Pernod Ricard has sights on Eastern Europe

Pernod Ricard has sights on Eastern Europe

Pernod Ricard's CEO for Europe has said that he sees strong opportunities for premium spirits in Eastern Europe.

Laurent Lacassagne told investors today (23 June) that Eastern Europe holds "significant and very attractive" prospects. "A significant part of this growth potential is coming from shifts from local brands to international brands," he said on a conference call.

This shift is being driven by rising disposable incomes and the emergence of middle class consumers in several markets. The Absolut and Chivas Brothers owner said that it expects volume sales of international spirits in its Europe, Middle East and Africa division to rise by 7.5% per year up to 2014.

This growth, he said, will not only be driven by Russia, whose economy has rebounded in the last year, but also by other countries such as Poland and Ukraine.

While Pernod is targeting increasingly affluent consumers in Eastern Europe, it is more focussed on market share gains in the mature countries of Western Europe. Across Europe in general, Lacassagne said: "We are gaining share in most European markets."

He added that the group has returned advertising and promotion spend in Europe to pre-crisis levels, with spend likely to hit 16% as a percentage of regional net sales in its current fiscal year.

Amid Europe's economic problems, Pernod Ricard has generally fared better than rival Diageo in the last year. This is largely because the French group has less exposure than Diageo to some of the hardest-hit markets, such as crisis-hit Greece.

Diageo, however, is likely to pull some ground back via Turkey over the next 12 months. Lacassagne said that he expects a bigger challenge from Diageo in Turkey following the Smirnoff distiller's deal to acquire local spirits giant Mey Icki.

Europe, Middle East and Africa, excluding France, represents 30% of Pernod Ricard's annual net sales.

More will follow on this conference call following the Q&A session.