Focus - Pernod Ricard's Allegro cost-saving programme
As promised, Pernod Ricard provided further details behind its 'Allegro' cost-saving programme last week. The concept was first given an airing in February this year, and all we were given at the time were two numbers: EUR150m, three years.
“We want to improve organisational efficiency in order to generate future growth, seize new opportunities - particularly innovation and digital - and increase the speed of execution,” said CEO Pierre Pringuet at the time. And that was about it.
The company used the release of its half-year results on Thursday as its opportunity to flesh out Allegro, which is being positioned as an “operational efficiency improvement project” that has three principles:
- Prioritisation - “Clarifying roles and responsibilities”
- Simplification - “of structures and processes”
- Mutualisation - “Sharing resourced and expertise”
The headline figure for job losses is 900 across the group, which represents about 5% of total workforce. This includes the “removal of the 'Brand Development Team' roles (in the brand companies) and partial redeployment to marketing teams”, says Pernod, while the holding company will consolidate shared functions, such as its research centre and IT.
As part of the simplification approach, all regional and brand company CEOs will begin to report directly into group CEO Alex Ricard from February (Ricard takes the helm in January). This will result in the removal of the MD of brands and MD of distribution network positions. Also, at the holding level, sales and marketing departments will be merged.
The mutualisation aspect sees the pooling of resources such as back offices – witness the merger of the Pernod and Ricard back offices in France earlier this year - with the creation of regional back office hubs for Asia in Singapore and Hong Kong. A single back office hub will also be set up for Australia, New Zealand and Travel Retail Pacific. Meanwhile, increased convergence of IT operations will aspire to the “development of shared business solutions”.
Pernod was at pains to point out, however, that Allegro is being conducted in keeping with what the firm calls its “DNA”. Decentralisation remains the watchword, the company said, with decision-making being conducted “as close as possible to our clients, consumers and brands”.
Ultimately, the aim is to save EUR150m (US$197m) over the previous and next two fiscal years, equating to a slowing of the rise in selling and general expenses from a CAGR of 8% from fiscal 2011 to 2013, to a 1% lift from fiscal 2014 to 2016.
This EUR150m is intended to be phased over the three years, thus:
- EUR30m in fiscal 2014
- EUR75m in 2015
- EUR45m in 2016
A further EUR45m is forecast for fiscal 2017.
A total implementation cost of EUR180m is expected, with the most recent fiscal year – the 12 months to the end of June – accounting for EUR119m of these costs.
Of the EUR150m of savings over the period, Pernod has committed to reinvesting “at least” one third to “support priority brands and innovations over two years (fiscal 2015 and 2016)”.
To access Pernod's results presentation, which includes a section on Allegro, click here.
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