Pernod: Scotch must be ‘more resilient’ in China

Pernod Ricard’s CEO believes there is a need to establish a “more resilient” market for Scotch whisky in China, as the group continues its struggle to claw back growth in the country.

Alexandre Ricard believes the Cognac market is “more resilient” than Scotch in China

In the first half of its financial year, the French drinks group experienced double-digit sales decline for its Scotch whisky portfolio in China, with Chivas and Royal Salute down.

Pernod’s total sales fell 2% in China due to continued “macro-economic slowdown and anti-extravagance campaign pressure”.

Difficulties for its Scotch brands extended to Asia Travel Retail, where passenger growth slowdown and a tough commercial and competitive environment impacted sales.

However, Martell Cognac achieved an overall 7% sales increase, and managed to grow 4% in China – which has implemented a crackdown on conspicuous spending and gifting since 2012.

At a roundtable earlier this week following the announcement of its H1 results, Pernod Ricard’s executives addressed some of the issues its faces in the Chinese market, particularly with regards to Scotch.

“China is a bit of a paradox because we are losing volume but gaining market share,” said Laurent Lacassagne, CEO of Pernod Ricard’s gin and Scotch whisky arm, Chivas Brothers.

“We don’t think there is a branding issue; it’s a global issue that started with the anti-austerity campaign. But we are far beyond that. In China the situation has changed but at the same time our portfolio has adapted. Today, China is much more representative of a normal emerging market.”

Alexandre Ricard, CEO of Pernod Ricard, said that while some of its competitors have seen their sales grow in China, this is due to more favourable comparison to H1 2014/15.

“From a comparable business point of view, we were the first ones to destock the market because we realised after Chinese New Year that sales had softened,” he said. “Our competition destocked later so from a shipment point of view are more favourable than we are.

“Our first six months have been perfectly in line with trends we have observed over the last fiscal year. Cognac is a more established segment in China. It is much more resilient for the time being and it’s our job to build more resilience in the Scotch segment.”

In total Pernod experienced an organic sales growth of 3% totalling €4.958 billion, while reported sales growth was up 7% due to a “favourable FX impact”.