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Pernod Will Slash SKUs By 30% In Some Markets, Says CFO

September 8, 2016

Pernod Ricard plans to rationalize its portfolio by as much as 30% in some markets over the next five years, company CFO Gilles Bogaert said yesterday. Speaking to investors and analysts, Bogaert said the initiative to significantly reduce SKUs in a number of key markets is part of Pernod’s “operational excellence roadmap” program, which is aimed at accruing cost savings of some €400 million ($452m) through 2020.

Bogaert added that the rationalization could also involve the sale of non-core brands. “When we have brands that aren’t core, we aren’t afraid to sell them,” he said. “We have a large whisk(e)y portfolio and we didn’t have a focus for Paddy, so we sold it to Sazerac (earlier this year).”

Pernod has already begun the culling process with Absolut. With some of its flavor extensions showing soft results, the French drinks giant has begun streamlining its flagship vodka brand’s flavor range. “We have reduced the number of (Absolut) flavors because there were too many,” Bogaert said. “In so doing, we’ve made more space for more disruptive innovations.”

After years of impressive growth, flavored vodka has struggled mightily of late in the U.S. market, exacerbating what were already challenging conditions for Absolut. Still, there are signs that times are getting a bit better for the iconic vodka brand. In the company’s recently completed fiscal year (ending June 30, 2016), Absolut’s depletions were down by 2% in its biggest market, the U.S. But that represented an improvement from the previous year, when depletions were down by 4%. Despite Absolut’s decline, Pernod’s overall net sales in the U.S. grew by 4% in fiscal 2015/2016. —Peter Zwiebach

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