Pernod has undergone a dramatic transformation in the last 12 months from local player to international leader. Jeannette Stamper asks whether the French drinks group has bitten off more than it can chew?

Few businesses have changed so dramatically as Pernod Ricard over the last two years. It would test any management team to go from decent-sized European drinks group with one foot firmly planted in France to serious global player in one big gulp, as this company has done.

Since the announcement of the success of Pernod's joint bid with Diageo for the Seagram portfolio, the need to convince in the big league has coloured everything the company does. And so far most observers, both inside and outside the world's financial markets, have been cautiously impressed.

But Pernod has had the luxury of living on promises for a while now. The Seagram deal was a good piece of business, but of course it meant a lot of integration work - delayed for some time by Diageo's regulatory hiccup in the US - and analysts have been patient. The general feeling among the journalists gathered in Paris and London for the company's 2001 results was that Pernod could have the rest of 2002 to get the job done, but next year will signal time to deliver.

In fact, despite being officially classified 'an aberration', 2001 turned out to be a pretty respectable year for the group. Organic growth was up 9.7%, earnings per share rose 12.5% and most of the major brands (excluding the Seagram additions, of which more later) showed strong progress, barring a rather sluggish Larios (+2%) and a dip in Wild Turkey (-3%).

Perhaps the best news of all was that the group's restructuring costs have turned out to be well below expectations, coming in at around €400m comfortably within the value of the cash raised from disposing of its unwanted Seagram brands, projected to be between €550m and €600m. Pernod was pretty bullish about 2002 too, predicting an operating margin up from 17.9% to 21% and still further improvement in earnings per share.

That's the good news. And nobody doubts Pernod Ricard's ability to manage its well-established brands, but there are a number of questions about how it will cope with the new ones that remain unanswered. Chivas and Martell, which along with Seagram Gin were very much the pick of the bunch, recorded an alarming dip in volume of 15% and 18% respectively in 2001.

Martell in particular is in long-term decline at the moment, and Pernod's people certainly can't be blamed for the slide, but the question remains as to whether they can reverse it. Richard Burrows, the group's joint managing director, didn't seem at all worried by the prospect.

Both are big brands with huge potential, he said, but had been badly affected by the Asian economic crisis of the late 1990s, a problem that is only now beginning to right itself. He also pointed to the vast overstocking of both products (Chivas has an inventory surplus of 750,000 litres and Martell 450,000 litres) which the group inherited and is still in the process of running down.

Burrows also insisted that the premium Scotch category to which Chivas belongs has great promise all over the world. And on the trickier topic of Martell, while implicitly accepting that Cognac was in trouble, he cited the recent success of Hennessy and Remy Martin in North America, from which he deduced that "it's not rocket science to see what's necessary to turn the brand around in the US." In short, Burrows expects the decline of both brands to continue in 2002, but breezily assured us that we would start to see some improvement in 2003.

Depending on how you look at it, this could be a reassuring sign of confidence that the job can be done - after all, Pernod knew what it was getting into when it purchased the ailing brands and must have had a plan to turn them around. Or it could just be a case of seriously underestimating the task ahead - perhaps Pernod just couldn't resist the chance of owning two such huge names and booking its ticket to the big league, when in fact it was ill-equipped to do so.

The fact is that there's no way of knowing which of these interpretations to believe. Pernod Ricard's confidence may or may not be misplaced, but among the people in charge, at least, it certainly seems to be sincere.

There were a few little inconsistencies in the presentation that might give cause for concern, however. We were told that the restructuring process passed off with 'almost no problems in almost any region of the world' in the words of Alain-Serge Delaitte, group communications director. Yet the departure of Seagram staff while regulatory approval was still being reached (surely an integration issue?) was held partly responsible for the decline in Chivas and Martell.

These two brands were also promised to offer some excellent synergies in Asia because of their similar positioning, when, if this was indeed the case, these synergies would surely have already been exploited by Seagram. They're small points, its true, which can probably be put down to corporate spin - giving something a positive gloss to sound upbeat, and then playing it down when you need an excuse. But they still suggest that perhaps not everything is planned to perfection - although again one can equally argue that there's only so much planning you can practically do without starting to make risky assumptions for the future.

No, the truth of the matter is that only time will tell. Pernod Ricard is a healthy company with a good record and a promising future. To compete with Diageo and Allied Domecq (and no doubt a few more vast conglomerates that will rise up in the years ahead) it will have to build its brands to the level of the Smirnoffs and the Bacardis of this world. There's no reason why Pernod can't do just that, but we should remember, as the management itself is no doubt fully aware, that it's uncharted territory from here on in.