Chinese clampdown sees Pernod sales slump24th October, 2013 by Amy Hopkins
The Chinese government’s 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 €2.013 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 “unfavourable foreign exchange” also impacted on the firm’s sales, as did a “difficult comparison” 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 country’s government attempts to curb a culture of conspicuous spending and gifting.
However, the group’s 18 key local brands posted a 8% increase in sales, with brands targeting emerging middle classes described as having a “very good” 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 “strong”, yet the firm cited “unfavourable comparatives” in the US due to a strong performance last year.
Pierre Pringuet, Chief Executive Officer of Pernod Ricard, said: “Our first quarter was adversely affected by the slowdown of the emerging markets and unfavourable technical effects.
“However, we remain confident in the diversity of our portfolio and the strength of our distribution network.”
Remy Cointreau also recently announced double-digit decline in sales of its Remy Martin Cognac as a result of the measures in China.