Pernod Ricard: Premiumization and decentralization fuelling growth in mixed macroeconomic environment

Published: January 2013

Publisher: MarketLine

Product ref: 160886

Pages: 30

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Introduction

Over the last 10 years of rapid acquisitions, Pernod Ricard has built a strong portfolio of premium brands on a global scale. Most of its brands enjoy a leading position in international markets. The company has adopted a decentralized operational structure to manage its global operations, based on six brand companies and 75 market companies.

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Highlights

Pernod Ricard recorded a 7.5% increase in revenues in 2012, reaching $11,429m; this performance was mainly driven by premium brands and emerging markets. The group has one of the largest marketing budgets in the industry; 21.8% of the group's net sales were spent on advertising and promotion in 2012.

The emerging markets are the key drivers of the company's growth, and represented 39% of its operating profit in 2012.

Pernod's attention is particularly focused on high income consumers, those 11 million individuals around the world that have over $1m in financial assets.

Your key questions answered
  • What is the size of the global wines & spirits market? How fast is the wines & spirits market growing? Who are the main competitors?
  • What is premiumization?
  • What are five pillars of Pernod Ricard's growth?
  • How does decentralized structure contribute to revenue increase?

Table of contents


OVERVIEW
Catalyst
Summary

PERNOD RICARD IS ONE OF THE LEADERS IN WINES AND SPIRITS MARKET GLOBALLY
Pernod Ricard focuses on a single business line of wines and spirits
The group has a wide portfolio of premium brands with a strong heritage
Pernod Ricard aims to become number one in the industry
It’s top 14 brands create Pernod Ricard's leadership position
The Absolut brand generated 24.2% share of strategic spirits sales volume in 2012, and Jacob's Creek led wine sales
Developing markets generated 39% of the group's operating profit in 2012
The group continues to post gains in mature markets
The group's revenue reached $11.4bn in 2012, growing 7.5%
Consistent growth in all segments except France

POSITIVE OUTLOOK FOR GLOBAL WINES AND SPIRITS MARKET
Global spirits market is expected to continue increasing at a steady rate
Global wines market is witnessing a steady increase
Europe is the largest wines and spirits market globally, but Asia Pacific grows at the fastest rate
Premium brands sales are strong even in mature markets
Premiumization trend sustained by "weekend millionaires" and growth in emerging markets
Diageo, United Spirits and Pernod Ricard lead the competitive global wines and spirits market in 2011
Advertisement restrictions may lessen high brand products' impact, while tax increases eat revenues
Counterfeit alcohol sales impacting players' revenues
Higher labor costs impact on revenues

FIVE PILLARS OF GROWTH
Five pillars of Pernod Ricard's growth
The house of brands: all Pernod Ricard's flagship brands under one roof
Premium brands generated 73% of net sales, growing by 19% in 2012
Pernod Ricard spent 21.8% of its net sales on advertising and promotion in 2012
Pernod Ricard subsidiaries are preparing to launch over 300 innovations
Lavish spending to target high net worth individuals
Decentralized management structure build around six brand companies and 75 market companies
Wholly owned and decentralized distribution network improves competitiveness
Nearly 19,000 employees are responsible for their own performance at the local level

CONCLUSIONS
Rise of middle class in developing markets creates growth opportunities for premium brands
Decentralization allows Pernod Ricard to benefit in a mixed macroeconomic environment

APPENDIX
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