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Pernod Ricard Suffers From China Slowdown, But Jameson, Price Mix Spur Advance In U.S.

April 24, 2014

Widespread destocking in China and an unfavorable currency exchange impact led to a 7% sales decline, to €6.19 billion ($8.54b), for Pernod Ricard in the first nine months of its fiscal year, but solid progress in the U.S. drove a modest rise in the company’s overall organic profit growth.

Pernod’s U.S. sales for the first three quarters of its fiscal year, which ends June 30, 2014, increased by 4%, due largely to positive price mix trends and continuing double-digit sales and volume growth for Jameson. The French drinks group also achieved marked growth in Brazil, India and Eastern Europe, where sales advanced by 9%. These sales gains essentially offset Pernod’s struggles in China (where leading brands Martell and Chivas Regal have been hampered by a sharp dropoff in luxury gift-giving) in bringing the company’s organic profit growth from recurring operations to between 1% and 3%.

Still, with the exception of Jameson, most of Pernod’s top-selling brands had little or no global volume growth over the first nine months of the year. Absolut (-3%), Chivas Regal (-6%), Malibu (-4%), Kahlua (-1%) and Martell (-7%) all lost ground, while Ballantine’s (+1%), Havana Club (+1%), Beefeater (+2%) and The Glenlivet (+1%) carved out modest increases.

Along with the release of its third-quarter results, Pernod Ricard USA announced that it had acquired Sonoma Valley’s Kenwood Vineyards from Korbel, and that it has fortified its alliances with Southern Wine & Spirits (SWS) and Republic National Distributing Co. (RNDC).

Under terms of the new distribution pacts, RNDC will continue to handle the Pernod portfolio in Texas, Louisiana, Maryland (including Montgomery County), Nebraska, North Dakota, Oklahoma, South Dakota and Washington, DC, while also selling Pernod Ricard wines in Virginia and in Georgia and New Mexico under National Distributing Company. Meanwhile, SWS has expanded its national footprint with Pernod by adding four control states—Alabama, Michigan, Mississippi and Ohio—thereby making Southern the exclusive spirits broker for Pernod Ricard in all 17 control state markets. Between them, SWS and RNDC—the U.S. market’s top two spirits and wine distributors—are now aligned with Pernod in well over 40 U.S. markets.

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