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Pernod's key brands squeezed by woes in Europe

DRINKS giant Pernod Ricard's key whisky brands Chivas Regal and Ballantine's have seen sales fall in volume terms as they were hit by tough markets in Europe and Asia but its Glenlivet single malt brand has continued to do well in the United States.

STRUGGLE: Chivas Regal has found the going tough in markets across Europe and Asia in recent times.
STRUGGLE: Chivas Regal has found the going tough in markets across Europe and Asia in recent times.

Pernod, the world's second-biggest spirit's group, said its Scotch whisky performance "remained virtually stable" in the final six months of 2012, the first half of its financial year, compared to the same period of the previous year when sales rose 12%.

But after a strong performance from its white spirit brands helped the French company to a 1% rise in profit to €1.5 billion (£1.3bn), chief executive Pierre Pringuet stuck with his target of full year profit growth.

"The good performance achieved this semester confirms the soundness of our business model: a comprehensive port- folio of first-class international and local brands, a premiumisation strategy enhanced by a strong innovation policy and global exposure allowing us to capture all growth relays," he said. "We are confident in continuing our growth mid-term."

Chivas Regal recorded a 3% rise in net sales after price increases offset a 3% fall in volumes.

Ballantine's was down 11% as volumes dropped by the same amount.

Meanwhile Glenlivet, its leading single malt brand, saw a 21% rise in net sales on the back of a 17% rise in volumes.

Like Diageo, the market leader, Pernod has felt the impact of economic problems in southern Europe. Ballantine's, which is particularly strong in markets such as Spain, saw its sales in Europe, excluding France, fall 7%.

In France, the second-largest export for Scotch whisky behind the United States, Chivas sales were down 10% although Ballantine's posted a 4% rise as did single malt brand Aberlour, as sales were hit by buying ahead of a tax rise the previous year.

But even in Asia, where whisky sales have been soaring in recent years as the monied classes have grown, Pernod's whisky brands have been experiencing some challenges, in part due to the timing of an early Chinese New Year in 2012.

Its top whisky brands saw only "marginal" growth in Asia, Pernod said, with volumes down in China and slower growth in South Korea.

Hitherto emerging markets, which make up around 40% of sales, have been seen by drinks companies as a bulwark against tough conditions in Europe.

Pernod, whose other brands include Mumm champagne, Absolut vodka and Martell cognac, said it still expected underlying operating profit growth of close to 6% in the year to June, slowing from 9% in the 2012 financial year.

Phil Carroll, analyst at Shore Capital, said: "Normally Pernod guidance is particularly cautious and it easily over delivers but in the current year we expect 6% profit growth to be just that."

First-half sales were €4.9bn, an underlying rise of 3%, slightly ahead of market expectations.

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