Pernod’s interims

on 18 February, 2014

The Pernod Ricard team were in London today (February 18) to flesh on the bones for their half year interim results which were announced last week.

For those that missed it, Pernod reported sales of Euros 4.57 million for half year 2013/14.

The team comprised: Board vice chairman and CEO, Pierre Pringuet, Laurent Lacassagne, chairman and CEO, Chivas Brothers and Denis O’Flynn, managing director, Pernod Ricard UK.

Pringuet summed the results up as “sales stable and slight increase in PRO (profit from recurring operations)”.

China has been bad for Pernod or, more specifically its Martell Cognac brand. The decision by the Chinese government to clamp down on ostentatious drinking and gifting has hit Cognac in particular hard. Hindsight is a great thing but China has been a Dodo-sized egg in the Martell basket and it has been smashed and scrambled. China is -18% in Pernod results. Excluding China, Asia and the Rest of the World, are +2%. Europe is +4% and the Americas are +3%. PRO: +2%

Just as Diageo CEO Ivan Menezes announced significant re-structuring with a view to chasing down wastage, stocking levels, repetition and costs back on January 30, so Pringuet talked of Pernod’s ambition to save Euro 150m in three years’ time through “simplifying, prioritising and mutualising”. He told the assembled press and city analysts that the company has a “task force of 200 people” looking into it. He warned the savings would inevitably include redundancies.

Recurring themes included premiumisation which is cornerstone of Pernod Ricard strategy – as it is with Diageo. After all these are the two largest premium drinks companies in the world. When you talk just volumes, there are others to consider.

There is also the cocktail growth which merges into general experimentation with the blurring of boundaries and cross category developments. So, we have flavoured spirits such as Bourbon with honey, Tequila flavoured beer, fruit ciders. Overall, it indicates a move to sweeter tastes.

In the UK, O’Flynn had good reason to swell his chest. PRUK reported a 9.2% increase to 6.2% value share, while Diageo only posted 0.9% but it does have a 31.2% share. Bacardi Brown Forman Brands did best, primarily due to Jack Daniel’s and JD with honey, with 13.9% increase (12.8% share) and William Grant’s First Drinks with 8.9% (11.2% value share).

Pernod Ricard UK’s star brands are: Campo Viejo, the Rioja brand, Chivas Regal scotch , Jameson Irish whiskey and Havana Club rum. Of Pernod’s top 14 brands, volumes were stable but sales were -1%. Its priority wines, Graffigna, Jacob’s Creek, Brancott Estate and Campo Viejo, were down -2% in volume but sales were +2%. Local brands, the tiddlers with their feet well and truly on the ground, were +9% volume and sales +4%. This was led by Imperial Blue whisky in India, Ararat Armenian brandy and Passport scotch showing double digit growth in Russia and Africa. There was also strong growth in Wyborowa vodka and Olmeca Tequila.

So while Diageo results are quite stage managed and very slick, Pernod Ricard’s tend to be lower key, more informal and more open. Both companies are impressive for their sheer scale, the impressive portfolio of great brands built up over the years and the obvious professionalism in all its manifestations.

With the advent of emerging markets such as China, India and Brazil, all sorts of questions and challenges have been thrown up. Such things as the new Chinese elite suddenly clamping down on luxury gifting plus trying to second guest when the Indian import tariffs on whisky will eventually come down, are a nightmare for forward planning. But North America is coming back, Europe is returning albeit in patches and there is still plenty to go for in South America and Africa.

If there is one certain at the moment, it is to keep on investing in whisk(e)y and particularly scotch whisky. It is obvious that the world’s thirst for it remains insatiated.

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