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Whisky dip hits Pernod Ricard as its Chinese sales slump

PERNOD Ricard has highlighted the continuing effects of slowing whisky and Cognac sales in China as it reported a 7% fall in net sales in the first nine months of its current financial year.

CHANGING TASTES: Chivas Brothers, owners of Pernod Ricard, have reported slowing sales of whisky and Cognac, although Glenlivet has bucked the trend. Picture: Getty
CHANGING TASTES: Chivas Brothers, owners of Pernod Ricard, have reported slowing sales of whisky and Cognac, although Glenlivet has bucked the trend. Picture: Getty

The owner of Paisley-based Chivas Brothers booked sales of €6.19 billion (£5.1bn) for the year to date.

The company said its performance was in line with the first half, declaring sales were stable when the effects of foreign exchange were stripped out.

Net sales of luxury blends Royal Salute, Ballantine's and Chivas Regal fell 9%, 4% and 2% respectively, and Martell Cognac was down 9%. But Speyside malt The Glenlivet saw a 9% jump in sales.

Pernod is continuing to feel pain in China, where sales of luxury goods such as whisky and Cognac have been undermined by curbs on gift giving to government officials. And sales have been hit in Ukraine due to the ongoing political and economic unrest.

The relative slowing of economic growth in China was also understood to have been a factor as the anticipated "destocking" by retailers led to a 3% fall in organic sales across Pernod's Asia and rest of the world territory.

Not counting China, the company reported sales growth of 5% for the region for the nine months, compared with 2% reported at the half-year.

Pernod's experience in China reflects a wider trend being seen within the Scotch exporting sector.

The Scotch Whisky Association reported earlier this month that the volume of Scotch exported to China had tumbled by 27% last year, from 22.9m bottles in 2012 to 16.7m in 2013.

The industry body said the decline had been anticipated in light of the economic slowdown in China and austerity measures put in place by the ruling political regime.

There is also understood to be an acceptance in the industry of growth slowing to more normal rate following a sustained period of high spending in China. One source highlighted that falling sales in the Chinese market are not confined to Scotch, with luxury goods across the board enduring falling sales.

Elsewhere in Asia, Pernod turned in a strong performance in India and travel retail outlets, but said the "situation remained difficult in South Korea and Thailand".

In Europe, underlying sales rose by 2%. This helped the company offset challenging factors such as the late timing of Easter, rises in excise duty and prices increases.

And in the Americas organic sales were up 4% following a robust showing in Brazil, which improved the firm's performance compared with the half-year update.

The company reported a 4% rise in underlying sales in the US, down on the position at the half-year, and announced yesterday it had acquired the assets of California's Kenwood Vineyards after reaching a deal with F Korbel & Bros.

Kenwood produces a portfolio of premium Sonoma wines, which are mainly distributed in the US and Canada. Pernod said the acquisition was consistent with its pursuit of a "multi-origin wine portfolio strategy".

This month has also seen the group seal new distribution agreements concluded with Pernod Ricard USA's largest distributors, Southern Wine & Spirits and Republic National Distributing Co.

And the group highlighted it had successfully issued a Euros 850m, six-year bond in March. The proceeds will be used to pay down bond debt.

Chief executive officer Pierre Pringuet said: "In an environment that remains challenging, our performance over the nine months was in line with the half-year and with our annual guidance. I am pleased with the acquisition of Kenwood and with the strengthening of our partnerships with two of our largest US distributors, which reinforce the group's portfolio and execution capability in the US."

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