FRANCE: Pernod Ricard to cut advert spend in H2
Pernod, which last week reported a 8% and 5% rises in organic operating profit and sales respectively in the six months ended 31 December, has said that it plans to cut advertising spend in its second half.
Advert spend rose as a percentage of sales by 0.5%, to 17.3%, in the first half, compared to the same period last year.
Analsyts have said that Pernod may boost operating profit in its second half by cutting ad spend, partly as a consequence of lower media rates in the UK and US, and allowing this to "flow through" onto the firm's balance sheet. This would potentially help to insulate the group against weakening economic conditions.
Pernod CEO Pierre Pringuet told just-drinks that it was possible a reduction in ad spend could boost operating profit in the second half, but he said it was too early to speculate. He said that Pernod, which recently unveiled a EUR50m campaign for Chivas Regal Scotch whisky, still has "the highest percentage (spend/sales ratio) in the industry".
Pernod rival Diageo said last week that it had already benefited from double-digit falls in television advertising rates in the UK and US in its first half. Diageo's advertising spend as a percentage of sales fell by just under 1%, mirroring a rise in operating margin.
Analyst group Bernstein said in a note this week that Diageo's ad spend savings may have contributed 2% to the firm's 6% organic profit growth in its first half.
Diageo CEO Paul Walsh declined to comment on the specific contribution of reduced ad spend when asked by just-drinks.
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