Pernod Unfazed by Souring Economy
Pierre Pringuet, Managing Director of Pernod Ricard, began the conference call by saying he’d like to offer his listeners “a ray of sunshine” for the next thirty minutes amidst crumbling economy and financial talk.
“When you look at the news and pile of losses announced by banks and some other institutions, so I would like to offer you a sort of ray of sunshine, sort of a thirty minute holiday on a nice sunny beach, maybe even Malibu beach or Barbados, presenting the outstanding results by Pernod Ricard,” said Pierre.
The French have a way of putting it, don’t they?
Pernod saw consolidated net sales increase 5.9% in the first half, impacted by organic growth of 10.1%. The weak U.S. dollar took a negative toll on sales and was primarily responsible for foreign exchange impact declining -2.5%.
With that said, the 15 strategic brands (including Beefeater, Malibu, Jameson, Jacob’s Creek and Kahlua), were the main drivers of overall growth. They grew 7% in volume and 13% in value, which demonstrates the very positive impact of price increases and mix effects, said Pernod.
Premium spirits contributed strongly to sales growth, particularly the strategic brands. Spirit sales grew 11% and premiums increased 17%. Most strategic brands recorded double-digit growth in value: Martell (+27%), Jameson (+23%), The Glenlivet (+18%), Chivas Regal (+16%), Havana Club (+16%), Malibu (+13%), Ballantine’s (+12%), Stolichnaya (+11%).
The wine business, meanwhile, recorded organic growth of 6% in value. Sales of Pernod’s three priority brands, Jacob’s Creek, Montana and Campo Viejo together increased +9%, thanks to premiumization, price increases and innovation, said the company. For champagnes, the price increase policy was also successful as reflected in the growth in value of Mumm (+17%) and Perrier Jouët (+7%).
UNITED STATES PERFORMANCE. In North America, organic growth was up 5%. The company reiterated several times that US growth was similar between the 1st quarter and 2nd quarter. Strategic brands such as Jameson, The Glenlivet, Malibu, Stolichnaya and Wild Turkey for spirits and Montana, Campo Viejo, Perrier Jouët and Mumm Napa for wines continued their “vigorous growth.” However, the Kahlúa, Chivas Regal and Beefeater brands had a more difficult 1st half-year.
Let’s get the bad news out of the way and touch on some of the weaker brands. U.S. depletions of Chivas Regal declined -7% in the first half. Volumes of Martell VS were particularly weak in the U.S. and U.K., which Pierre said was expected. He said the company’s strategy is to raise the price of VS “dramatically” and save on inventory for the future. As a result, the company expects the decline in volume in the U.S. and U.K. Pernod said it is currently working with its U.S. arm to find ways to rejuvenate the brand in the U.S.
Depletions of Kahluah were down -6%, which Pierre says has a lot to do with how Pernod has positioned the brand in the U.S.
“Positioning for desperate middle aged housewives was not probably the most promising market one can target or is not aspirational and yes we suffered in the U.S. The situation is simple in the U.S. Strong brands continue to give very good performance but weaker brands suffer.”
To combat less than favorable marketing, Pernod is launching a new “Dare to be Curious” platform for Kahluah.
Beefeater remains difficult in the U.S. with depletions down -5%. Pierre said the company is very pleased with the result of the new marketing platform for Beefeater, but noted gin is still suffering in the U.S.
“Gin, let’s be honest, is not the most buoyant category,” he noted.
Now for the good stuff. As we said before, Jameson, Glenlivet, Malibu and Stoli continue to do well in the U.S. despite price increases across the board. Jameson saw depletions rise 23% in the first half, which Pierre chalked up to price increase. Glenlivet depletions rose 5% and Malibu was up 4% at the result of price increases. Stoli, meanwhile, rose 1%.
As for wine and champagne, Jacobs Creek rose 5% in depletions with improved mix, while Montana’s depletions grew 19% despite price increases. Perrier Jouet experienced “good growth” in the U.S. as well.
