(Bloomberg) -- US consumers are switching from Cognac to tequila, according to analysts at Morgan Stanley, reinforcing the bank’s view that clients should sell shares of Remy Cointreau SA.
Cognac has been the weakest performing spirit in the US over the last 12-18 months, partly due to its higher exposure to lower-income consumers, Morgan Stanley said. Demand for spirits in the US has been dismal following a boom in the pandemic, and as economic growth has slowed this year from a rapid pace in the second half of 2023.
“Our analysis of panel data shows Cognac drinks have increasingly shifted to tequila in the last 52 weeks,” Rashad Kawan and colleagues wrote in a note to clients on Friday.
Shares of Remy, the Paris-based maker of Remy Martin Cognac, have fallen 52% over the past year, underperforming an index of European beverage stocks, on worries about consumers trading down, as well as customers having too much inventory.
Morgan Stanley has an underweight rating on Remy and a €70 price target that is among the lowest assigned by banks tracked by Bloomberg. The stock rose 1.3% to €71.60 at 12:21 p.m. Friday in Paris.
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