Pernod hit by China and currency exchange rates

03 September, 2014

Pernod Ricard CEO Pierre Pringuet remains optimistic about China despite 23% decline in sales in its full year results.

Pringuet was speaking at a briefing in London today (September 3) for journalists and city analysts, following the release of the group’s full year results last week.

Key brands Martell cognac and scotch whisky blend, Chivas Regal are the major casualties of the Chinese government’s clamp down on extravagant entertaining and gifting. Martell is -9% in sales, -6% volume while Chivas is -4% and -7% sales/volumes.

The company has also been hit by volatile exchange rate fluctuations particularly regarding the travel retail sector where the channel trades in US dollars, specifically in South America where local currencies are extremely volatile.

Its flagship vodka brand, Absolut has been “disappointing”, according to Pringuet in the US, its “domestic market” due to the rise of “craft vodkas, fancy flavours - cakes and pastries and the blurring of categories”.

Pringuet pointed out that if you take China out of its Asia/Rest of the World category, organic sales were +5%. Nevertheless, he said with a huge emerging middle class and more and more travelling, the company remains optimistic about China.

He said sales of the most premium expressions of scotches and cognac such as Martell Cordon Bleu had suffered but Martell Noblige and Ballantine’s Finest had held up. So going forward the company would concentrate on brands, expressions the affluent middle classes could afford.

On Africa, he said Pernod had opened six affiliate offices - Morocco, Nigeria, Ghana, Angola, Kenya and Nambia - and sales had grown 23% organically. He admitted that the company had been weak in South America. “We started as an outsider but we are now a true contender,” he said.

Laurent Lacassagne, chairman and CEO of Chivas Brothers, Pernod’s scotch whisky and premium gin division, chipped in on India. “It has fantastic potential but it will take time. 100 Pipers is doing extremely well,” he said.

Pringuet defended the company's 'operational efficiency improvement project', codenamed: "Allegro", the mission of which is to “prioritise, simplify and mutualise”. He said it was not just about cutting costs but was also about investing for the future, seizing potential growth and being proactive. “Change is inevitable, we have to evolve,” he said.





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Christian Davis

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