WEAKENING ECONOMY. Here’s what Pierre had to say about the U.S. economy and its effect on Pernod Ricard:
“In some of our shipments so far we haven’t seen any slowdown in this market. Of course if we look at the depletions we could see probably Nov. and Dec. were a bit weaker. What does that mean? Today, first of all, I don’t have any sort of a crystal ball on what the future could be. There could be a slowdown but nonetheless it’s quite clear that the strong brands – Jameson, Glenlivet, Malibu, Stolichnaya and Wild Turkey – could continue to deliver growth. Of course, that could impact some weaker brands like Kahlua or Chivas or Beefeater. That’s the situation. Nonetheless, for our branded premium products we believe there is potential for growth in the next couple of months in the U.S.”
In Pierre’s opinion, it comes down to the idea that strong brands will be able to survive, but weaker brands will likely suffer at least a little bit.
“The strongest brand will prove to be the most resilient. Brands that have performed year after year will prevail and will be rewarding to Pernod.”
He also noted that the emerging markets (China, Russia, India) will help make up for the lack of growth in the U.S., which Pierre called a “shift in power.” He pointed out that the emerging markets have “domestic consumption” for Pernod’s products.
“We can be pessimistic about the situation in the U.S. But in the new World one shouldn’t look westward but eastward... How long do you think the slowdown will be? I don’t know. Maybe just a few months. I think there is some good evidence that the world could recover,” he said later during the question and answer section of the conference call.
“It’s just that looking at Pernod business it’s spread across many economies...we think we can resist a slowdown in some countries based on how spread out we are.”
VIN & SPRIT. Pierre would comment very little on Pernod’s involvement with V&S and Stoli. When asked if Pernod had placed an indicative bid with the Swedish government this week for Absolut, Pierre only answered this: “We also confirm that we are part of the privatization of Vin & Sprit and if by chance the government requested an indicative offer, then yes we made in an indicative offer.”
“The Swedish government is absolutely free to talk about the process and I am not. Having said that, we are there as we said earlier,” he continued.
He also confirmed that there is ongoing discussion with Stoli and that Pernod cannot buy both Stoli and Absolut.
“We cannot own both,” he said. “Both brands are a serious competitor and we’ll see.”
WSD BRIEFS:
SAZERAC TO PURCHASE CORAZON DE AGAVE. The Sazerac Co. has entered into a letter of intent to purchase Corazon de Agave from Sidney Frank Importing for an undisclosed sum, the company said today. Corazon de Agave is available in Blanco, Reposado & Anejo.
267 INFUSIONS WAS PURCHASED BY THE FALIC GROUP from Boz Spirits and will operate in the future under the name Innovative Liquors. The new company says it will pursue aggressive plans to dramatically increase distribution in domestic and international markets in the upcoming months.
E&J GALLO HAS SIGNED A CONTRACT WITH TEJON RANCH CO., one of the largest wineries in the U.S., to grow additional acres of wine grapes for E & J Gallo Winery. The contract, which extends for at least ten years, calls for the Ranch to produce 300 acres of rubired wine grapes for Gallo. In addition to the approximately 300 acres already being grown for Gallo, the new agreement brings the total acreage under contract with the winery to over 600. Tejon Ranch, located at the southern end of the San Joaquin Valley, has been growing grapes for Gallo, off and on, for more than 30 years.
TERRAVANT WINE CO., a custom crush facility, has appointed Alan Phillips as Direct of Winemaking for all production services.
SKYY SPIRITS is now the official marketer and distributor of Cabo Wabo tequila in the U.S.
TRUTH SQUADERS, PIPING ALL HANDS. It’s that time of the year, time to take a quick WSD Truth Squad survey. It’s very helpful to us to understand where you stand on a few important issues, and we’ll report the general results in the next couple of weeks. All answers are kept anonymous. Just click here to take the survey: http://tiny.cc/nnda6
Until tomorrow, Megan
“Insist on yourself; never imitate... Every great man is unique.”
-Ralph Waldo Emerson
--------- Sell Day Calendar ----------
Today's Sell Day: 17
Sell days this month: 22
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Wed.
