Industry & Business

Pernod Ricard cautious on China

Pernod Ricard cautious on China

February 11
14:03 2016

Pernod RicardThe situation in China remains challenging for spirits company Pernod Ricard and sales in its second biggest market could fall up to 10% this year, the company announced today.

Like rivals Remy Cointreau and Diageo, Pernod Ricard has been hurt by a government clampdown on luxury gifts and a slowing economy in China, though analysts said it appeared to be taking a more cautious line.

Pernod Chairman and CEO Alexandre Ricard told Reuters that while he remained “very confident” about long-term prospects in China the economic climate now was “not good” and later said sales this financial year could fall by 5-10%.

His comments contrasted with those of Remy which last month said premium cognac sales in China were recovering.

Pernod Richard said its sales in China fell 2% in the six months to the end of December, helped by earlier shipments than a last year for the Chinese New Year.

Stripping out this factor, sales fell 8% in the first half though cognac did better than whiskey.

But the world’s second-largest spirits company behind Britain’s Diageo kept its overall annual profit growth target unchanged as robust demand in its main US market and cost controls lifted first-half operating profit 3%.

The owner of Jameson whiskey, Absolut vodka and Martell cognac said it was expecting a rise of 1-3% in underlying operating profit for the year ending June 30.

n the US, Pernod’s leading brand Absolut has been struggling as trendy drinkers turn to brown spirits such as bourbon and niche vodkas like Texas-based Tito’s Handmade Vodka.

Sales of Absolut were down in value but the underlying trend was improving, in line with the company’s medium-term aim of stabilising Absolut sales, Pernod said.

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