Pernod Ricard aims to accelerate sales growth

The spirts company’s performance in its last financial year was flat

Alexandre Ricard, new chairman and chief executive officer of French drinks maker Pernod Ricard.

Alexandre Ricard, new chairman and chief executive officer of French drinks maker Pernod Ricard.

 

Pernod Ricard is banking on a taste for higher priced spirits in the United States and India, along with recovering demand for cognac in China, to speed up sales growth, its new boss said.

The owner of Absolut vodka, Martell cognac and Jameson whiskey wants to overtake Britain’s Diageo one day to become the world’s biggest spirits company, and acquisitions could play a part, Alexandre Ricard said.

“Our medium-term goal is to return to our historical average growth rates,” said Mr Ricard, who became chairman and chief executive in February, putting the founding family back in charge of day-to-day management for the first time since 2008.

Pernod Ricard said it was aiming to accelerate underlying sales and operating profit growth to between 4 per cent and 5 per cent in the medium term.

Its target is for sales to rise by close to a mid-single digit percentage in the United States and a high-single digit percentage in China.

It is four decades since the company was formed from the merger of French family businesses Pernod and Ricard, renowned for their aniseed-flavoured pastis spirits.

A family business in 1975, it has since transformed into a global giant with annual sales of €8 billion . But after years of robust growth, Pernod Ricard faces challenges in two key markets: China and the United States.

Mr Ricard, 43, the grandson of the company’s founder, has made sales growth a top priority.

In China, the group’s number two market after the United States, economic growth is slowing and a government clampdown on extravagant spending has hurt demand for premium spirits.

In the United States, Pernod Ricard’s largest brand, Absolut vodka, is struggling as trendy drinkers turn to brown spirits such as bourbon and niche vodka brands like Texas-based Tito’s Handmade Vodka.

In the financial year that ended in June 2014, Pernod Ricard’s underlying sales were flat. There have, however, been signs of a gradual recovery, with sales up 2 per cent in the nine months to March 31 this year.

In China, the launch of lower priced cognac such as Martell Noblige has boosted sales volumes and Alexandre Ricard reiterated that Chinese sales may stabilise by the end of June.

Pernod Ricard also wants to gain traction in the US spirits market, the world’s biggest, where its 11 per cent share by value trails the 27 per cent of market leader Diageo, Mr Ricard said.

With US consumer confidence improving, the company is stepping up investment in its Martell cognac there, boosting sales teams to tap a growing appetite for premium tipples.

Reviving Absolut vodka, whose US sales fell 5 per cent amid price competition in the nine months to the end of March, will take some time, however, Mr Ricard said.

The company has launched luxury vodka brand Absolut Elyx to boost revenue and is this month launching Absolut OAK, a vodka aged in an oak barrel much like a fine whiskey.

India has been another key growth area for Pernod Ricard. Driven by its local whisky brands, sales growth reached 19 per cent in the first nine months of the financial year.

Pernod Ricard has expanded over the past decade through acquisitions. But debt of 8.4 billion euros at the end of June has curbed any big buys because the company wants to keep its investment grade rating.

“Today, we look at external, bolt-on growth opportunities. Small or medium-sized deals,” said Mr Ricard, citing the US and emerging markets. He also would not rule out the possibility of large deals in the longer term.

- Reuters