Farming & Food

Pernod Ricard sales growth slows as China and India decelerate

But drinks maker is keeping forecast at 5-7% organic rise in profit for full year

Sales at Pernod, the world’s second-largest distiller, grew 1.3 per cent on an organic basis in the first quarter. Photograph: Luke MacGregor/Bloomberg

Thu Oct 17 2019 - 08:01

Jameson-owner Pernod Ricard began its fiscal year on a tepid note as demand for cognac in China slowed after stellar growth this time last year. The slowdown in Asia contrasts with a strong performance by rival LVMH's wine and spirits division, which includes Belvedere vodka and Moet and Chandon champagne.

Sales at the world’s second-largest distiller grew 1.3 per cent on an organic basis in the first quarter. Analysts expected 3.1 per cent. The shares fell as in early Paris trading.

Pointing to a "particularly uncertain" environment, Pernod Ricard predicted growth rates will moderate from last year in India and China, where sales slowed dramatically from last year.

“It’s what I expected and what we had shared with the markets a month ago,” chief executive Alexandre Ricard said, adding that the distiller remains “perfectly in line” with its road-map. The basis of comparison will be more favourable in the second half, Mr Ricard said.

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The maker of brands including Beefeater and Havana Club as well as Jameson confirmed its outlook for earnings growth to slow this year to 5 per cent to 7 per cent from its fastest pace in seven years.

Growth in the key US market, where the company is contending with the threat of tariffs on Jameson and Glenlivet, reached 6 per cent.

Local bourbons

Pernod Ricard has added local bourbons to its arsenal in recent years, including the $223 million (€200 million) acquisition of Castle Brands announced in August.

The group said it may raise prices on its spirits to counter US trade tariffs, at a time when it is also grappling with decelerating growth rates in key markets like China and India.

It is under pressure from US hedge fund Elliott, which holds a 2.5 per cent stake, to improve profit margins and corporate governance. – Bloomberg/Reuters

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