The Kahlúa question
It’s a blend of sugar cane spirit, 100 per cent Arabica coffee and vanilla bean that’s been hand-crafted in Mexico since 1936 – though it may be better known to Irish drinkers as the non-Baileys part of a Baby Guinness. But the decade has not been kind to cocktail-friendly Kahlúa, the coffee-flavoured liqueur brand owned by Pernod Ricard, the largest distributor of spirits in the world.
A trading update from Pernod has shown that it was the only one of its 14 “strategic” brands to show a reversal in sales in the nine month period to the end of March – while Pernod’s whiskey, whisky and cognac volumes powered ahead with double-digit growth thanks to swelling sales in emerging markets, the value and volume of the Kahlúa shifted sank back 3 per cent. Pernod’s last annual report shows that the company wrote down the value of the Kahlúa brand by some €100 million. That’s a lot of bottles of seasonal Kahlúa Peppermint Mocha left languishing at the back of the storeroom.
In an industry that depends so much on marketing, is Pernod weaning itself off Kahlúa? It has only owned the drink since 2005, when it was one of a batch of brands it acquired in its takeover of Allied Domecq. That deal also saw Pernod inherit Tia Maria, another coffee-flavoured liqueur (and Baby Guinness ingredient substitute), but this was later sold to Illva Saronno, maker of Disaronno (amaretto), in 2009.
Since then, drinks sales in the US and Canada (the biggest markets for Kahlúa) wilted in the recession as new orders gave way to wholesaler destocking. Pernod, reporting year-on-year growth of 5 per cent in its total underlying sales in the first quarter, indicated yesterday that the US was “gradually recovering”. Fans of Black Russians are yet to join in the party.