Pernod ‘too slow’ to react to low abv trend in Korea

The head of Pernod Ricard’s Asia business has admitted the group was “too slow” to react to the low abv spirits trend in South Korea, where the French firm’s sales have seen dramatic declines.

Philippe Guettat, chairman and CEO of Pernod Ricard Asia

Speaking to investors, Philippe Guettat, chairman and CEO of Pernod Ricard Asia, said the group continues to battle “strong declines” in South Korea following a consumer shift to low abv products.

“It’s no secret this market has been challenging for us for a number of years,” he said. “We [posted] a strong decline for the first nine months and we were probably too slow to react to the low abv trend that completely changed the course of the market.”

Guettat claimed that low abv products, bottled between 35% and 37% abv, now account for 40% of the total local whisky market in South Korea, and as much as three quarters in certain areas.

As such, Ballantine’s and The Glenlivet maker Pernod has established a new commercial and management team to “tackle the new market dynamics and inspire a new winning mindset”.

The firm as also launched the 35% abv 35 Imperial to capitalise on ‘business entertainment’ occasions.

“We were probably too slow to innovate and did not fully understand the consumer needs and what lower abv whiskies offered consumers,” Guettat added.

The executive also noted that Pernod Ricard experienced “unprecedented challenges” in India over the past six months due to demonetisation and the highway ban on alcohol sales.

Pernod Ricard is also set to be impacted by the introduction of a Goods and Services Tax (GST) in India, which is set to come into affect in July this year.

“So what you must not forget is that the long-term potential remains very strong,” Guettat said of India. “The fundamentals of the business over the last 20 years will ensure its success. [Our] business model is unique and resilient.

“Without doubt it’s a temporary slowdown in the history of a promising market and a very successful business unit in Pernod Ricard India.”

Elsewhere in Asia, Pernod Ricard is experiencing solid growth in Japan and Vietnam, as well as “stabilisation” in China thanks to Martell Cognac’s return to growth.

Looking ahead, Guettat said that despite a number of market challenges, FY17 will be a “year of stability” for Pernod Ricard in Asia.

Last month, Pernod Ricard revealed that its nine-month sales climbed 3% to €7 billion (US$7.6bn).