Photographer: Balint Porneczi/Bloomberg

Drink to That: Cognac Eyes the Trump Effect

  • Lower corporate tax rate could boost high-end spirits: CEO
  • Rich households to benefit from such tax policies, Remy says

Luxury spending is set to benefit if U.S. President-elect Donald Trump succeeds in lowering U.S. taxes, spurring rich consumers to buy more, according to the CEO of French cognac maker Remy Cointreau SA.

“Affluent households should continue to benefit from these tax decisions,” Chief Executive Officer Valerie Chapoulaud-Floquet said Thursday on a conference call about the Remy Martin owner’s first-half results. “The decrease in the tax rate should continue to stretch the market.”

As part of his campaign, Trump proposed tax cuts worth $6.2 trillion over the next decade with the top 1 percent 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 U.S. corporate tax to 15 percent from 35 percent.

The French spirits company has been focusing more on the most expensive spirits, epitomized by a six-liter bottle of Louis XIII cognac that sells for $80,000. The distiller has high hopes in the U.S. for that blend, which is made up of 40-to-100 year-old cognacs and is the company’s priciest offering, Chapoulaud-Floquet said. The U.S. has yet to reach its full potential for spirits growth, according to Remy Cointreau.

Still, Chapoulaud-Floquet raised the possibility that the U.S. 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 favorable. Now, if I were a tequila producer, I might be a little bit afraid, for sure.”

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