Pernod's Allied forces - one year on

By | 27 July 2006

The announcement of Pernod Ricard's full-year sales figures this week coincided with the first anniversary of the company's acquisition of Allied Domecq. Olly Wehring takes a look at the performances of Pernod's brands - old and new - and looks at what the future holds for them.

The first anniversary of Pernod Ricard's purchase of Allied Domecq passed yesterday (26 July). The move saw Pernod's key brand stable rise to 14, and now includes brands like Ballantine's Scotch whisky, Beefeater gin, Champagnes Mumm and Perrier-Jouët and liqueur brand Kahlua.

So, how have the major Allied brands fared in the last 12 months in, what the company calls, the 'new' Pernod Ricard?

The French drinks giant is keen to set the scene by highlighting the overstocking carried out by Allied prior to takeover in June last year. As managing director Pierre Pringuet says: "The last quarter has been affected by heavy trade loading a year earlier. Bonuses for Allied staff were determined on volumes at the end of June 2005." Pringuet reveals that last June saw twice the average volumes of Ballantine's shipped compared to any other June.

At the same time, Pernod spent the year destocking and terminating sales which generated parallel business - the so-called 'grey market'. In Latin America, for example, 70cl bottles had been shipped to markets traditionally supplied with 75cl or 1-litre bottles - these bottles would inevitably be destined to head back to Europe for sale.

Looking at a selection of the former Allied brands, the most high profile, Ballantine's, saw full-year volume sales slide by 12% year-on-year to 5.3m 9-litre cases. Despite growth in Germany and France, the brand saw sales slide in Spain and Italy. Pernod remains upbeat on the Ballantine's future, however, saying that the whisky will now be able to have greater presence across the whole of Asia and not just in South Korea, where Allied had focused much of its efforts.

Beefeater gin also saw sales slide in the last year, falling by 6% to 2.3m cases. Sales of Malibu, however, rose 2% to 3.3m cases for the year but the figures wer not enough to satisfy Pringuet. "We haven't yet defined our plans for the Malibu range," he said.

Kahlua, meanwhile, is Pernod's most difficult new brand, with sales falling by 8% to 2.1m cases. Demand for the liqueur brand is very mature in the West, where its consumer base is ageing. "We need to rejuvenate the brand totally," says Pringuet, "but it's very much a work-in-progress."

Stolichnaya vodka performed admirably, with sales leaping 16% to 2.6m cases, due to continued strong growth in the US. The New Zealand Montana wine range was up 4%, but Pernod's fortunes in Champagne were mixed - Mumm dipped by 1% with Perrier-Jouët posting a 1% rise. "Champagne is a very untidy market," Pringuet asserts. "It needs clearing up."

Going forward, Pernod says it will produce a structured strategic programme for its new brands in the coming months. For example, the company says it will develop a new communication platform for Ballantine's, which is in the later stages of research. The group also points to Allied's marketing coverage prior to the takeover. "Allied was very focused with its (marketing) investment," says Patrick O'Driscoll, commercial director at Chivas Brothers. "They were concentrating on a small number of markets."

O'Driscoll believes that, with greater coverage for the brands in more markets, the future looks bright. He also believes that the struggling brands are well-placed to prosper. "The basics are all there for these brands," he says. "The fundamentals are looking pretty good - ultimately, we have the products that consumers want."

O'Driscoll is well aware, however, that the period of grace is now over. "The pressure is on this year," he says, "there's no doubt about that. You only get one year's grace at Pernod." Pringuet is in agreement that the challenge is now on. "It's a huge amount of work," he says, "but we know we can do it."

Sectors: Spirits, Wine

Companies: Pernod, Allied, Ricard, Kahlua, Perrier, Stolichnaya, Chivas

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