YTD sell days Over/Under: 0
“When you look at the news and pile of losses announced by banks and some other institutions, so I would like to offer you a sort of ray of sunshine, sort of a thirty minute holiday on a nice sunny beach, maybe even Malibu beach or Barbados, presenting the outstanding results by Pernod Ricard,” said Pierre.
The French have a way of putting it, don’t they?
Pernod saw consolidated net sales increase 5.9% in the first half, impacted by organic growth of 10.1%. The weak U.S. dollar took a negative toll on sales and was primarily responsible for foreign exchange impact declining -2.5%.
With that said, the 15 strategic brands (including Beefeater, Malibu, Jameson, Jacob’s Creek and Kahlua), were the main drivers of overall growth. They grew 7% in volume and 13% in value, which demonstrates the very positive impact of price increases and mix effects, said Pernod.
Premium spirits contributed strongly to sales growth, particularly the strategic brands. Spirit sales grew 11% and premiums increased 17%. Most strategic brands recorded double-digit growth in value: Martell (+27%), Jameson (+23%), The Glenlivet (+18%), Chivas Regal (+16%), Havana Club (+16%), Malibu (+13%), Ballantine’s (+12%), Stolichnaya (+11%).
The wine business, meanwhile, recorded organic growth of 6% in value. Sales of Pernod’s three priority brands, Jacob’s Creek, Montana and Campo Viejo together increased +9%, thanks to premiumization, price increases and innovation, said the company. For champagnes, the price increase policy was also successful as reflected in the growth in value of Mumm (+17%) and Perrier Jouët (+7%).
UNITED STATES PERFORMANCE. In North America, organic growth was up 5%. The company reiterated several times that US growth was similar between the 1st quarter and 2nd quarter. Strategic brands such as Jameson, The Glenlivet, Malibu, Stolichnaya and Wild Turkey for spirits and Montana, Campo Viejo, Perrier Jouët and Mumm Napa for wines continued their “vigorous growth.” However, the Kahlúa, Chivas Regal and Beefeater brands had a more difficult 1st half-year.
Let’s get the bad news out of the way and touch on some of the weaker brands. U.S. depletions of Chivas Regal declined -7% in the first half. Volumes of Martell VS were particularly weak in the U.S. and U.K., which Pierre said was expected. He said the company’s strategy is to raise the price of VS “dramatically” and save on inventory for the future. As a result, the company expects the decline in volume in the U.S. and U.K. Pernod said it is currently working with its U.S. arm to find ways to rejuvenate the brand in the U.S.
Depletions of Kahluah were down -6%, which Pierre says has a lot to do with how Pernod has positioned the brand in the U.S.
“Positioning for desperate middle aged housewives was not probably the most promising market one can target or is not aspirational and yes we suffered in the U.S. The situation is simple in the U.S. Strong brands continue to give very good performance but weaker brands suffer.”
To combat less than favorable marketing, Pernod is launching a new “Dare to be Curious” platform for Kahluah.
Beefeater remains difficult in the U.S. with depletions down -5%. Pierre said the company is very pleased with the result of the new marketing platform for Beefeater, but noted gin is still suffering in the U.S.
“Gin, let’s be honest, is not the most buoyant category,” he noted.
Now for the good stuff. As we said before, Jameson, Glenlivet, Malibu and Stoli continue to do well in the U.S. despite price increases across the board. Jameson saw depletions rise 23% in the first half, which Pierre chalked up to price increase. Glenlivet depletions rose 5% and Malibu was up 4% at the result of price increases. Stoli, meanwhile, rose 1%.
As for wine and champagne, Jacobs Creek rose 5% in depletions with improved mix, while Montana’s depletions grew 19% despite price increases. Perrier Jouet experienced “good growth” in the U.S. as well.
