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Pernod Ricard targets -2% China growth

The company’s managing director finance and operations, Gilles Bogaert, says replicating this year’s -2% organic growth in China would be a “good performance” for fiscal year 2015/16.

Pernod Ricard’s Bogaert says replicating FY14/15’s -2% growth in China for FY15/16 would be a “good performance”.

Responding to a question from The Spirits Business at a recent media event, Bogaert said soft underlying trends in the country had led to a “slow start to the year”.

Pernod Ricard’s full year 2014/15 financial report showed a marked improvement in the company’s performance in China, rebounding from a -23% loss for FY13/14, to a -2% decline for FY14/15.

“If we deliver the same [next year], if would be a good performance,” Bogaert said.

He emphasised that Pernod Ricard was “confident in the mid-to-long term”, and was “preparing for a ‘New China’” as consumption shifts from prestige and ultra prestige to the premium and super premium price brackets.

Cognac brand Martell, which returned to growth in FY14/15 with sales up 2%, “remains the backbone of our business there,” Bogaert continued.

Forex fortunes

The recent market turbulence fuelled by China’s currency devaluation is not a major cause for concern for Bogaert.

Before recent volatility, the yuan was around 11% more valuable against the euro year-on-year, he said. As such, the recent 4-5% slide against the euro means “there is no reason to change pricing”.

Bogaert did however express concern regarding the impact the yuan devaluation has had on other emerging market currencies. This will “hurt more” in markets such as India than the yuan devaluation alone.

“So far Pernod Ricard has only been impacted by soft underlying trends [in China] and emerging market currencies,” he explained.

With more than 3,000 people in the field and its full portfolio of products, Pernod Ricard is “well placed” to make the shift to New China, he concluded.

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