Exclusive news and research on the wine, spirits and beer business

Pernod Ricard Cuts Profit Forecast On China Difficulties, But Enjoys 5% Bounce In U.S.

February 13, 2014

Pernod Ricard has cut its full-year profit forecast after enduring an 18% sales decline in China during its fiscal first half, but the company returned to growth in the Americas after a strong second quarter driven by solid gains in the U.S. market.

Pernod Ricard enjoyed 5% sales growth in the U.S.—its biggest market—during its first half (ended December 31, 2013), thanks to impressive advances in its whisk(e)y stable, led by Jameson (sales up 20%), The Glenlivet (+14%) and Chivas Regal (+2%). Pernod’s biggest brand in the U.S., Absolut vodka, wasn’t as fortunate, experiencing what Pernod calls “persistent difficulties in a category that remains highly competitive.” Absolut’s U.S. sales dropped by 1% in the first half. Still, Pernod Ricard USA CEO Bryan Fry is optimistic about the iconic vodka brand’s prospects. “Over the past few years, we’ve lost share of the vodka category, but we haven’t lost any volume, and have actually grown value,” he tells SND. “We’re continuing to take price—one of the few leading vodka brands able to do that—and we’re experimenting in new areas and creating new consumption occasions, with products like our City Series, Absolut Tune (a fusion product featuring Absolut and sparkling wine) and Absolut Elyx (a handcrafted edition that sells for around $50 a bottle).”

Pernod’s global first-half sales were flat on an organic basis, at €4.57 billion ($6.25b), but down by 7% on a reported basis due to foreign exchange impact. The Paris-based drinks giant’s profit rose by 2% organically, to €1.36 billion ($1.86b), largely because of cost control. Pernod’s sales in its biggest region—Asia/Rest of World (38% of total sales), fell by 4%, although excluding China its sales were up by 2%. The company achieved positive results in Europe (+4%)—which accounts for 35% of global sales—thanks to marked gains in France, Germany and Eastern Europe. In the Americas (26% of global sales), the U.S. outperformed the rest of the region, although Pernod returned to growth in Brazil amid double-digit advances for Absolut, Chivas Regal and Ballantine’s.

Looking ahead, Pernod CEO Pierre Pringuet said, “we remain confident in the medium and long-term potential of China but we anticipate difficulties to persist for the full financial year.” Largely because of this, the company has revised its profit forecast down to 1%-3%, after previously projecting 4%-5% profit growth after its fiscal first quarter.

Subscribe to Shanken News Daily’s Email Newsletter, delivered to your inbox each morning.

Tagged :

GET YOUR FIRST LOOK AT 2021 DATA AND 2022 PROJECTIONS FOR THE WINE AND SPIRITS INDUSTRIES. ORDER YOUR 2022 IMPACT DATABANK REPORTS. CLICK HERE.

Previous :  Next :