The Pernod Ricard subsidiary swept the board at the International Spirits Challenge 2021, securing two trophies, three double-gold medals and 47 golds. Its brands include The Glenlivet, Chivas Regal, Ballantine’s, Royal Salute and Aberlour.
Gourgues was already well-versed in the portfolio, as he has spent the past seven years heading up Pernod Ricard’s operations in China. He has been with the business since 2001, when he became a brand manager for its Mumm and Perrier-Jouët Champagnes. Gourgues worked his way up to international director of Martell Mumm Perrier-Jouët, before taking over as president and chief executive of Pernod Ricard Japan in 2011.
After three years in that role, he moved to China. His time in Shanghai was bookmarked by two crises – the government crackdown on “conspicuous consumption” and then the Covid-19 pandemic – so he is accustomed to overcoming challenges. The rm’s China business was down 25% in the year before Gourgues arrived in Shanghai, but he turned it around and le it in very good shape. He believes that China will remain a strong growth engine for the business, and the drinks industry in general, in the years ahead.
“The number of consumers for importers of spirits in general and Scotch whisky in particular has grown tremendously,” he says. “The spectrum is much broader than it used to be. It was focused on high-end luxury stores and nightclubs, but now it’s much broader, which is much healthier. Scotch whisky consumers are also younger and younger, even for a highend product.
“The affluent class of people with over $5,000 income once their rent is paid is increasing by 7 million additional people on a yearly basis. You put the purchasing power of one Switzerland each year into China. It’s really significant numbers and it’s tremendous for the Scotch whisky portfolio there.”
The UK was just emerging from lockdown when Gourgues landed in London this summer. He has been regularly travelling up to Glasgow, Edinburgh, Dumbarton and Speyside to oversee the Chivas Brothers business, which has faced many of its own challenges, including Covid, Brexit, a transatlantic tariff war and the threat of strike action from workers.
However, Gourgues is upbeat about the rm’s prospects. Its Scotch whisky business is up 6% over the past year, driven largely by a very strong performance in the US. “If we compound the past two years, which is a way to measure our progression compared to pre-Covid times, it’s a slight negative at minus 2%,” says Gourgues.
That is solely down to the collapse of the travel retail channel. Traveller numbers have plummeted during the pandemic, all but wiping out this vital route to market, which is often dubbed “the seventh continent”.
“The Scotch business is heavily exposed to global travel retail,” says Gourgues. “If we take out travel retail, the growth last year was 16%, and on a compound basis for two years we are 5% higher than pre-Covid levels.”
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On this two-year compound base, North America is up 19% and Western Europe is up 3%, with the UK standing out after enjoying 23% sales growth. Sales in China have grown 47%, India is up 21%, Brazil is up 60%, Colombia is up 52%, and there is also strong growth in Eastern Europe, Africa and the Middle East, and Oceania. “We have gained market share in seven of our top 10 markets,” says Gourgues. “We are back to our long-term growth trajectory, and we are monitoring that very closely. We can supply the market, and we are very diligent in terms of product pricing. We are launching initiatives to offer different propositions into the market in order to maintain the growth.
“In domestic markets where Covid is a bit lighter, the resurgence is very strong. We are higher than pre-Covid levels for our four core brands, and even higher for our other brands. It’s a great basis to start with. In the US, we have increased the moments of consumption. The o-trade has grown very significantly. The on-trade is back now too. We now have a bigger business, with more consumers enjoying our products, so it’s a great place to start with.”
The priority is to maintain the momentum in mature markets like the US, France and the UK, while building up a head of stream in emerging markets. “China, India, Latin America and Eastern Europe are the future of the growth potential,” he says. “We will keep focusing on innovation and introducing new propositions into the market. Chivas 13 Cask Edition and Glenlivet Caribbean Reserve drove significant growth last year. We have more things coming in the months ahead to drive more growth.”
When asked if there is a concern that emerging markets could be sluggish in the short term due to the uneven vaccine rollout, Gourgues emphasises the importance of agility. “It won’t be a straight line. The behaviour from one market to the next is extremely different. India, which has been very heavily hit in the past year, and is the biggest market for whisky, is certainly going to be in a better situation, so there’s an element of positivity.
“It’s like rally racing – you need one foot to speed up, but you need one foot on the brake, and to steer to take the best opportunities. That’s how I would describe this year: cruising fast, but being very agile and understanding the market realities.”
The company has received several boosts in recent months. The tariff wars have given way to a period of détente, which should make exports to the US a lot smoother and more profitable. Strike action was averted after union members voted to accept an improved offer from the company following further talks. Brexit is still causing logistical concerns, but Chivas Brothers is better placed to circumnavigate those issues than smaller producers thanks to its in-house expertise and its ability to ship bulk loads to the EU, and its sales in Europe are flourishing.
Despite all the positivity around growth in key markets, there is a lingering sense that the Scotch whisky sector will not fully recover until travel retail rebounds. “It’s unpredictable. Traveller numbers are still very low. We expect a gradual recovery, but I would be surprised to see GTR at pre-Covid levels by June 2022. But I’m sure it will recover in a more targeted way, depending upon the ease of travel. There will be very significant opportunities on specific countries to activate our brands. It’s in government hands, but there is a true appetite for people travelling again, and we will go where there is opportunity.
“If we look back over the past two years, we are almost ¤at, despite the big drop in travel retail. We are very confident that by this time next year it will be positive figures for the total business, and higher than pre-Covid. Home entertainment and consumption will keep on growing, the ecommerce dimension will play a very big role, and the on-trade recovery will provide a great boost.”
