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Pernod defends strategy following activist move

Pernod Ricard has insisted its strategy for growth “is the right one” following the news that activist investor Elliott Management Corporation is looking to shake up the company after building a stake of more than 2.5%.

Alexandre Ricard: “Our strategy is working and is the right one”

Yesterday morning, New York-based Elliott – the world’s largest activist hedge fund – announced it had taken the stake and called on the French group to improve profitability and corporate governance.

The firm said Pernod’s operational improvement plans have “failed to generate operating leverage”, leaving it less profitable than rival Diageo with a five-percentage point disadvantage. It also accused the Martell Cognac and Jameson maker of an insular approach to corporate governance, with a “lack of outside perspectives”.

Pernod has responded to Elliott’s move, saying it is “well placed to continue to execute on its strategic roadmap”. The group’s sales and profits from recurring operations were up by 6% and 6.3% respectively in 2017/18, and it is expecting to register organic profit growth from recurring operations of 5-7% in its 2018/19 fiscal year.

Pernod embarked on a cost-cutting scheme – dubbed Project Allegro – in 2014 to save €150 million (now US$170m) over three years. The move resulted in a 5% reduction of Pernod’s global workforce and was said to rid the firm of “complexity” following numerous acquisitions and mergers over the years.

When Alexandre Ricard took the helm at Pernod almost four years ago, he implemented a consumer­-centric business model focusing on moments of consumption – or moments of ‘convivialité’.

In a statement released yesterday, Alexandre Ricard stressed that the group’s strategy “is working”.

“We are a group with strong family values committed to long-term value creation. Over the past three years, we have created more than €11bn of value and our share price has increased by +37.7%, significantly outperforming the CAC40 index (+5.6%) and the Eurostoxx Food & Beverage index (-13.4%),” he said.

“That being said, long-term value creation is not measured by share price performance alone but by taking into account the interests of all stakeholders: our shareholders, our 19,000 employees, our consumers, our partners and suppliers.

“Our strategy is working and is the right one combining short-term profitability and sustainable, profitable and responsible growth under a consistent and long-term roadmap.”

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