Comment - Pernod Ricard gives Asia the Royal Salute
Royal Salute 62 Gun Salute
Pernod has elevated Royal Salute to the status of "prestige" brand and the luxury blended whisky is to be one of the firm's 14 priority spirits and Champagnes as it enters a new fiscal year from the beginning of this month.
At first glance, the move may come as something of a surprise. Specific Royal Salute sales figures are not available but Pernod's half-year report, published in February, alludes to tough times for the brand.
Growth for local whiskies such as Royal Stag in India and Imperial in South Korea "offset the difficulties of Royal Salute in Asia and Ararat in Russia", Pernod said.
Looking beyond this, however, Royal Salute's seat at the top table is another clear indication of where Pernod sees its business going, and the general direction is east.
just-drinks recently attended a dinner to mark the new 62 Gun Salute whisky, the luxury Royal Salute blend that will set you back more than US$2,000 for a bottle when it launches early next year (Royal Salute's entry level is a 21-year-old variant, which retails here in the UK for around GBP90 (US$135) per bottle). The company flew business contacts over from Asia to take part in a luxurious weekend that included some of the best hotels and dining experiences London has to offer.
Asia's thirst for premium Scotch whisky - and Cognac - has already helped to prop up sales at the likes of Pernod, Remy Cointreau and, to a lesser extent, Diageo over the last six months. Pernod, then, is using Royal Salute as part of a long-term strategy to expand its reach to Asia's growing mass of business leaders.
The global economic downturn has highlighted the increasing gap in growth opportunities between established western markets and emerging markets in Asia.
On a macroeconomic level, China's gross domestic product has continued to grow in high single digits, while Europe and the US have slipped into recession and look likely to struggle for several years to come.
This macroeconomic shift will be replicated in the drinks industry.
The old argument has it that, while emerging markets provide more growth opportunities, established markets remain more profitable. There is still truth to this, while demand in emerging markets also tends to be more volatile in times of economic difficulty.
But for how much longer will this hold true? When just-drinks caught up with Pernod's CEO, Pierre Pringuet, in Paris last year, he told us that emerging markets - including Asia - could be generating half of the company's annual profits from recurring operations by 2020.
Emerging markets contributed to around a third of Pernod's profits for the year to the end of June 2009, compared to just 17% in the year to the end of June 2004. Around 45% of the group's workforce is based outside of Europe, with Asia Pacific containing more employees than the Americas.
Royal Salute, then, is another example of Pernod's shifting geographic focus, as well as evidence that Asia's thirst for premium drinks remains undimmed. Might we look back on the global economic downturn as a turning point in global consumer demand?
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