Could Ballantines be holding Pernod Ricard back in Scotch whisky?

Could Ballantine's be holding Pernod Ricard back in Scotch whisky?

Pernod Ricard's performance in the Scotch whisky category is being held back by its lack of presence in Latin America and Africa, while Diageo is reaping the rewards from its coverage in the growth markets, according to an analyst.

The company, which has led the way in international spirits in China, may be growing its Scotch volumes around the world, but only in line with the broader category market, Nomura said earlier today (22 May). Citing Euromonitor figures, the analysts said that Pernod has increased its blended Scotch volumes over the last five years by 4.9% CAGR (compound annual growth rate) compared to a global average of 5% growth.

Diageo, meanwhile, can boast a CAGR of 10.9% over the last five years.

Pernod's Chivas Regal brand goes up against Diageo's Johnnie Walker in the blended Scotch category.

"The historical under-representation in some key geographies (especially LatAm and Africa) has held back any outperformance in Scotch, despite the strong position in Asia," Nomura said in a note to clients. "We estimate that the company has increased Scotch volumes broadly in line with the industry in the last five years on average."

Despite healthy growth from Chivas Regal, which has delivered a 12% increase in sales and an 8% lift in year-to-date volumes, Pernod is being held back by its Ballantine's brand, which has been historically strong in southern Europe, Nomura noted.

Also, while Pernod is the strongest interntaional spirits player in China, the analysts noted that the country is keener on Cognac than it is on Scotch. "Across super-premium Scotch and Cognac in China, the company claims a 48% share versus 24% for its nearest competitor, and the company continues to have the number one position in China for Scotch," Nomura said. "However, Cognac continues to increase revenues faster than Scotch in China."

A weak presence in Africa, where Diageo has a "total beverage alcohol" strategy in place, is also preventing Pernod from matching the UK-based drinks company's growth rates. However, in its H1 conference call, Nomura said, Pernod indicated that it "was investigating working more closely with either beer companies or beer wholesalers to get a better route to market" in the region.

The analysts noted that, "with more focus on developing distribution in these regions (LatAm and Africa), we see scope for faster growth in future."

Nomura estimated that Pernod accounts for around 25% of global Scotch volumes, behind Diageo with around 40%.