Pernod CEO on coronavirus: ‘We don’t know how this will pan out’
Alexandre Ricard, CEO of Pernod Ricard, said it is too early to tell how coronavirus would impact the group, but warned it would hit its “biggest heavyweight brands in China”.
Speaking during a briefing last week for Pernod Ricard’s H1 results, Ricard said: “There’s no doubt that the Covid-19 situation will have a negative impact on Chivas. Chivas and Martell are our two biggest heavyweight brands in China and travel retail, specifically.”
“I don’t think we should be distracted by how it may impact us this week or next. Frankly your guess is as good as mine. We just don’t know how this will pan out,” said Ricard.
The “big unknown” is how the group performed during Chinese New Year, Ricard said, which will be uncovered at the end of March.
He added that the company was “very clear” with its assumption in the group’s revised guidance for fiscal 2020.
Pernod Ricard anticipates the outbreak will have a “severe” impact on its China and travel retail business. In China, the firm expects a “gradual recovery” from March, returning to normal in June. As a result, the French drinks group cut its guidance for organic growth in profit from recurring operations for fiscal 2020 to 2%‐4%, from previous expectations of 5%‐7%.
For its Q3 travel retail Asia, Pernod Ricard assumes “significant impact on passenger traffic” in early February. The group predicts a “gradual recovery” from April and a return to normalcy by June.
US president Donald Trump locked the US in numerous trade wars last year as a result of implementing 25% and 10% import tariffs on steel and aluminium respectively, effective from 1 June 2018.
On 2 October, the US government revealed its intentions to impose a 25% import tariff on EU goods, including single malt Scotch whisky, single malt whiskey from Northern Ireland, liqueurs and cordials from Germany, Italy, Spain, Ireland and the UK and wine. The dispute is over civil aircraft subsidies.
Regarding the US-EU tariffs, Ricard said: “We’re calling for these tariffs to go back down”. Jean-Christophe Coutures, chairman and CEO of Chivas Brothers, also said that the group was mainly “worried” about the small players as the single malt market in the US is “supply-driven”.
When asked about how the Australian wildfires affected the group, Ricard said the impact was “limited” and they were “lucky” to not be hit.
In the March 2020 issue of The Spirits Business, we took an in-depth look at the impact Covid-19 could have on the spirits industry’s long-term prosperity.