CHINA: Pernod Ricard looks to Asia, despite recent China headache
China has seen economic growth slow, but Pernod Ricard believes the country is set fair for the future
Pernod Ricard is targeting a 5% lift in its market share in Asia within the next two-and-a-half years, although short-term headwinds in China have slowed growth in recent months.
The company, which hosted its latest 'Capital Market Day' in Beijing yesterday (28 May), said that it hopes to up its share of the “premium-plus western-style” spirits market in Asia from 35% to 40% by 2015. Since the closure of the Seagram transaction, Pernod's Asia division has seen sales increase seven-fold over the ten years from 2002, while profits have risen by ten times their 2002 level, breaking US$1.3bn last year.
The definition of the term “premium-plus” was given as US$7 per bottle and over.
China, the group's second most profitable market, was acknowledged as being the strongest growth driver in the region - followed by the likes of India, Travel Retail, Korea and Vietnam - although “a recent challenging environment” had come into play in the country earlier this year. A reduction of GDP growth in the country from 10% in 2011 to 7% last year was a result of the government's 12th five-year economic plan, which aimed to control inflation and reign in extravagant purchasing.
In March, Pernod highlighted a clampdown on inter-governmental gift-giving and banquets. Then, in its results for the nine months to the end of March, the company noted its weakness in the country in its third quarter, as the economic slowdown and a “soft” Chinese New Year hampered performance.
Looking forward, however, Pernod is aiming to raise its value share of premium-plus western-style spirits in China to 50% by 2015, a move that would require a rise of 3% on last year's share.
“The year so far has been one of converging challenges,” said Con Constandis, MD of Pernod Ricard China, at yesterday's presentation. “In the short term, we have seen pressure on consumer purchasing behaviour.
“But, in the medium to long term, the fundamentals remain extremely strong. We believe that Pernod Ricard China is best positioned to weather the recent challenges and deliver sustainable growth.”
Pernod forecast medium- to long-term sales growth from Asia to come in in the high single to low double-digit bracket, with fiscal 2013 sales growth expected to hit high single-digits.
The company claims to be market leader in the category in nine markets in the region, including China and India, and number two in six others, including Thailand and South Korea. Future targets for Pernod include Laos, Mongolia and Myanmar, where several alcoholic drinks companies, including Heineken and Carlsberg, have announced their return following political reforms. The French company plans to open affiliate offices in the three markets in the coming months.
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