just On Call - Pernod Ricard spies China growth behind "significant declines"
Pernod said its sales have been hit by anti-gifting measures
Pernod Ricard has seen recovery in some sectors of the Chinese alcohol market in Q1, but warned that the time and pace of a revival is still uncertain.
In a call with analysts, Pernod's MD of finance, Gilles Bogaert, said that the 25% of its China business that has been hit by anti-extravagance measures was in “significant decline”. Sales in some channels had dropped by 50% to 60%, Bogaert said, without identifying which channels.
However, he said that, while the remaining 75% of Pernod's business in China had negative year-on-year growth because of restocking and tough comparisons from the same quarter last year, there are some signs of recovery.
“Our expectations for the second half of the year are that we see some improvements because of more favourable comparisons,” he said. “But also, there is some recovery in some of the categories. However, it will take time, and there are still questions over pace.”
A government crack-down on gift giving by officials has hit international spirits sales in China, and in Q1 results released today Pernod reported a “sharp decline” in sales. The company said it expects full-year organic profits growth to remain positive, with a 4% to 5% lift.
Bogaert also said that China's Mid-Autumn Festival was “not good”, while increased competition in restaurant channels in the country has put further pressure on Cognac sales.
Answering a question on where increased competition is coming from, Bogaert said prices on “some famous baijiu” brands in the restaurant channel have been “significantly reduced”. “That's the kind of competition we face there,” he said.
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