Pernod raises the stakes

01 June, 2012

Pernod Richard is raising the stakes in scotch whisky after a week in which it hosted a ‘Capital Markets Day’ of presentations up at its flagship Glenlivet distillery on Speyside.

A host of city analysts and journalists representing most of the major business publications in the world were in attendance.

The key messages from the world’s second largest premium drinks company were that, Chivas Brothers, its scotch and premium gin division, has committed £40 million annually to increase the company’s distillation and production capacity.

As the second largest scotch whisky company in the world after Diageo, it boasts sales of 20 million 9-litre cases of spirits worldwide.

A new bottling hall in Paisley will open this summer, primarily to deal with hand bottling of prestige brand such as Chivas Regal 25, the Royal Salute range and the top expressions of The Glenlivet and Ballantine’s.

Malt whisky distillation is being increased with Glenallachie, Glentauchers, Tormore and Longmorn distilleries being expanded.

Glen Keith re-opens in April 2013 which will mean a 25% capacity increase across 2012 and 2013, said Pernod.

The message from senior Pernod personnel was that the company has an inventory of six million casks of scotch whisky ageing in more than 300 warehouses in Scotland.

It is investing and gearing up for what appears to be an unstoppable thirst for scotch across the globe, with the possible exception of Africa.

Analysts continually pressed the likes of Chivas CEO Christian Porta, for hard facts on whether the French-based premium alcoholic drinks company can meet demand in the years ahead.

In Asia, Pernod Ricard is the number one with Chivas Regal, Ballantine’s and Royal Salute. Also having a leading cognac, such as Martell, in the portfolio helps in its dealings with Asian distributors, importers and ultimately retailers.

But in South America, the company is lagging behind badly. The recent news that Diageo has bought Ypióca, which the company claims is the number two cachaça brand by value and number three by volume, in Brazil, will not have pleased the Pernod management.

Significantly, Ypióca Agroindustrial Limitada also has an extensive sales and distribution network in the north east of Brazil and the second largest retail penetration nationwide. This just goes to strengthen Diageo’s grip on South America.

Pernod CEO, Pierre Pringuet told the assembled gathering that the key messages they wanted to convey were:

-       Scotch whisky is a growing category and in emerging markets in particular is a modern category appealing to young, aspirational and affluent consumers;

-       Pernod has the portfolio of premium and prestige brands to capitalise on mature and emerging markets;

-       Scotch is profitable and cash generative and Chivas Brothers is investing heavily to meet future demand.

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