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Pernod Ricard Posts Flat Full-Year Sales On China Difficulties, U.S. Also Slows

August 28, 2014

China’s dramatic downturn in luxury spirits consumption continues to impact the major industry players, with Pernod Ricard the latest to cite Asia as the main factor behind slowing global sales. For its full fiscal year ended in June, Pernod posted net sales of €7.95 billion ($10.48b)—equal to last year on an organic basis, but down 7% including group structure and foreign exchange effects. Pernod was able to generate 2% growth in profit from recurring operations to €2.1 billion ($2.77b), which the company attributed to “strict control of resources.”

A 23% sales drop in China significantly affected performance, the company said. Two of Pernod’s key brands in the Chinese market—Martell and Chivas Regal—posted sharp declines globally for the full year. Martell, which has sold more than 1 million cases annually in China in recent years, slipped 6% by volume to 1.9 million cases, and fell 9% by value. Chivas was down 7% to 4.6 million cases globally, with net sales declining 4%.

But China hasn’t been the only market presenting challenges for Pernod in recent months. Growth in the Americas—where net sales increased 2% for the full year—was hampered by slowdowns in the U.S. and travel retail, the company said, with the situation appearing to deteriorate in the fourth quarter, when Americas net sales slumped 3% organically (13% on a reported basis). U.S. net sales increased 1%, compared with 8% in the previous year, with Jameson’s net sales up 15% and Absolut’s sales down 2% in a price-competitive vodka market.

On the positive side, Pernod flagged a “marked improvement in Europe,” where sales rose 2%. Ricard pastis and Havana Club, two brands that had been struggling, were both on the rise, with volumes up 4% and 3%, respectively.

Among Pernod’s other main brands, Absolut was down 4% globally to 11.1 million cases for the year (net sales declined 1%), while Ballantine’s was flat at 5.9 million cases. Jameson continued its strong upward trend, rising 9% to 4.7 million cases, and The Glenlivet increased 2% to reach the 1-million-case milestone. Pernod’s Champagne brands were also a bright spot, particularly Perrier-Jouët, whose volume increased 9% to 300,000 cases, with net sales jumping 16%.

Pernod deputy CEO Alexandre Ricard, who’s slated to take over as CEO for Pierre Pringuet next January, said, “In this context which will remain challenging, we anticipate a gradual improvement in our sales growth, and we will increase the investment behind our brands and priority innovations in order to sustain long-term growth.”

Meanwhile, as part of its aggressive cost-savings initiative, the company told Reuters that it would be slashing 900 jobs, or about 5% of its workforce, but declined to provide details on where the cuts would take place.

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