Chinese clampdown sees Pernod sales slump24th October, 2013 by Amy Hopkins
The Chinese governmentâs anti-extravagant spending campaign has contributed to a profit slump for Pernod Ricard over the past three months.
Announcing its net sales for the quarter from July to September, the French drinks group said that sales had declined by 9% to âŹ2.013 billion.
The decline was driven by slowing sales in Asia, which saw a 14% drop compared to the same period last year. However, the group said that the dip was prevalent across the spectrum of emerging markets.
An âunfavourable foreign exchangeâ also impacted on the firmâs sales, as did a âdifficult comparisonâ to strong performances this time last year.
Its top 14 brands posted a 5% decline in sales and a 1% decline in volumes, with noted disappointing performances for Martell Cognac and Ballantines Scotch in Asia.
Sales of high-end Cognac and Scotch brands have been dropping over the past few months in China as the countryâs government attempts to curb a culture of conspicuous spending and gifting.
However, the groupâs 18 key local brands posted a 8% increase in sales, with brands targeting emerging middle classes described as having a âvery goodâ performance.
These poor quarterly results have consequently led the firm to revise its target for full-year profit growth to between 4% and 5%, compared to a previous goal of 6%.
For mature markets, the performance in Western Europe was described as âstrongâ, yet the firm cited âunfavourable comparativesâ in the US due to a strong performance last year.
Pierre Pringuet, Chief Executive Officer of Pernod Ricard, said: âOur first quarter was adversely affected by the slowdown of the emerging markets and unfavourable technical effects.
âHowever, we remain confident in the diversity of our portfolio and the strength of our distribution network.â
Remy Cointreau also recently announced double-digit decline in sales of its Remy Martin Cognac as a result of the measures in China.