Pernod Ricard restructures

Pernod Ricard faces coronavirus & Jacob’s Creek challenges

February 13, 2020
By Alana House

Pernod Ricard has revealed organic growth of 2.7% in HY20, plus reported growth of 5.6%, but has flagged there are challenges ahead for China and Jacob’s Creek.

Chairman Alexandre Ricard said: “Looking to H2 FY20, the environment remains particularly uncertain from a geopolitical standpoint, with the additional pressure related to the COVID-19 outbreak.  While we cannot currently predict the duration and extent of the impact, we remain confident in our strategy.  Our first priority is to ensure the safety and wellbeing of our employees and business partners. I would like to praise the exemplary behaviour of our teams during this difficult time.  We fully support their efforts, as well as those of the Chinese people and authorities to contain the epidemic.

“Assuming a severe impact of COVID-19, mainly on Q3 FY20, we are at this stage providing a guidance of organic growth in profit from recurring operations for full-year FY20 of +2% to +4% and will continue to closely monitor our environment.”

The company had previously predicted profit growth in FY2020 would be 5-7% . This follows a similar move by Diageo, which is also predicting its organic net sales to be at the lower end of the range originally estimated.

Pernod Ricard has reported that all outlets in China’s on-trade were closed for February, with Hubei province outlets closed until end of June. Home deliveries were also disrupted.

It predicted on-trade would generally be back on track by June, while off-trade recovery would begin in March.

“Softening decline” for Jacob’s Creek

Pernod Ricard noted that while it had seen good growth for Brancott Estate and Campo Viejo, this was “offset by softening decline in Jacob’s Creek”.

Jacob's Creek

The company said there were growth hopes for the brand in China and India.

Jacob’s Creek was a star performer for Pernod Ricard in FY19, recording double-digit growth in markets including China and India.

Brancott Estate enjoyed double-digit growth in HY20, with brand strength seen in the UK, New Zealand, Russia, the US and Canada.

Campo Viejo’s strong growth was mainly in the UK.

Pernod Ricard said its “Launch of Reconquer” project is in place to “resume growth in France and reorganisation of wine business to reignite its performance”.

When it came to spirits, it said there was a “dynamic performance of strategic international brands”, in particular Jameson, Martell, The Glenlivet, Malibu, Ballantine’s, Royal Salute and Beefeater.

Regional performances

Sales growth for Pernod Ricard in HY 20 was described as “robust”, with a very strong basis of comparison: +2.7% vs +7.8% in H1 FY19.

The US saw 4% growth, driven by whiskies and specialty brands. China enjoyed 11% growth, enhanced by an earlier Chinese New Year. India was up 5% in a “volatile context”.

Asia/Rest of World had 3% growth, driven mainly by China and India, dampened by the transfer of Imperial Korea to a third-party distributor.

Europe also had 3% growth, with “improving trends”, driven by Germany, UK and Eastern Europe acceleration, but Pernod Ricard noted there are “difficulties remaining in France”.

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