Analysis - Pernod Ricard's Jameson, Martell opportunity
We all know by now that, if you're working for an international spirits company and the Chinese market is a big deal for you, then you haven't been sleeping too well for the past year or so.
We also know the threat exists that China's previously insatiable appetite for brown spirits from abroad may never return to its once-dizzying heights. That fear has been keenly felt already this year by Remy Cointreau, with the uncertain future for Remy Martin leading to the departure of two of the company's top brass in the space of three weeks.
At first glance, Pernod's half-year results, released yesterday, make for worrying reading. While the company's Asia/Rest of the World reporting area posted a 4% slide in year-on-year sales for the period, it was China that was the guiltiest party: Pernod's sales in the country plunged in the half-year by 18%.
The good news, however, is that, Martell's sales globally improved the longer the first half went on. In Q1, the Cognac brand's sales fell by 12%; in Q2, the speed of the decrease slowed, to -8%. “To us,” said analysts at UBS today, “that suggests that Pernod is leveraging its global distribution for the brand beyond China quite rapidly.”
Indeed, excepting China, Martell's sales were up by 9% in the six months to the end of December.
The opportunity is being taken, then, for Pernod to “globalise” a spirits brand that, until recently, was leaning a little too heavily on one booming market.
That opportunity also applies, according to UBS, to Pernod's Jameson Irish whiskey brand. “In 2005,” the analysts note, “the US represented 22% of Jameson global volumes. In 2012, this had risen to 44%, by far the largest single country for the brand.
“In the case of both brands, we see strong potential for Pernod to leverage its global distribution strength to globalise them - Martell today remains a China-centric Cognac brand, and Jameson a US-centric brand.
“Given Pernod's global distribution strength, we believe that this strategy will be an effective one.”
Our advice? Don't take Jameson to China any time soon.
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