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Interview, Part 2: Pernod Ricard’s Paul Duffy

March 15, 2017

In the second part of our interview with Paul Duffy, the Pernod Ricard North America chairman and CEO discusses the recent acquisition of craft distiller Smooth Ambler, as well as the company’s efforts in the rising Cognac and Tequila categories.

SND: Pernod Ricard recently acquired rising craft player Smooth Ambler. Are you planning more acquisition activity in the craft space?

Duffy: What’s happening in craft spirits is incredibly interesting. There’s sometimes an assumption that craft always equals authenticity. But our base brands are also authentic. Every bottle of Absolut is produced in the small town of Ahus in the south of Sweden, with a tremendous amount of respect for the environment. A brand like Jameson, which started in 1780, has generations of distillers and craftsmen behind it. We also want to make sure we’re positioning ourselves to acquire brands for the future. That’s where Smooth Ambler fits in. We’re planning to make a number of acquisitions and put various brands in this space into our new brand ventures team. We expect to scale a number of them over time. The Smooth Ambler acquisition is a good start.

SND: With Cognac surging in the U.S., Martell (+6% to 105,000 cases last year) has been one of the category’s top performers of late. Yet it remains far smaller than its biggest competitors.

Duffy: Martell is the oldest Cognac house, at 302 years old. It has a great story to tell. We recently introduced a new kind of V.S.O.P. Cognac finished in Bourbon casks called Blue Swift ($50 a 750-ml.). It’s an important innovation and we’ve seen a very positive response. On the V.S. side, we see the growth rate in the whole category, and we’re enjoying good growth as well. Martell is becoming a very important focus point for us—we see a great opportunity there.

SND: High-end Tequila continues to grow quickly, yet Altos (+28% to 160,000 cases) has been outperforming Avión (-7% to 118,000 cases). Is there a ceiling for luxury Tequila?

Duffy: When I left the U.S. in 2012, we were just starting off in Tequila. We had just made the acquisition of Avión. We had just launched Altos. A couple of years later, we’re looking at explosive growth. Avión has achieved over 100,000 cases, which is remarkable given its upscale price point ($35 a 750-ml. and above). That’s the high-end play. Altos is geared to be a high-quality, accessible brand. We like to say it’s crafted like we give a damn, but priced like we don’t, and it’s on a tear. The two brands complement each other very well. We don’t see the Tequila market slowing down anytime soon.

SND: With the U.S. and Cuba recently re-establishing ties, it appears as though Pernod Ricard could soon be allowed to sell Cuban rum in the U.S. Do you believe this will occur in the next few years? If so, what do you think of Cuban rum’s prospects here?

Duffy: We have to be clear that for U.S. companies to import Cuban rum, the trade embargo has to move. That’s up to Congress. Do we think that Cuban rum has great potential in the United States? Absolutely. Are we confident that Pernod Ricard’s brand, Havana Club, can attack that market if it does open up? Yes is the answer to that. We’ve seen excellent growth of the brand around the world.

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