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Pernod seeing ‘gradual improvement’ in China
China’s austerity measures have had “deeper and wider” effects than first expected for Pernod Ricard, although the group now anticipates a “gradual improvement” in the region.
Pernod Ricard’s super-premium Cognac Martell Noblige is showing continued growth in the region, unlike its ultra-premium peers
The Chinese government’s decision to reduce official spending on extravagant products has severely impacted luxury spirits producers’ sales, with Pernod Ricard posting a 23% decline for the market in its 2013/14 financial results.
Depletions for Martell Cognac, whose high-end Cordon Bleu expression retails for CNY970 (€120) a bottle, declined 5%, while Pernod Ricard’s whisky arm, Chivas Brothers, saw Scotch depletions move -18%.
However the group has asserted its confidence in a renewed strategy to adjust its business model to target China’s increasing band of middle class consumers.
Pierre Pringuet, CEO of Pernod Ricard, said the outlook was already looking positive for stabilisation in China.
He referred to a slowdown in the depletions decline for Chivas Regal in the last quarter of the year, which stood at -8% against the -16% recorded in the first nine months of the year.
“[The measures] were probably deeper and wider than we anticipated but we now anticipate a gradual – and there’s emphasis on the gradual – improvement of the situation in China.
“In the medium- to long-term we are extremely optimistic about the country because of its financial economic growth and increase of the middle class.”
Speaking at a press conference to mark the French drinks group’s 2013/14 financial results, Pringuet drew attention to a 24% net gain in depletions for the super-premium Martell Noblige, which retails for CNY365 (€45), versus the declines felt by the ultra-premium Cordon Bleu.
“It’s precisely these products which are affordable to the vast majority of the middle class,” he added.
“We have the depth of the portfolio, we have the strength in terms of sales premiumisation to really target the middle class, which translates into growth, so we are very confident for the future of China.”
Laurent Lacassagne, CEO of Chivas Brothers, revealed that the group had undertaken “specific consumer work” to address the market changes in China, and added: “We are having to adjust and adapt our business model at the moment, but the profitability of the market is still huge. We are going on investing in China.”