Pernod to sell cider activities, focus on core business

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Related tags: Pernod ricard

The sale of the cider unit CSR - announced last week by Pernod
Ricard - will see the disposal of the last remaining non-core
business, allowing the French group to finally devote all its
efforts to building its wine and spirits empire.

French wine and spirits company Pernod Ricard has confirmed that it is to sell its cider operations as part of its ongoing programme of focusing on core business units.

Pernod's cider business CSR includes the Loic Raison brand, and has been slated for disposal for some time as Pernod continues to build its wine and spirit business following the successful takeover of part of the Seagram business.

The company said that it had begun talks with Cidreries du Calvados La Fermiere over the eventual sale of the company, although it did not reveal any further details such as an expected price or the likely date for the conclusion of the deal.

Pernod is now the third largest wine and spirit group in the world after its joint bid for Seagram with market leader Diageo. That deal was finally completed this year with the disposal of all the brands which were unwanted by either partner, but it also entailed a change of direction by the French company.

In the mid and late 1990s the company had rapidly expanded its non-drinks operations - firstly the fruit preparations business Sias-MPA, which produced ingredients for the food industry, and then its BWG distribution arm, which consisted mainly of British and Irish drinks retailers and wholesalers. Both these businesses were successful - although latterly Sias had struggled because of supply problems - but once the Seagram deal became a reality, they were quickly seen as surplus to requirements.

However, the streamlining had begun before the Seagram deal, with the (unsuccessful) sale of the Orangina soft drinks business to Coca-Cola first mooted in the mid 1990s (the brand eventually being sold to Cadbury Schweppes in 2001) and Yoo-Hoo, the chocolate milk brand in the US, also put up for sale after failing to make an impact (it too was bought by Cadbury in 2001).

Now Pernod is truly streamlined, and will undoubtedly begin to look for further opportunities for growth in the wine and spirit sector - in particular in wine, where despite the success of Jacob's Creek and its other New World brands it still has considerable room for growth. Whether it will continue to look for acquisitions in the New World or try to develop a European portfolio is still unclear, but the momentum is with the New World, and that is likely to be enough to persuade the company to continue down that route.

In spirits, the growth is more likely to come from expanding the company's strong regional brands such as Larios gin and Wyborowa vodka into more international markets. The whisky brands, both Scotch and Irish, are already well known on the international stage - more so following the acquisition of the Seagram brands which include Chivas Regal - and Martell Cognac, also part of Seagram, has been added to the Pernod stable with a worldwide following, but even these have still got significant growth potential.

While the brown spirit portfolio is rapidly becoming a match for any in the world, with the most rapid growth in the spirits market seen in white spirits in recent years, Pernod's gin, vodka, tequila and rum brands still have some way to go to match those of its main rivals. We will undoubtedly see a further push for Larios and Wyborowa, brands with true international potential, but Havana Club's growth will continue to be hampered by the fact that it cannot be sold in the US market and various related lawsuits.

Nonetheless, with the sale of the cider operations, virtually the last remaining element of the old Pernod Ricard will disappear, and the company can finally begin to focus 100 per cent of its efforts on wine and spirits.

Related topics: R&D

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