the president before her daughter Amélie, once clarified that she was not the owner of Louis XIII, but a steward, aiming to pass Louis XIII to the next generation and support the business.
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