FRANCE: Comment - Pernod Ricard: showing the right spirit
Pernod Ricard has announced a 5.9% sales rise, and will buy Czech distiller Becherovka. Jointly acquiring Seagram's brands has established Pernod as one of the leading spirits companies. It has shifted its focus from France to markets across the world, including many fast-growing developing regions.
The Becherovka takeover, which the Czech government has finally approved, should
enhance Pernod's global reach still further.
Following its recent sale of Orangina, and its recent purchase of Polish distiller Polmos Poznan, French drinks group Pernod Ricard has made further moves to strengthen its position in the global spirits market. The Czech government's approval of the purchase of 59% of Becherovka, in addition to Pernod's existing 30% holding, gives it control of the distiller.
Pernod had to buy out its Czech subsidiary, Salb, to complete the deal. Salb had originally been going to buy the stake, but hesitated as Becherovka is currently being sued by a businessman who claims to be the only holder of the unique recipe of the firm's main spirit. Salb wanted state guarantees against potential liabilities, which the Czech government was unwilling to offer. Pernod bought out its partners in Salb in September to save the deal.
This move demonstrates Pernod's commitment to its wine and spirits division, which recently reported an annual increase in sales of 8.7%, driving Pernod's overall sales increase of 5.9%. Having attained a 15% growth in operating profitability, Pernod's wine and spirits division is becoming the powerhouse of the company. It is now seeking to expand the business further.
Although the planned joint takeover of Seagram's drinks brands is currently being held up by concerns over Diageo's potential control over the rum market, this is expected only to delay the takeover. The regulator is extremely unlikely to present a serious problem for Pernod, which will become the third largest global drinks company on completion of the deal.
Pernod, which now owns Chivas Regal, The Glenlivet, Seagram's Gin and Martell as well as Havana Club, Jameson's whiskey and its eponymous pastis brands, is in a strong position, with a portfolio well distributed amongst the major spirit categories.
The company is also left much less dependent on western European markets (particularly France). The newly acquired brands - both from Seagram and the eastern European acquisitions - will allow Pernod to introduce its entire portfolio into wider markets.
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