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Pernod Q1 hit by 26% drop in China
Martell owner Pernod Ricard saw organic sales for the first quarter of fiscal 2025 fall by 5.9% after double-digit drops in China and the US.
Sales for the three months to 30 September 2024 totalled €2.78 billion (US$3bn) after sales plunged by 26% in China and by 10% in the US. It followed a full-year sales decline of 1%, with China falling by 10%.
The French firm said the group had seen a ‘slow start’ to the financial year, explaining that China’s ‘sharp decline’ was in the context of ‘continuing macroeconomic weakness’ while inventory adjustments impacted its US sales.
The firm also said its first-quarter sales were ‘softer than previously expected’ due to the impact of China’s weak performance in Asia travel retail. Global travel retail sales rose by 3% for the quarter, with growth in all regions except Asia.
Pernod noted that consumer demand was weak over the summer in China and ahead of the Mid-Autumn Festival in October. It also noted decreases for Martell Cognac and Scotch whisky in the market.
The Paris-based spirits giant is among the firms that will be impacted by China’s tariffs on imported brandy from the European Union, which came into force on 11 October 2024.
Pernod said it had acted to mitigate the repercussions of the duties on its performance. Analyst GlobalData said the Martell owner is expected to face a smaller impact than its competitors due to the company’s cooperation with Chinese authorities.
Due to the current economic environment in China, Pernod predicts a ‘more significant full-year decline’ than the previous 12 months.
All regions post sales slump
While all of its regions declined during the quarter, Pernod Ricard highlighted ‘strong performances’ in markets such as Japan, Canada, Poland, Brazil, Turkey, Nigeria, and travel retail in the Americas and Europe.
The Americas region fell by 5% as the spirits market in the States ‘continued to normalise’ .
Within the region, Canada and Brazil reported ‘strong’ results, while Mexico was in decline due to the impact of ‘weak tourism’ in the on-trade.
While China and Korea contributed to the Asia Pacific and rest-of-the-world region’s 8% decline, India posted growth of 2%. The group also highlighted ‘strong results’ in Africa and Middle East, in particular in Turkey with blended Scotch brands Ballantine’s and Chivas Regal.
The company’s performance in Europe was ‘robust’ despite falling by 3%, but sales were down by 1%, excluding Russia. Western Europe was hit by ‘adverse summer weather’ and the group gained market share in France, Germany and Poland.
Within Europe, Pernod Ricard reported a ‘solid performance’ for Ballantine’s, its ready-to-drink (RTD) portfolio, and Mumm Champagne.
Cognac and Scotch drive declines
The company’s ‘strategic international brands’ plunged by 10%, due to Martell in China, Royal Salute whisky in Korea, and The Glenlivet single malt in the US.
‘Speciality brands’ were down by 9%, but the group highlighted ‘good results’ for Bumbu rum, and Irish whiskey brands Redbreast and Spot.
Pernod’s ‘strategic local brands’ posted a 1% uptick, led by Seagram’s whiskies and Kahlúa coffee liqueur.
The RTD portfolio rose by double digits, driven by Absolut Vodka and Canadian business Ace Beverage.
For fiscal 2025, Pernod Ricard expects full-year organic sales to return to growth as it continues to recover its volumes. The group reiterated its aim of reaching organic growth of between 4% and 7%.
Fellow French firm LVMH reported this week that its spirits sales dropped by 11% in the first nine months of 2024 as demand for Hennessy Cognac remained weak in China.
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