If Pernod Ricard is frustrated by the ongoing deliberations of the competition authorities of Europe and North America, which stand between it and the successful closure of its Seagram deal, it wasn't obvious at Friday's results conference. Well not too obvious.

"It is like owning a new Rolls-Royce but not having the keys yet, all you can do is take a look inside. You can't quite get your hands on it yet," says Giles Cambournac, CEO of P-R's subsidiary Campbell Distillers.

Restlessness best explains the atmosphere which dominated proceedings. Restlessness caused by knowing the company is close to clinching the most important deal of its recent history - close but chairman Patrick Ricard is yet to light his cigar.

Spirits & wine:
Significant growth of the business profitability
Operation profit /Net sales

Source: Pernod Ricard

Nothing appears to be being taken for granted in the Pernod camp regarding the final decision, a lesson well learnt perhaps from its neighbours in Belgium, Interbrew. Ricard said on Friday that the company had moved its internal deadline for the merger between the two businesses from April 1st to May 1st, however, he admitted even this may still be "optimistic".

"When the EU files are completed," Ricard said, "they have one month and if they still have not reached a decision they have another four months. Our files are well prepared but the decision is in there hands. In the US, while the file is much smaller, after a few months they can ask for more information.

"The deal with Diageo was done to avoid problems with the competition authorities," Ricard continued. "One of the strong points we had with Diageo was that the brands are compatible." However he added: "We are much smaller than our associates but we are not the competition authorities and it is not in our hands. The competition authorities feel the way they want to feel."

Even aside from such a momentous turning point in the company's future, this is a massive year for Pernod Ricard. It has landmark decisions, deals and litigation from Havana to Warsaw to contend with - the price of finally taking its place in the big time.

Firstly it needs to pay for the Seagram bid and, once/if the deal is finalised, then Pernod has unwanted "venture assets" to dispose of. Ricard told just-drinks.com that he had set the ambitious target of one year to see the brands sold. "We are going to move fast, we have one year to get rid of venture assets."

Sandeman Port and Sherry, Four Roses Bourbon and Passport Scotch Whisky are all up for grabs. "We have had interest for all the brands from Seagram," said Ricard. But in a recent interview with just-drinks.com, chairman and CEO of Remy-Cointreau (long considered the front runner for Seagram cast-offs) Dominique Heriard Dubreuil cast doubt over the attractiveness of the brands. She said that although, "it would depend on the price tag" she was unsure if Remy's growth would come from the brands currently on offer.

Furthermore, noises from the US suggest that Four Roses is not attracting the kind of attention Pernod would like. Its problem is that while Jack Daniels and Jim Beam continue to dominate the value and volume section and brands such as Maker's Mark and Woodford Reserve drive the growth of the premium sector, the place of generic brands such as Four Roses is unclear.

The disposal of Pernod's own assets may also be fraught. In this case the company has, under the financing agreements for the Seagram acquisition, two years to make the disposal of non-core assets. These include, the fruit preparation and soft drink businesses and BWG, the UK distribution operation.

Fruit processing:Operating profit

Weakening of fruit preparation profit margins due to increased cost of raw materials (increased quality standards).
Negative organic growth in soft drinks and ciders

Due to CSR's poor results
Despite good growth of Orangina

Source: Pernod Ricard

The disposal of Sias, the company's fruit preparation business is well into the second round, apparently. However, the fruit preparation and soft drink businesses in general saw operating profits fall 0.3% in 2000, due to the increased cost of raw materials and negative organic growth in soft drinks and ciders, which impacted on CSR Pampryl's (the fruit juice operation) results.

Despite good growth in Orangina, questions have been raised as to how easily Pernod will sell these assets and what sort of prices it will get. Talking of the fruit preparation business, Ricard said: "The margins have been affected but it is a unique business, the only worldwide company dealing in fruit processing. Due to the number of company's showing interest we feel it is not going to be that difficult to sell. We have already eliminated some companies." But he admitted: " Certainly a few years ago it was worth more money, but it wasn't for sale at that time."

Orangina and BWG offer a potentially easier ride this year. Although the Orangina sale may seem never ending to some observers, Ricard said: "Talks are still in progress [with Cadbury Schweppes], there is no rush. We have to agree on a price, they want the best price for them and we want the best price for us." Asked if an agreement was close he continued: "It is improving, we are about to do a process of due diligence and if you do due diligence you have to agree on something at least."

BWG is altogether more positive. The distribution business saw operating profits leap 27.6% on the back of acquisitions such as Bargain Booze and Rounds and Daunts. And, Pernod appointed Societe General last week to help with the sale and Richard Burrows joint managing director of Pernod Ricard said: "We will engage with interested parties in May, early June. Beyond that would be speculative. This is not dependant on the Seagram sale," he went on, "we have decided to sell, but not at any price - this is a fine business."

Beyond the sale of assets and the potential integration of the Seagram business into its portfolio, Pernod has ongoing concerns in Poland. Here it has been established as the sole bidder for the Wyborowa producer, Polmos Poznan (as of 15 March) and is fighting the Polish authorites, through food and drink exporter Agros, for the export rights to the country's vodkas. The former may provide the answer to the latter in the long run as Wyborowa is the real prize. And, the Pernod board might be convinced to drop its claims to the export rights to all Poland's vodkas if it gets a favourable deal with Wyborowa.

"If we have Wyborowa it would solve a big problem," Ricard told just-drinks.com. "We cannot market all the brands - we could sell them [the export rights] back or find an agreement."

Meanwhile the French group's troubles over Havana Club with Bacardi continue. The WTO should announce a ruling on the issue in the coming weeks but as Ricard says: "If it comes back in favour of the US, the EU can appeal, if it comes back in favour of the EU, the US can appeal". The debate over whether Bacardi or Havana Club Holdings (owned by Pernod in conjunction with the Cuban state) owns the rights to the name in the US, is set to drag on.

Not a problem you may think given the anti-Cuban stance of the new Bush administration and therefore the continued ban on Cuban products in the US. But Castro is getting no younger and his death could change the embargo for good. Pernod would love a decision in its favour before this happened.

So while the group's figures continue to impress, sales grew 22% in 2000, with operating profits on the core wine and spirit business up 15%, this is a make or break year. Success in all or many of these ventures will finally see it challenge Allied Domecq for the number two spot. But only one thing is certain, Ricard, Burrows et al have a busy time ahead.

Summary Income Statement

99-00 evolution
Net sales excl.duty & taxes

Gross margin


Marketing & sales cost


Production & overheads

Operating profit
Interest expenses
Pre-tax profit
Source: Pernod Ricard

Operating profit achievements by activity

Spirits & Wine: 72% of the group's operating profit

Distribution:strong performance

99-00 evolution
Spirits & wine
Fruit processing
Source: Pernod Ricard