The managing director of Pernod Ricard yesterday hailed India as a potential "El Dorado" for Scotch whisky sales following the recent lifting of prohibitive import tariffs there.
However, Pierre Pringuet warned that the world's second-biggest drinks company will demand trade sanctions if the country's state authorities scupper moves by the New Delhi government to level the playing field with local brands.
Pringuet was speaking in London as he unveiled softer-than-expected final-quarter sales figures at Pernod, which were affected partly by a slowdown in premium whisky sales in China.
The Paris-listed company nevertheless lifted its full-year profit forecast for the year to June 30. Strong annualised growth within the premium segments of Pernod's 15 strategic brands - which include the whiskies Ballantine's, The Glenlivet and Chivas Regal - lifted margins and offset higher spending on advertising and promotion.
Last week the European Union formally suspended a dispute panel initiated at the World Trade Organisation over India's additional duties on imported wines and spirits. This came after India agreed to scrap additional regional duties on wine and spirits that can push tariffs as high as 550% on imported spirits and 264% on wines.
Pringuet stressed that sales of Pernod's local Indian whisky brands, including Royal Stag and Imperial Blue, are increasing rapidly. Royal Stag accounts for five million cases a year and is growing at more than 20%.
Imported Scotch is "unaffordable" in comparison, he added, contrasting the e7 (£4.69) a consumer will pay for Royal Stag with the e20 charged for a bottle of Scotch.
"This huge market for whisky accounts for 60 million cases annually," he added. "If just 10% of that is converted into Scotch whisky sales (that's) a new El Dorado."
One major headache remains. Following this month's withdrawal of the Additional Customs Duty, the Indian government indicated it would bring forward new legislation allowing states to impose their own duties on a non-discriminatory basis in line with WTO rules.
The state government of Maharashtra has already jumped the gun while this legislation remains in draft form, imposing its own 200% tax on Scotch whisky which, it is alleged, breaches the requirement for a level playing field. It is feared other states will follow suit.
Pringuet said: "Local duties need to be monitored closely and we may need to ask the European Commission to intervene if necessary."
Earlier this month Chivas Brothers, which employs 1600 staff across 31 sites in Scotland, announced plans to invest £4.75m in bottling operations to keep up with growing global demand for leading brands.
Total sales for 2006-07 were e6.443bn, a rise of 9.1% on a like-for-like basis. By value, the rise was 13%, reflecting the group's strategy to sell more expensive "premium" versions of its products.
Growth in the final three months was 5.5%, against analysts' forecasts of 6%, partly due also to European retailers buying in stock in the third quarter ahead of price rises. The group nevertheless said it expects profit growth to be "slightly in excess" of its previous guidance of 20% on a constant exchange basis.
Eight of Pernod's 15 strategic brands posted double-digit annual volume growth, including The Glenlivet (15%), Ballantine's (11%) and Irish whiskey Jameson (11%). Pringuet highlighted the "enormous potential" of Ballantine's aged whiskies in the Far East, following a near-doubling of sales in China, and said the firm is primed for further growth. "We probably have a healthier inventory than any other player in the Scotch whisky market," he added.
Chivas Regal achieved a record sale of 4.1 million cases. Organic sales growth, at 6%, was held back by a difficult US market and economic turmoil in Thailand.
Pringuet admitted yesterday that Pernod may have to choose between buying one of the world's two leading vodkas, Absolut and Stolichnaya, which together analysts value at $9bn (£4.4bn).
Asked if Pernod Ricard could afford to buy both and also be allowed to do so by regulators, Pringuet answered "probably no" to both questions.
The company that makes Absolut is being sold by the Swedish government, while Pernod has the distribu- tion rights for Stolichnaya outside Russia and is in talks with Moscow authorities about acquiring full brand rights.
Pernod Ricard shares closed down 5.2% at e152.59.
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