Cointreau bets on Donald Trump tax cuts boost

Luxury spending is set to benefit if US president-elect Donald Trump succeeds in lowering US taxes, spurring rich consumers to buy more, according to the chief executive of French cognac maker Remy Cointreau.

“Affluent households should continue to benefit from these tax decisions,” chief executive Valerie Chapoulaud-Floquet said about the Remy Martin owner’s first-half results.

“The decrease in the tax rate should continue to stretch the market,” she said.

As part of his campaign, Mr Trump proposed tax cuts worth $6.2 trillion (€5.8tn) over the next decade with the top 1% of American earners receiving almost half of the total benefit and boosting spending power, according to an analysis by the Tax Policy Center.

He also promoted a plan to lower the basic US corporate tax to 15% from 35%. The French spirits company has been focusing more on the most expensive spirits, epitomised by a six-litre bottle of Louis XIII cognac that sells for €75,500.

The distiller has high hopes in the US for that blend, which is made up of 40-to-100 year-old cognacs and is the company’s priciest offering, Ms Chapoulaud-Floquet said.

The US has yet to reach its full potential for spirits growth, according to Remy Cointreau. Still, Ms Chapoulaud-Floquet raised the possibility that the US may increase import taxes. That could harm Remy’s business, especially because cognac cannot be made anywhere outside of the designated production area in France.

“Let’s be pragmatic, let’s see what happens,” she said. “Are American whiskies going to benefit from nationalism? Maybe. Will Barbadian rum be treated differently? I don’t know. In the luxury world, for the time being, what’s being said is that what could happen will be favourable. Now, if I were a tequila producer, I might be a little bit afraid, for sure. ”

Remy shares gained 1% yesterday and have now risen 14% this year.