Pernod Ricard Q3 sales fall 14.5% amid pandemic

French drinks group Pernod Ricard saw sales drop by 14.5% during its third quarter as coronavirus had a “significant” impact on trading.

Martell Cognac’s sales decline was one of the main contributors to Pernod’s Q3 drop

Sales for the three months ending 31 March 2020 fell organically to €1.73bn (US$1.86bn). For the nine-month period to 31 March 2020, Pernod Ricard’s organic sales fell 2.1% to €7.2 billion (US$7.7bn).

Jameson owner Pernod Ricard confirmed its forecast of a 20% decline in operating profit for its 2020 financial year as a result of the coronavirus pandemic. Among its covid-19 assumptions, the group predicts an 80% business decline in travel retail for the period between February and June 2020.

Alexandre Ricard, chairman and CEO, said: “Our business model and strategy are resilient. Performance in H1 through the start of Q3 was solid, thanks to the implementation of our Transform & Accelerate strategic plan.

“Since then, the covid-19 pandemic has led to a significant deterioration of the environment across the globe. I would like to praise the exemplary behaviour of our teams and their impact on their respective communities around the world at this very difficult time.

“Under current assumptions of the impact of covid-19, we are confirming our guidance of an organic decline in profit from recurring operations for full-year FY20 of c. -20%. We are staying the strategic course while implementing a comprehensive action plan to mitigate costs and tightly manage cash.

“Thanks to our solid fundamentals and strong liquidity position, I am confident in Pernod Ricard’s ability to bounce back from today’s challenges to achieve its growth potential.”

Pernod Ricard said it has showed “good resilience” during the covid-19 crisis and has implemented a comprehensive cost mitigation programme, along with active management of its cash position. The group also said it had adapted its manufacturing and supply chains “to ensure they remain broadly operational”.

Among Pernod’s tightened costs include the cancellation of advertising and promotion spend, a “strong structure cost discipline” such as recruitment and travel freeze, and “strict control” of spend commitments for the coming months.

The company has also suspended its share buyback scheme for the 2020 full-year, with the remainder of €0.5bn (US$538 million). A payment of €523m (US$562m) to shareholders was completed during the current financial year.

Market performance

Geographically during the year-to-date, the group’s US sales grew 3%, led by Jameson Irish whiskey, The Glenlivet Scotch whisky, Malibu rum liqueur and speciality brands. The market witnessed a slowdown in March due to confinement and social-distancing measures implemented in most states.

Sales in China fell 11% with a “severe decline” in Q3 as on-trade venues closed at the start of January due to the covid-19 pandemic. It was also impacted by the earlier Chinese New Year.

India grew sales by 1% with mid-single-digit growth until February. But the market’s performance was “softened” in Q3 due to the country’s lockdown on 24 March. Korea reported a 26% drop, while Japan increased sales by 2%.

Global travel retail sales dropped by 13% as restrictions and lockdowns were imposed across the world.

Europe was “stable” with a “good performance” to February, impacted by a double-digit decline in March when covid-19 hit. France and Italy’s sales both fell 5%, while Spain dropped by 2%. The UK saw sales grow 2% and Russia’s sales rose by 9%.

The company’s ‘strategic international brands’ dropped by 2% due to a 20% sales decline in the third quarter, primarily led by Martell Cognac and Chivas Regal Scotch whisky in China and global travel retail. Jameson, The Glenlivet, Malibu, Royal Salute whisky and Beefeater gin witnessed “continued strong dynamism”.

‘Strategic local brands’ fell by 1%, while ‘speciality brands’ grew sales by 13% thanks to Lillet apéritif, Altos Tequila, Redbreast Irish whiskey, Monkey 47 gin, Aberlour Scotch whisky and Del Mageuy mezcal.

During the group’s third quarter, Pernod Ricard made a number of investments. Last month, the French firm purchased the remaining stake in Monkey 47 and made a “significant investment” in Japan’s Kyoto Distillery, creator of Ki No Bi gin.

The company also invested in super-premium liqueur Italicus Rosolio di Bergamotto with an aim to turn it into “one of the world’s most successful aperitivo brands”.