WEAKENING ECONOMY. Here’s what Pierre had to say about the U.S. economy and its effect on Pernod Ricard:
“In some of our shipments so far we haven’t seen any slowdown in this market. Of course if we look at the depletions we could see probably Nov. and Dec. were a bit weaker. What does that mean? Today, first of all, I don’t have any sort of a crystal ball on what the future could be. There could be a slowdown but nonetheless it’s quite clear that the strong brands – Jameson, Glenlivet, Malibu, Stolichnaya and Wild Turkey – could continue to deliver growth. Of course, that could impact some weaker brands like Kahlua or Chivas or Beefeater. That’s the situation. Nonetheless, for our branded premium products we believe there is potential for growth in the next couple of months in the U.S.”
In Pierre’s opinion, it comes down to the idea that strong brands will be able to survive, but weaker brands will likely suffer at least a little bit.
“The strongest brand will prove to be the most resilient. Brands that have performed year after year will prevail and will be rewarding to Pernod.”
He also noted that the emerging markets (China, Russia, India) will help make up for the lack of growth in the U.S., which Pierre called a “shift in power.” He pointed out that the emerging markets have “domestic consumption” for Pernod’s products.
“We can be pessimistic about the situation in the U.S. But in the new World one shouldn’t look westward but eastward... How long do you think the slowdown will be? I don’t know. Maybe just a few months. I think there is some good evidence that the world could recover,” he said later during the question and answer section of the conference call.
“It’s just that looking at Pernod business it’s spread across many economies...we think we can resist a slowdown in some countries based on how spread out we are.”
VIN & SPRIT. Pierre would comment very little on Pernod’s involvement with V&S and Stoli. When asked if Pernod had placed an indicative bid with the Swedish government this week for Absolut, Pierre only answered this: “We also confirm that we are part of the privatization of Vin & Sprit and if by chance the government requested an indicative offer, then yes we made in an indicative offer.”
“The Swedish government is absolutely free to talk about the process and I am not. Having said that, we are there as we said earlier,” he continued.
He also confirmed that there is ongoing discussion with Stoli and that Pernod cannot buy both Stoli and Absolut.
“We cannot own both,” he said. “Both brands are a serious competitor and we’ll see.”
WSD BRIEFS:
SAZERAC TO PURCHASE CORAZON DE AGAVE. The Sazerac Co. has entered into a letter of intent to purchase Corazon de Agave from Sidney Frank Importing for an undisclosed sum, the company said today. Corazon de Agave is available in Blanco, Reposado & Anejo.
267 INFUSIONS WAS PURCHASED BY THE FALIC GROUP from Boz Spirits and will operate in the future under the name Innovative Liquors. The new company says it will pursue aggressive plans to dramatically increase distribution in domestic and international markets in the upcoming months.
E&J GALLO HAS SIGNED A CONTRACT WITH TEJON RANCH CO., one of the largest wineries in the U.S., to grow additional acres of wine grapes for E & J Gallo Winery. The contract, which extends for at least ten years, calls for the Ranch to produce 300 acres of rubired wine grapes for Gallo. In addition to the approximately 300 acres already being grown for Gallo, the new agreement brings the total acreage under contract with the winery to over 600. Tejon Ranch, located at the southern end of the San Joaquin Valley, has been growing grapes for Gallo, off and on, for more than 30 years.
TERRAVANT WINE CO., a custom crush facility, has appointed Alan Phillips as Direct of Winemaking for all production services.
SKYY SPIRITS is now the official marketer and distributor of Cabo Wabo tequila in the U.S.
TRUTH SQUADERS, PIPING ALL HANDS. It’s that time of the year, time to take a quick WSD Truth Squad survey. It’s very helpful to us to understand where you stand on a few important issues, and we’ll report the general results in the next couple of weeks. All answers are kept anonymous. Just click here to take the survey: http://tiny.cc/nnda6
Until tomorrow, Megan
“Insist on yourself; never imitate... Every great man is unique.”
-Ralph Waldo Emerson
--------- Sell Day Calendar ----------
Today's Sell Day: 17
Sell days this month: 22
Sell days this month last year: 22
This month ends on a: Thur
This month last year ended on a: Wed.
YTD sell days Over/Under: 0
posted at 1:18 PM
<< Home