FRANCE: Comment - Pernod Ricard: Orangina gone for good
Pernod Ricard has completed the sale of its Orangina-Pampryl unit to Cadbury Schweppes. The sale increases Cadbury's reach in carbonated beverages, and leaves Pernod as a pure alcoholic drinks business. The Seagram acquisition has established Pernod as a major player in the global drinks market for the first time, but many of the brands need work to reach their full potential. Divesting non-core assets should help Pernod focus on this goal.
Cadbury Schweppes has now completed its €700m (US$633m) purchase of Pernod Ricard's Orangina-Pampry soft drinks business, following European Commission approval earlier this week.
Although expected, the approval must have come as a relief to the management at Orangina's former owner, Pernod Ricard. Last year an agreement to sell Orangina to Coca-Cola was scuppered by the French authorities over anti-competitive concerns. However, this time it was decided that the product lines of the two businesses involved were complementary and would not adversely affect smaller competitors.
Cadbury walks away with Orangina carbonated orange, Yoo-Hoo chocolate drink and Pampryl fruit juices, while Pernod Ricard can finally turn its full attention to its faster growing wines and spirits businesses. This was the French company's plan from the start, after the acquisition of many of Seagram's brands left it as a major player in the drinks industry.
The Orangina sale comes as part of a wide range of reforms. Also gone are Pernod's fruit-preparation division and its UK Oddbins chain of off-licenses. While all of these assets were healthy businesses in their own right, the parent is determined to become a highly focused organization dedicated to growth in the manufacturing of alcoholic beverages.
The Seagram acquisition changed the face of the drinks industry, establishing Pernod as a credible threat to the likes of Allied Domecq and Brown Foreman. The company also plans to restructure its whisky and cognac operations to integrate them more closely with its share of Seagram, giving it a further advantage over its rivals.
Pernod has a strong portfolio with a lot of potential. Products such as Seagram Gin and Chivas are popular but need a major marketing investment to revitalize the brands. Sales of others, such as Jameson Irish whiskey, are already growing quickly but require a stronger distribution network and additional marketing to take advantage of this trend. Divesting the non-drinks business should help Pernod to focus on this goal.
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