Pernod Ricard addresses ‘challenges’ in China

Pernod Ricard has seen its Cognac sales recover in China over the New Year period, however volume sales of its Scotch brands slipped 11%.

Volume sales of Pernod Ricard’s whisky brands fell 11% over Chinese New Year, as Cognac climbed 7%

During a conference call yesterday, the French drinks group revealed that between December and February, its Cognac sales grew 7% by volume in China – the group’s second largest market.

In total, sales of the group’s imported spirits increased 3%, but its whiskies suffered an 11% decline.

Pernod Ricard’s Cognac and luxury whisky sales have been hit since the Chinese government embarked on its campaign of austerity in 2012. In its 2013/14 full financial year, the group’s Cognac sales fell 22% by volume, while whisky slipped 13% in the region.

Declines have slowed in 2014/15 as year-to-date figures show the Cognac sales dropped 1%. As such, Pernod executives confirmed a “gradual improvement after a challenging year”.

In September last year Pernod Ricard CEO Pierre Pringuet, who was recently replaced by Alexandre Ricard, said the measures in China had “deeper and wider” effects than expected, but said the group now anticipates “gradual improvement” in the region.

However, in this latest conference call, Pernod said China would remain a “challenging” market as its campaign against excessive spending would “continue to be enforced”.

Looking at other markets, Pernod said its brands had continued their “success story” in India – its fourth largest market – where Ballantine’s, Chivas Regal, The Glenlivet and Absolut all reported double-digit growth in H1 2014/15.

It was recently revealed the group had increased it borrowing limit in the region to £161m in order to challenge the dominance of Diageo’s United Spirits.

Announcing its total half-year financial results for 2014/15, Pernod reported a 5% dip in net profits.