Pernod announces sales fall of 3% for the half year

23 February, 2010

Pernod Ricard has announced a fall in sales to €3.789 million for the last half of 2009.

Pernod Ricard, the second largest drinks company in the world, has announced a fall in sales to €3.789 million (-3%) for the half year from July to December 2009.

Its 15 “strategic brands” which include Absolut, Chivas, Ballantine’s, Beefeater, Martell, Mumm and Jacob’s Creek, declined 5% in volume and 3% in value.

Gilles Bogaert, Pernod’s managing director finance, told a briefing in London on February 23 for financial analysts and journalists, that the fall was in line with expectations following the economic crisis last year.

The results were exacerbated by the devaluation of the Venezuelan Bolivar and the comparative weakness of the US dollar.  When asked by a financial journalist as to why the devaluation of the Venezuelan currency had has such a dramatic effect on Pernod’s results, Bogaert pointed out that the South American country was the seventh most important scotch whisky market.

“It is a premium scotch market. They drink it at lunch and dinner. Chivas is a key brand there,” he said.

The results showed that Chivas is down 13% in volume and -6% in sales. Its blended stablemate, Ballantine’s is down 11% in volume and -13% in sales. Bogaert was keen to impress that the Venezuelan situation had affected all premium scotch whisky producers.

He explained that Martell’s mixed results (-3%, volume, +3% sales) were due to efforts to re-position the cognac brand under Pernod’s premiumisation strategy. In moving it away from the basic VS category it had lost volume but gained value.

The worst hit was Pernod’s wine portfolio and particularly champagne. Mumm is down 13% by volume and -11% in sales while Perrier Jouët collapsed by 12% in volume and 16% in sales.

Its major wine brands, Jacob’s Creek and Montana were down 10% and 4% in volume respectively and -6% and -4% in sales.

Jean-Manuel Spriet, managing director of Pernod Ricard UK who has been critical of the strategic use of deep discounting by British multiple retailers to drive footfall into their stores, announced a new campaign to support Jacob’s Creek in an effort to distance the brand from its competitors.

He said the wine sector was now back in modest growth (3%) but suppliers faced four threats: increasing excise duties, unfavourable foreign exchange rates (£ vs AUS$), deep discounting and the Australian wine surplus.

Spriet is hoping that the new TV advertising will demonstrate the company’s commitment to the brand and deter the UK supermarket operators from discounting the brand out of the £5+, “upper mass market” category.

“Price is everything,” he said. “ There is huge pressure on margins. We believe in building brands and defending price positioning. As well as Jacob’s Creek, we have Campo Viejo in the premium category and we have 20% of the branded sparkling wine category. We believe in the equity of the brand.”

Bogaert said that the company had committed to lower its debt by the disposing of brands. It had already made €800 million from selling off the likes of Wild Turkey bourbon and the liqueur, Tia Maria. He admitted they still had €200m to find.  Despite rumours that the rest of Pernod’s wine interests are likely to form part of that disposal programme, Bogaert refused to give any indication of what might go save to say they were not planning to sell any of Pernod’s 15 strategic brands.

Asked about Pernod’s commitment to ‘premiumisation’, Bogart defended it, saying that in all emerging markets there is a move away from cheaper local brands to premium imported brands. He said the trend “does not happen alone” companies need to “substantiate the brand and back them through investment.”

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