Insight: Pernod Ricard lifts industry spirits
Pernod's share price rose by around 3% after the group reported that it had limited a decline in like-for-like sales to 4% for its fiscal first quarter. Net sales were EUR1.65bn (US$2.5bn) for the three months to the end of September, compared to the same period last year.
The quarterly report, which comes against a strong first quarter last year, will add to growing hope in the drinks industry that key markets are on the mend after a year of economic turmoil.
Pernod CEO Pierre Pringuet said he is "confident" about the year ahead, while the group declared its intention to raise advertising and promotion spend.
Advertising spend as a percentage of net sales was 17.2% in Pernod's last fiscal year, due to cuts in the second half of the year. But, group managing director for finance, Gilles Bogaert, said in the firm's results conference call today that the ad spend ratio for the current fiscal year will rise.
"Our objective is to invest more during the year because we believe this is the best way to exit the crisis stronger," he said.
Bogaert added that, despite sales decline in North America for the first quarter, there is less destocking of products by distributors. "We believe it is largely behind us," he said.
Pernod benefited particularly from its presence in emerging markets across Asia.
Asia was Pernod's only region to report organic sales growth (3%) for the quarter, with Americas, Europe and France down 2%, 11% and 3% respectively. Most of the growth was attributed to India and China, with the latter driving 13% net sales growth for Martell Cognac.
"In China, the trend on Cognac is better than on Scotch," said Bogaert, who added that Chivas Regal also reported growth in the country, although this was largely at the expense of another Pernod Scotch brand, Ballantine's.
Analyst group Sanford C Bernstein said today that Pernod's 4% sales drop beat its expectations and there are "positive indications" for the second quarter.
"We also note that price-mix on the top 15 brands remains positive at 4%, most likely continuing to benefit from strong growth in premium Cognac in China."
In terms of the firm's 15 strategic brands, like-for-like net sales of Mumm and Perrier-Jouët Champagne fell by 18% and 38% respectively for the period, reflecting a tough year for the Champagne sector in general.
Absolut vodka also had a tough time, with sales down 7% on an organic basis for quarter.
Pernod will issue profits guidance at its annual general meeting on 2 November.
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