There are some products that lend themselves to a touch of snobbery. Cognac is one of them. To many, cognac and brandy are pretty much the same poison, but tell that to a proud producer from the Cognac region in south-west France and the curl of the lip followed by a snort and a sniff, will tell you where you went wrong.
"You can make brandy from cabbages, but Cognac is special," the folks from Charente-Maritime will rush to correct the error. In addition, some companies from the region have a patient and well-designed strategy aimed at developing their brands at the high-end of the global market. One of these is the firm we are examining this morning, Rémy Cointreau.
Rémy, of course, produces the famous Rémy Martin and Louis X111 Cognacs and has a portfolio of 12 unique brands including Cointreau liqueur, Greek Metaxa spirit, Mount Gay rum, and a single malt Scotch whisky.
The group dates back to 1726 but the present company is the result of a merger 30 years ago between Rémy Martin headed by the Dubreuil family and the Cointreau family. Today the company employs 2,000, is listed on the Paris Stock Exchange and is valued by the market at €5bn.
Because it is not possible to make Cognac anywhere other than in Cognac, this means there are sizeable barriers to entry for rivals and the players there take full advantage. Four brands share 85pc of the world market. These are Hennessy (LVMH), Martel (Pernod), Courvoisier (Japan's Suntory) and Rémy Cointreau, which has a global market share of 12pc.
Rémy's focus on the high-end of the price range means that it enjoys double the growth of the overall spirits market (5pc).
It sells its product above $50 per bottle. This has been possible as the group controls most of its own distribution in Asia, US and some European countries. This has enabled it to implement pricing strategy consistent with its high-end positioning and the perceived uniqueness of its product.
Recently, however, the behaviour of the market has been changing. Europe has been losing its taste for the digestif. Today, Europe, Middle East and Africa (EMEA) account for 27pc of group sales.
This is not a problem because US demand and Chinese sales until recently has been markedly strong. Unfortunately the protest in Hong Kong that has raged for months has taken its toll on Rémy sales and the recent virus outbreak threatens its business in China.
Rémy Cointreau revenue last year was a record at €1.2bn, up 8pc with operating profits at €265m and profit margins an impressive 22pc.
Cognac sales, which account for almost three quarters of total revenue, saw growth increase 12pc driven by the Asia Pacific region.
The continued development of Rémy Martin XO resulted in an increase in both price and volume helping operating profits for Cognac. Liqueurs and spirits also saw a growth of 4pc, driven by Cointreau and St Rémy brandy.
Net debt increased €30m due mainly to a €100m share buyback programme. Rémy investors, with their shares trading at €101, saw them fall 10pc last week, its deepest decline in four years. They trade on a high price earnings multiple of 31, more than a third higher than its rival Pernod Ricard.
Late last year Rémy, Pernod and their investors breathed a sigh of relief after the US spared Cognac and Irish whiskey from increased tariffs following the US victory in a 15-year dispute over aircraft subsidies at the World Trade Organisation. Whiskies from Scotland and Baileys liqueur were not so lucky.
Dividends per share last year were €1.65 but an additional €1 per share was paid as an exceptional dividend.
Overall Remy is an expensive share, worth having in any portfolio, but the sharp fall in Asia is a worry so it's best to hold back on investing at this time.
Nothing in this section should be taken as a recommendation, either explicit or implicit to buy any of the shares mentioned.