Pernod lobbies against US border tax proposals

Pernod Ricard’s CEO Alexandre Ricard has branded the proposed US border levy a “consumer tax”, as the French drinks group lobbies president Donald Trump’s administration.

Alexandre Ricard has branded the proposed US border tax a “consumer tax”

Pernod has backed retailers such as Walmart, Target and Best Buy in urging the White House not to not to impose import tariffs of up to 20% on non-US produced products – which would include spirits.

The movement, called Americans for Affordable Products, comprises more than 100 businesses opposed to the proposals – including Diageo North America and LVMH.

“We’re a provenance-based industry, and you cannot produce Scotch in the US, just like you cannot produce Bourbon in Scotland,” Ricard at a roundtable on Tuesday (14 February).

“Cognac is French, Scotch is Scottish and Irish whiskey is Irish… It’s a very specific industry – an industry of appellations. We cannot move production for competitive reasons, so if there were to be a border tax we’d basically [have to] pass this through the consumers.

“What the retailers are saying – and we’re fully in line with them – [is that] the border adjustment tax is a consumer tax, a consumption tax. I don’t think its fair to the American consumer, but… go figure. We’ll see what happens.”

Demonetisation impact

Across the globe, other economic headwinds challenge the business. Pernod’s recent H1 sales were hit by a temporary slowdown on Indian whiskies, attributed to the demonetisation of 86% of the country’s banknotes during November 2016.

Ricard said there is “absolutely no doubt” that demonetisation in India had an impact on consumption, though any effects would be “clearly temporary”, with consumer adaptation set to be “done and dusted” by the end of March.

The market’s underlying potential, he said, is “extremely strong”, and was hit since “for a given period, people had no cash”.

Brexit fallout

Also speaking at the roundtable, Laurent Pillet, recently appointed managing director of Pernod Ricard UK, refused to provide detailed information on whether product prices will rise following exchange rate fluctuations and subsequent devaluation of the sterling.

However, he confirmed the group would look at optimising the cost of imported goods, review operational efficiencies – such as where staff and resources are allocated – and consider potential price increases.

“Long-term, very transparently, [maintaining margin] is not sustainable, we are impacted on our margin because the cost of goods imported is more expensive in sterling than it used to be in the past.

“On a temporary basis we can absorb part of it, but in the long-term we need to impact part of this to our consumers.”