Pernod Ricard sees return to growth

Chief executive Pierre Pringuet: Confident about brand strength
Chief executive Pierre Pringuet: Confident about brand strength
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Chivas Brothers parent group Pernod Ricard has predicted a recovery in sales this year, despite the tough trading conditions facing the drinks industry.

However, the world’s second-largest spirits maker, owner of brands such as Absolut vodka and Chivas Regal whisky, said higher investments behind its “priority” portfolio could hold back profit growth.

For the three months to the end of September, the French firm posted a 2 per cent rise in sales to €2 billion (£1.6bn). That came in ahead of forecasts and compares to a 1.5 per cent fall reported last week by larger rival Diageo for the same period.

Pernod Ricard also forecast profit growth of 1-3 per cent for the financial year ending 30 June. Profits at the Paris-­headquartered group grew by 2 per cent in 2013-14.

Chief executive Pierre Pringuet said the return to sales growth, which came in the wake of a 2 per cent decline in the final quarter of last year, “illustrates the group’s resilience in a difficult context”.

He added: “We are confident in the strength of our portfolio and distribution network.”

Among the drinks giant’s top-selling brands, The Glenlivet single malt whisky was one of the strongest performers, with a 17 per cent jump in net sales. ­Chivas Regal and Ballantine’s both grew 9 per cent.

Recent Scotch Whisky Association figures showed exports of Scotland’s national drink slid 11 per cent in the first half as anti-extravagance measures in China, an economic slowdown in some markets and a stronger pound all took their toll.

Deputy chief executive Alexandre Ricard said the profit outlook was “realistic”, and a return to growth in China hinged on the strength of demand during the Chinese New Year celebrations that start on 19 February.

The group generates 12 per cent of its sales in China, its largest market after the US. Ricard said: “The Chinese New Year will be the judge.”

He added: “For the full ­financial year we anticipate a gradual improvement in sales, in an environment that will ­remain difficult.

“We plan to increase investment behind our priority brands and innovations. As a result, our 2014-15 guidance is organic growth in profit from recurring operations between 1 and 3 per cent.”

Sales in China were down 9 per cent in the first quarter, but that was a dramatic improvement on the previous month, which saw a slump of 38 per cent.

Like its rivals, including smaller peer Remy Cointreau, Pernod Ricard has been hurt by a ­Chinese clampdown on luxury gifts in the country, in addition to the slowdown in growth.

In Asia as a whole, like-for-like sales rose 4 per cent, driven by a 21 per cent jump in India. ­Brazil achieved double-digit sales growth but takings in the US fell 3 per cent, reflecting a soft market for Absolut vodka amid fierce price competition.

Europe, which accounts for 35 per cent of Pernod Ricard’s revenues, saw sales dip 1 per cent as the cool summer hit demand for Ricard, its aniseed-based drink.