Pernod reaffirms cost-cutting commitment

Pernod Ricard has reaffirmed its “serious commitment” to cost-cutting programme Project Allegro in its full-year financial results, which today revealed a double-digit net profit decline.

Pernod Ricard has revealed a 13% decline in net profits for the year 2013/14

The French drinks group, producer of Jameson Irish whiskey and Martell Cognac, today announced that its sales for 2013/14 declined 7% to €7.9 billion and net profit had plummeted 14% to €1.02 billion.

China’s on-going clampdown on excessive spending and gifting among military officials was highlighted by Pernod Ricard as the main catalyst for its decline, with sales dropping 23% in the region, mirroring the troubles faced by Diageo and Remy Cointreau in the region.

Its Martell Cognac brand was adversely affected by the country’s austerity measures, with overall volumes declining 6% and net sales by 9%.

However, while Cognac has been the main category affected by China, the group’s blended Scotch whisky brands also had poor performances in the year, with Chivas Regal declining 4% in net sales, Ballantine’s 4% and Royal Salute by 8%. Volumes for these brands also either stood stagnant or witnessed single-digit declines.

Absolut, the biggest-selling brand in Pernod Ricard’s stable, saw marginal net sales and volume declines, shifting 11.1m nine-litre cases in the year, while Havana Club rum, Ricard aperitif, and The Glenlivet saw single-digit sales growth.

Also in the group’s headline portfolio, sales of Malibu and Kahlua dropped 4% and 7% respectively, while sales of Beefeater gin were left flat.

The star performer for the year was Jameson Irish whiskey, which achieved 12% growth in net sales and 9% volume growth, demonstrating the group’s focus on the rapidly growing Irish whiskey category.

In terms of regions, while the ROW region showed a 4% sales decline, the exclusion of China from the region shows 5% growth. Meanwhile “marked improvement” was seen in European sales, which increased by 2%, and a “slowdown of growth” caused sales in the Americas to decline by 2%.

Cost-cutting plan

In February this year, Pernod Ricard revealed its streamlining programme, called Project Allegro, in a bid to improve business processes and save €150m over the next three years.

The group admitted that job losses would be likely, and were apparent with the reorganisation of its French distribution units, a move which was reported to have lead to around 60 redundancies.

Pierre Pringuet, CEO of Pernod Ricard, said: “We are seriously committed to the Allegro project: this operational efficiency project must enable us to maximise our future growth while generating a hard figure of €150 million of savings.”

He also said of the group’s full year results: “Despite an environment that was more difficult than anticipated, we have delivered the guidance announced in February, proof of everyone’s commitment, which I would like to commend.”

Alexandre Ricard, deputy CEO and chief operating officer of Pernod Ricard, said that he anticipates a “gradual improvement” in the group’s sales performance in the coming year.

“In this context which will remain challenging, we anticipate a gradual improvement in our sales growth, and we will increase the investment behind our brands and priority innovations in order to sustain long-term growth,” he said.