Pernod Ricard steadies European ship

By Ben Bouckley

- Last updated on GMT

Related tags Pernod ricard

Pernod Ricard steadies European ship
French spirits giant Pernod Ricard has successfully grown European sales in 2010/11 after a worrying 5% slump last year, due to a “recovery in consumer spending”.

Recording growth within all European regions in the financial year to September 1, Pernod Ricard attributed stable sales to a “robust recovery”​ within Eastern and Central Europe, where sales grew 9%.

Sales fell 33% in Greece and 5% in Spain, but the company said Western European sales had “clearly improved”​ compared to the previous financial year.

Overall sales totalled €7.643bn, up 8% year-on-year, with profits from recurring operations up 11% to €1.441m. Group debt was cut by €1.045bn to €9.038bn.

Pernod Ricard recorded its strongest growth in Asia, with 19% sales growth the “driving force for group growth”​, primarily due to China, India, Vietnam, Taiwan and duty-free markets.

Japanese tsunami

Growth was also strong in Africa, the Middle East and Turkey, while the company said the effects of the Japanese tsunami were “less significant than anticipated”​, with sales down 7% in the fourth quarter of the year.

Within the Americas, Pernod Ricard's 8% growth was underpinned by strong US sales of Absolut and Jameson, while the firm reported a 12% rise in Brazilian sales, driven by its flagship 'Top 14' brand portfolio that includes Absolut and Scotch whiskies.

Top 14 brands comprise 58% of group sales, and the company said production volumes rose 6% during 2010/11 to reach a record high, as did member brands Absolut, Chivas, Jameson, Havana Club, Martell, Royal Salute and The Glenlivet.

‘Priority premium’ wine brands grew 0.4% due to the success of Campo Viejo and Graffigna, despite a slump in sales of Jacob’s Creek and Brancott Estate.

Premium brands represented 71%​ of Pernod Ricard’s group sales during the 2010/11 financial year, a two- percentage point increase compared to the previous year.

This fits with a company strategy of “premiumisation, thanks to substantial, targeted investment”​, which helped it increase its gross product margin in 2010/11.

Pernod Ricard ceo Pierre Pringuet (pictured) said: "For 2011/12 the beginning of the financial year confirms the resilience of our market. We will continue to grow, by capitalising on the strength of our brand portfolio, the quality of our distribution network and the powerful leverage of emerging markets."

Geographic luck

Jeremy Cunnington, Senior Alcoholic Drinks Analyst at Euromonitor told that he thought Pernod Ricard had benefited from "geographic luck in that it has relatively limited exposure to the PIG markets and the UK, with Spain the only country where it was very exposed".

He added that a strong presence in the two best-performing markets in Western Europe, France and Germany (especially compared to rival Diageo whose major markets include Spain, Greece, the UK and Ireland) was another major benefit.

However, Cunnington warned that Pernod Ricard's "luck could change if France gets drawn into the sovereign debt crisis, and has to carry out tough austerity measures hitting economic growth".

Nonetheless, the analyst said Pernod Ricard's strong presence in "dynamic growth markets" ​such as Poland in Central and Eastern Europe meant that it had benefited from a strong regional recovery.

"These countries account for around €400m of the company’s European revenues, about 50% more than Diageo. This stronger position has primarily come through acquisition (notably of Allied Domecq and V&S) but also sustained investment in the region,"​ he said.

Cunnington added: "In the foreseeable future, it is these markets that are going to be the company’s growth engine in Europe, especially with Western Europe likely to continue to suffer for a while."

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