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Pernod comments on China’s anti-dumping enquiry

It is too early to determine any potential impact that could come from China’s anti-dumping enquiry into European brandy, the CEO of Pernod Ricard said.

Martell Cognac
Pernod Ricard is the owner of Cognac brand Martell

Speaking to media during a roundtable in London on 6 March, Alexandre Ricard, Pernod Ricard CEO, said he would not go into the politics behind the enquiry, but shared a small amount of insight.

For context, on 5 January this year, China’s ministry of commerce announced it was launching an anti-dumping investigation into all brandy imported from the EU, following a complaint by the China Alcoholic Beverages Association on behalf of the domestic brandy industry.

Anti-dumping investigations aim to establish whether a product being imported into a country is being sold at below the price in its domestic market, an act referred to as ‘dumping’.

Ricard said: “What can we say: at this stage, I won’t go into the politics of the initiation of the anti-dumping enquiry.

“The documentation they [China] have produced suggests there is an under-pricing of roughly 15% to 16%, 15.8%. We are cooperating.

“They asked some of the key industry players if they’re willing to volunteer to help the enquiry and we immediately raised our hands and said we’re more than happy to cooperate.

“We’re working with them on the topic and we will see.”

H2 outlook more positive than H1

Pernod Ricard saw organic revenue fall by 3% in the first half (H1) of fiscal 2024 and now expects flat sales for the full year.

However, Ricard said the second half of the financial year was looking more positive than H1.

“We expect growth in H2, versus -3% in H1, leading to a full year of broadly stable organic sales,” Ricard said. “We will continue to invest quite heavily on that front, including digital capabilities.

“We’re building partially from a pyramid of influence on the acquisitions made last year.”

Furthermore, Ricard stressed the company was seeing an “overall normalisation after, we call it a ‘post-Covid super cycle’ in our industry”.

“We experienced three years of double-digit growth, which is quite exceptional in our environment,” he said. “Our baseline growth in our industry is in single digits, around 4%.

“We believe over time, we can deliver between 4% and 7% consistently, aiming at the higher end. So after three years of abnormal super-cycle growth, there is this normalisation taking place.

“The second piece of normalisation is the US. There is where we experienced the highest growth differential, vis-à-vis, the underlying trends.

“The US is a market that delivers between 4% and 5% on an ongoing basis of value growth in spirits, and has been doing so for the past two decades.

“But over the past three years in the US, instead of delivering 4%, the industry delivered 8% – double-rate growth for three years in a row.

“That normalisation is still ongoing. Until we catch up with the underlying trends, we’ll be at around 1% to 2% and we believe we’ll get back to historical trends in the next six to 12 months.”

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