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Pernod Ricard USA Sees Accelerated Premium Progress Ahead

May 24, 2011

While cautious optimism remains the byword across much of the U.S. drinks industry, Pernod Ricard USA and its top distributor Southern Wine & Spirits appear more sanguine on the market’s outlook, especially at the premium end. Speaking at a Pernod Ricard Americas presentation in New York today, Pernod USA chairman and CEO Paul Duffy and Southern Wine & Spirits president and COO Wayne Chaplin said premium wine and spirits are again increasing share within their categories—and that the on-premise has been experiencing “a big rebound.”

Citing data from the U.S. Bureau of Labor Statistics, Duffy said on-premise dollar sales were rising about 3.6% on a rolling 12-month basis through February, with that rate steadily accelerating since the low point of early 2010 and now matching off-premise growth. “We’re seeing continued improvement as the on-premise comes back to what we consider a more normal growth rate of about 3%,” Chaplin added.

In the off-premise, Chaplin pointed to gains for premium wines, particularly sparkling wines, in 2010. Both sparkling (+13.2%) and table wines (+8.4%) saw marked value increases, according to Nielsen, “and we believe Champagne to be a leading indicator for the market,” Chaplin said. Premium spirits also have again gained momentum: in the 52 weeks through the end of April, both the super-premium segment ($26–$41) and the ultra-premium segment ($41 and up) were up by double-digits, well ahead of the market. The super-premium-and-above tier now accounts for nearly 18% of spirits dollar sales in the U.S. (the premium level—$16–$26—accounts for another 29%).

Duffy said Pernod USA’s portfolio, more heavily skewed toward the premium end than the market in general, is positioned to capitalize on premiumization’s reemergence. Pernod derives 72% of sales at premium-and-above, versus 47% for the total market. Its average retail price per bottle is about $2.50 higher than the spirits market average of $14.57.

The recent performances of Absolut, Jameson and The Glenlivet in particular illustrate those dynamics at the brand level. Depletions for all three have accelerated over the past year, but Absolut’s turnaround has been particularly impressive. In the nine months through March 2010, the brand’s U.S. depletions fell 4%; in the same period ending in March 2011, depletions were up 3% and growth is trending higher than that in both Nielsen and NABCA data. (Pernod acknowledged its downward pricing adjustment—an average decrease of about 3.6% to $19.28 per bottle from April of 2008 through April of 2011—has helped buttress those numbers.) The New York metro market has been a point of emphasis for Absolut, and depletions are responding to the extra attention, rising 8% year-to-date in the area. Jameson, meanwhile, continues to be “on fire,” according to Duffy, helped by an expanding geographic base. Now showing double-digit growth in all 50 states, Jameson’s U.S. depletions are rising at close to 30%, despite a base of over 1 million cases.

The 28-state alignment between Pernod USA and Southern, forged in early 2009 following Pernod’s purchase of Absolut, appears to be serving those brands well. (Southern now handles 57% of Pernod’s business, while RNDC is its next biggest wholesaler with 17%. (National Wine & Spirits and Glazer’s hold smaller shares.) The arrangement includes Pernod-dedicated sales teams within Southern’s organization in all open markets, and Chaplin said Pernod receives “greater than its ‘fair share’ of activities and focus based on its strategic importance.”

Despite strong growth of Absolut, Jameson, and The Glenlivet and improved fortunes for Malibu, work remains to be done in other areas. The stubborn, ongoing decline of Kahlúa stands out. And while Pernod now presents itself as a “strong challenger” in premium spirits, second only to Diageo with a 14% market share, it has some way to go to catch up to Diageo’s 31% share. But having transformed itself via the Absolut deal and its recently consolidated routes to market, Pernod Ricard USA has emerged as a formidable and rising U.S. presence.

Pernod Ricard USA – Leading Brands
(thousands of nine-liter cases)
Depletions Percent Change
Brand Origin Type 2008 2009 2010 2008-2009 2009-2010
Absolut Sweden Vodka 4,732 4,485 4,631 -5.2% 3.3%
Seagram’s Extra Dry USA Gin 2,775 2,623 2,438 -5.5% -7.1%
Malibu Barbados Rum 1,632 1,605 1,636 -1.7% 1.9%
Jameson Ireland Irish Whiskey 684 815 1,037 19.2% 27.2%
Kahlúa Mexico Liqueur 1,098 1,029 998 -6.3% -3.0%
Jacob’s Creek Australia Wine 968 943 897 -2.6% -4.9%
Hiram Walker USA Cordials 919 918 890 -0.1% -3.1%
Beefeater UK Gin 549 514 511 -6.4% -0.6%
Kahlúa Ready-to-Drink* Mexico Cocktail 575 475 405 -17.4% -14.7%
Chivas Regal UK Scotch Whisky 425 397 402 -6.6% 1.3%
Frïs Denmark Vodka 221 261 359 18.1% 37.5%
The Glenlivet UK Single Malt 284 286 309 0.7% 8.0%
Seagram’s Twisted USA Gin 252 243 232 -3.6% -4.5%
Mumm Napa USA Sparkling Wine 179 179 220 22.9%
Total Top 10 15,293 14,773 14,965 -3.4% 1.3%
*includes Drinks-to-Go
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