Pernod Ricard admits that the effects of a hefty 2012 French VAT hike on spirits has ‘severely affected’ the fortunes of key brand Ricard and other aniseed spirits with 45%+ ABV.
Sales of the spirit fell 3%, but it was the only brand within Paris-based Pernod Ricard’s ‘Top 14’ portfolio to suffer a value decline, as the firm reported full-year 2011/12 results in the year to June 30 today.
Overall, French sales fell one per cent due to a decrease in spirits consumption following the excise duty hike of January 1 2012 (14% on average), which had a particularly adverse effect on the aniseed category, Pernod Ricard reported.
Aniseed-based spirits had been hit especially hard hit by the excise tax hike since they were 45% proof or more, and thus penalized on social welfare grounds, CEO Pierre Pringuet told journalists this morning.
“The increase on a bottle of Pastis or Ricard is approximately €2 per bottle, which is a substantial increase,” he explained.
“Consumption is down, and we believe this will continue, certainly until the end of the calendar year,” he added, since it took consumers 12-18 months to get used to price hikes.
Pernod Ricard has reported its best full-year results since the 2008 financial crisis, with top and bottom line growth boosted by record branded sales in ‘growth driver’ Asia.
Turnover rose 8% to €8.215bn – driven by 17% growth in emerging markets – while net profit from recurring operations rose to €509m versus €469m 12 months ago.
Pernod Ricard said that Asia/Rest of World was the group growth driver with sales up 15%, primarily due to China, India, Vietnam and Taiwan; Africa/Middle East also performed well.
US sales grew 5% driven by Jameson, which CEO Pierre Pringuet told journalists had developed there in “spectacular fashion”, while Europe (excluding France) grew 2%; albeit with a “pronounced bipolarisation” – sales up 16% in Eastern Europe, down 1% in the West.
The wine and spirits giant also cut its net debt – which has been a concern for some analysts – by €385m to €9.363bn.
Star spirits brands
The firm said premium brands now accounted for 73% of group sales, up 2% on last year, which boosted gross margin, while advertising and promotions liked to the most profitable Top 14 brands bore fruit.
Hailing an ‘all-time record’ for its Top 14 (volume sales up 3% to 47.2m 9-litre cases), Pernod Ricard said they accounted for 60% of group sales.
Absolut sales rose 3%, Chivas 7%, Jameson 16%, Malibu 8%, Beefeater 8%, while Martell 10%, The Glenlivet (16%) and Royal Salute (20%) were the standout performers.
Crucially, an improved price/mix effect meant that Pernod Ricard’s top 14 brands grew 10% by value overall: Martell rose 25%, Royal Salute 23%, The Glenlivet and Jameson both 18%.
Pringuet said his firm’s strong results were due to a “clear and consistent strategy” involving substantial brand investment, premiumisation and geographic expansion.
Three key executive appointments were also announced by Pernod Ricard today after the death of former chair Patrick Ricard, with Daniele Ricard taking his place, and his nephew Alexandre Ricard confirmed as CEO in waiting from 2015.