Andy Morton

Analysis - Pernod Ricard to catch China growth with broader portfolio

By | 25 October 2013

Pernod Ricard released its Q1 results yesterday

Pernod Ricard released its Q1 results yesterday

Pernod Ricard will extend its portfolio in China as sales in the country return to solid growth in two years, an analyst has predicted.

UBS analyst Melissa Earlam said the French group, which yesterday posted “sharp declines” in Q1 China sales, should post an 8% lift in FY 2015. In FY 2016, Pernod will post a 12% sales growth, Earlam estimated.

Pernod blamed its China sales drop on anti-extravagance measures put in place at the beginning of the year. The measures, which have hurt other international spirits companies, helped drive Pernod's overall 9% sales dip in the first quarter. China makes up about 16% of Pernod's operating profits.

Earlam said Pernod will create “a wider product portfolio to drive the growth”, with recovery first expected in Martell's VSOP and Cordon Bleu Cognac brands. The analyst also said recovery will lag in KTV and banqueting channels compared to on- and off-trade.

In a call with analysts yesterday, Pernod's CFO Gilles Bogaert said that sales in some channels in China have dropped by 50% to 60% without identifying which channel.

Expert analysis

PepsiCo, Inc. - Mergers & Acquisitions (M&A), Partnerships & Alliances and Investment Report

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Sectors: Emerging markets – BRIC, Spirits

Companies: Pernod Ricard, Ricard, Martell

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