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Pernod Ricard suffers fall in sales of Scotch

PERNOD Ricard has seen sales of its key Scotch whisky brands dip 4% in the first half of the financial year as a result of their exposure to the slowing Chinese market.

The drinks giant, which owns Paisley-based Chivas Brothers, reported the Speyside malt Glenlivet was the strongest Scotch whisky performer with growth in numerous markets.

Glenlivet saw its net organic sales in the six months to the end of 2013 grow 10% with volumes up by 1%.

Alexandre Ricard, deputy chief executive and chief operating officer, said: "It was a very good performance on the part of Glenlivet. Not just in the US but everywhere, in particular in South Africa and India."

However for the popular blended whiskies Chivas Regal and Ballantine's it was more of a mixed picture.

Both brands saw net sales dip 4% while volumes for Chivas were 8% lower although Ballantine's saw 2% growth.

The upmarket Royal Salute blend also struggled in the period with an 11% fall in net sales and a 10% decline in volumes.

Pierre Pringuet, Pernod chief executive, said all the Scotch whisky brands had maintained their market share in China but total group sales in that country were 18% lower than in the first half of 2012/13.

That meant group figures for Asia and the rest of the world were 4% behind.

In the Americas total sales were up by 3% with Glenlivet seeing a 14% rise in the US and Chivas up 2%.

European sales were ahead by 4%, compared with a 2% decline in the same period of 2012/13. Within

Europe, Ballantine's became the number one Scotch whisky brand in Poland and was also said to have performed well in Russia while Chivas was a strong contributor to the 12% growth seen in Germany.

Pernod has repeatedly said it sees great long-term potential for Scotch whisky. Last year it re-opened its Glen Keith distillery as well as taking the wrappers off a new bottling hall at Paisley.

A new build distillery at Carron in Speyside is likely to come into operation next year.

The weakness in China and unfavourable foreign exchange rates were the main factors behind a 7% slide in Pernod's half-year revenue from €4.9 billion (£4bn) to €4.57bn.

Net profit was down 2% from €846 million to €828m, however Pernod pointed out that stripping out foreign exchange movements would have seen it report a 6% increase.

Pernod had expected sales in China, its second biggest country market, to pick up through the first six months of 2014 but has now revised that position by suggesting an upturn is unlikely to occur until later in the calendar year.

As a result it downgraded full-year forecasts of net profit growth from recurring operations to between 1% and 3%.

It had expected 4% to 5% when it reported first quarter results in October.

That warning is similar to other drinks firms, such as market leader Diageo, which has also seen slower growth in emerging economies.

Mr Pringuet said: "The pick-up in the Chinese market will not happen in this fiscal year.

"This has nothing to do with the medium- and long-term potential of the Chinese market which will remain a large and profitable market for Pernod Ricard."

The top 14 brands, which includes the premium whisky labels as well as the likes of Malibu, Absolut Vodka and Beefeater Gin, were 1% down in the half-year.

What Pernod describes as its 18 key local brands - and which has Clan Campbell, 100 Pipers and Passport Scotch under its umbrella - were up by 4%.

Premium wines posted a 2% rise with other categories flat.

Pernod is also starting a cost-saving project aimed at trimming around €150m annually which it plans to reinvest in brand development.

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