Pernod is benefitting from the growth of premium Cognac in China

Pernod Ricard has the edge over Diageo in terms of investor value partly due to its lower exposure to Europe’s struggling economies, according to an analyst. 

In a client note today (7 January), Bernstein Research analyst Trevor Stirling said that Diageo has the “upper hand” in Scotch whisky, particularly in LatAm, but that Pernod benefits from very strong profitable growth from premium Cognac in China. Stirling added that Pernod has “lower exposure to the PIIGS (Portugal, Ireland, Italy, Greece and Spain) in Europe”. 

“Hence, Pernod Ricard offers slightly superior long-term top-line growth, whilst Diageo offers more operating leverage in the short-medium,” Stirling said. 

“Overall, we have a slight preference for Pernod Ricard given current relative valuation and the fact we believe Pernod Ricard's growth model is perhaps slightly more top-line oriented.” 

On Remy Cointreau, Stirling noted that it has a “higher growth rate than its spirits peers because of its extremely high exposure to fast growing Chinese demand for premium Cognac”. 

Concluding, Stirling said that, overall, Bernstein has a “positive long-term stance” on the European beverages sector, including brewers.