Pernod Ricard signals trends to watch and remains ‘cautious’ about China

Pernod Ricard has shown caution over its progress in China and hinted at further plans being lined up for both the ready-to-drink (RTD) and Tequila categories.

Speaking to the drinks business following a briefing this week, Pernod Ricard chairman and CEO Alexandre Ricard said that the company had experienced a “cautious” Chinese New Year, but admitted it was too early to say when the Chinese market would bounce back to health.

Ricard told db: “The [Chinese] market is structured in such a way that, until we get retailer’s sell-out data, which takes approximately one month to consolidate, we won’t know [how China is doing]” but added: “we had a cautious approach as we entered into Chinese New Year” and insisted: “we do believe that China will be back to growth” but admitted: “There are a number of headwinds in China”.

Despite Asia Pacific (AP) still offering a lot of promise, the Chinese economy as well as tariffs had played havoc with EU spirits exports with Pernod Ricard’s sales in China seeing a 9% drop meaning leading to its most recent results for AP staying relatively flat.

Some of this was also accounted for by what Ricard has called “phasing issues” with the Indian market [with its licence suspension woes along with investigations from the Competition Commission], but noted that now, with plans afoot for its new distillery and decade long plan for the market, it can attest that “India is doing extremely well”.

Pernod Ricard recently lowered its sales guidance and, rather than its initial forecast of growth, now predicts stable sales for the full year, giving rise to speculation over its longer term plans to adjust the trajectory for sales globally in the future.

The drinks giant reiterated that the current plan is to steer the spirits arm of the business through “normalisation” of the sector, which was previously enjoying a post-Covid boom.

Now, Pernod’s plan is to navigate those “headwinds” and, while the business raised its prices, Ricard and his team reiterated that “premiumisation was not dead”, shrugging off concerns that down-trading among consumers was becoming de rigeur.

Discussing the burgeoning RTD sector as a means for further premiumisation opportunities, Ricard revealed that there was a strategy in place and that the company had a “clear business plan” for the category and name-checked brands including “Jameson, Havana Club, Beefeater and Malibu”. The move follows Pernod Ricard recently refocusing its interest in RTDs in the US market after partnering its Absolut vodka brand with both Sprite in the UK and Ocean Spray in the US, supporting the launches with what it termed as a “big big investment”. Chivas Brothers also launched two cocktail products to fill a gap in the market last year. The group has remained tentative in the past though, last year, it uttered: “If you don’t get RTDS right, it can damage your brand franchise”.

Speaking more confidently this week, Ricard told db: “We have a number of brands doing RTDs and we have a clear business plan. We just launched outside of the US and also in the US right now we just launched Ocean Spray a couple of weeks ago. We have made a big, big investment [into RTDs].”

The US market’s sales had recently shown a 7% decline owing to both retail and consumer demand waning amidst price hikes being introduced, along with poor sales in Canada.

Similarly, Europe’s sales fell by 4% and sales in Britain were described as “soft”, but, according to Pernod Ricard UK managing director Julia Massies, there were many initiatives that the company was moving forwards with to boost the business’s profile and reputation in Britain. Massies then highlighted the group’s moves to reduce the gender pay gap as well as find ways to offer better diversity across the business.

In addition to this, Massies further confirmed that in terms of its spirits portfolio, the UK arm of the business “will not be winding back any pricing” and stated that “premiumisation is not dead in the UK”. To further illustrate this, Massies referenced how pubs, bars and restaurants were the place where trends would always be seeded and recognised when she pointed out that “the on-trade is still where you will see trends of the future”.

One area that has garnered much speculation has been the company’s wine portfolio which saw an 11% drop and it has been widely rumoured that there are plans to sell off the Australian wine division by the end of the month. Irrespective of questions, however, Ricard would not be drawn to comment and, in a private meeting told db that despite rumours he has “been hearing since 2018, every time I am asked the question, I will still say ‘no comment’”.

Regarding the group’s distilleries and ways that Chivas Brothers will assist in supporting Pernod’s premium spirits portfolio in the future, Jean-Etienne Gourgues chairman and CEO Chivas Brothers assured: “It is a broad-based business and whisky is a long-term game”.

Ricard also said that since taking a majority stake in Código 1530, the company has become “excited” by the potential that the Tequila category presents and added that the industry “sometimes had an image of Tequila just being about shots” but observed that there is “a lot of excitement in the market analysis at the moment” and hinted that when it comes to the Tequila category and the group’s future moves, the trade should certainly “watch that space”.