Pernod confident in China’s Scotch future

Pernod Ricard has reaffirmed its confidence in driving luxury spirits across Asian markets, despite the recent slowdown of Scotch whisky in China.

Alexandre Ricard, deputy CEO of Pernod Ricard, said he was “absolutely confident” the group will quickly recover from a difficult year in China

The French drinks producer last week announced a dip in Scotch whisky profits in China during its latest fiscal year, largely attributed to a decline in the Scotch market and a government crackdown on conspicuous consumption.

An economic slowdown in Western Europe, including the group’s domestic French market, also impacted on the company’s profits – although an overall increase of 6% was described as a “solid performance”.

The group’s Scotch brands – including Chivas Regal and Ballantines – suffered a “challenging year” in key Asian markets including South Korea, Thailand and, most notably, China.

Rival Diageo also suffered from a slowdown in the region, with many commentators expressing concern that businesses might not be able to use the once buoyant Chinese economy to offset persistent difficulties in Europe.

At a meeting between company bosses and members of the press in London yesterday, Pernod Ricard deputy CEO Alexandre Ricard reaffirmed his “absolute confidence” that Pernod would recover from the sales drop and that it would continue to focus on its core ethos of “premiumisation”.

He also said that the slowdown was “in line with expectation”, describing the dip as “conjunctural”.

“There has been a slowdown for Scotch in China, but this is not surprising. There has been a leadership change which can generate about a year of uncertainty.

“The Chinese economy was seen to be growing too fast so it was the clear goal of the Chinese authorities to slow this down.

“So yes, there has been a slowdown, but this is a conjunctural slowdown. We expect improvements in 2014 and we will not sacrifice long-term potential for short-term gain.”

Laurent Lacassagne, Chivas Brothers executive chairman, said the company must not overreact to “temporary turbulences” and that the future for Scotch whisky and other premium spirits looked bright across all emerging markets.

He added: “The growing number of middle classes in the emerging markets means that the future of Scotch whisky is positive.”

Pernod is therefore increasing capacity to meet this expected demand in the emerging markets, stating that this also demonstrates the company’s confidence for sales 2014.

In particular, Lacassagne indicated Brazil, South Africa and Mexico held “great potential” for the category.