Seagram integration boosts Pernod results
there is still much work to be done to improve sales at Martell and
Chivas Regal.
Pernod Ricard, the world's third largest wine and spirits company, has reported a 78 per cent increase in sales from its core operations to €3.4 billion, of which €1.4 billion came from its share of the Seagram business, acquired jointly with Diageo in 2000.
Operating profit from wines and spirits was €710 million, a rise of 106 per cent, of which 7.5 per cent was organic growth. Most of the improvement came from reducing distribution cost and expenses.
Last year also saw the sale of most of Pernod Ricard's non-core businesses (distribution, soft drinks). Sales from these activities fell to just €1.4 billion, down sharply compared with 2001, for a €40 million contribution to operating profit. By year's end, the disposals were almost complete.
Group sales were €4.8 billion, up 6.2 per cent, while operating profits reached €750 million, up 67 per cent.
The Ricard pastis brand remained the company's top seller last year in volume terms, with 6.5 million cases sold worldwide. But on the whole it was a bad year for the core anis brands - Pastis 51 sold 2 million cases, but like Ricard, showed a decline compared to the previous year when sales had grown 5 per cent.
In terms of growth, the best brand performance came from Amaro Ramazzotti, the group's Italian bitters brand, which lifted volumes 14.3 per cent to 1.1 million cases - the newest addition to Pernod Ricard's million-case brands. There was also strong growth from Jacob's Creek Australian wine (up 11.6 per cent to 5.9 million cases) and Havana Club rum (also up 11.6 per cent to 1.9 million cases).
The Jameson Irish whiskey brand was the only other top brand to post an increase in volume (up 6.6 per cent to 1.5 million cases). Clan Campbell Scotch sales fell 0.9 per cent to 1.6 million cases, while Wild Turkey Bourbon also showed a decline, with volumes falling 5.4 per cent to 0.7 million cases.
Total volume sales for Pernod's core brands were therefore 21 million cases in 2002, up 3.5 per cent compared to the previous year.
As far as the acquired Seagram brands are concerned, there was a recovery in the second half of the year after a poor start, but overall volumes remained lower than in 2001 at 7.4 million cases (down 5.2 per cent). The declines were due primarily to the destocking of key brands Chivas Regal and Martell, sales of which dropped 9.1 and 10.5 per cent respectively as a result. Chivas sales were also badly affected by the economic downturn in Venezuela.
There was a strong performance from Seagram's main Scotch whisky brand, The Glenlivet, however, which posted a 2.3 per cent rise in volumes over the year to 0.4 million cases.
But with wholesalers inventories finally reduced, the company is planning a major push for both Martell and Chivas Regal this year.
Regarding Chivas, a premium blended Scotch whisky, Pernod Ricard stressed the recovery in sales in both North and (to a lesser extent) South America, as well as growth in excess of 30 per cent in both Spain and South Korea, all of which meant that strong growth was expected this year. A 17-year-old variant, Chivas Revolve, was also successfully launched last year.
The prospects are less rosy for Martell, with Pernod saying its target was to get the Cognac brand back on the path to growth after a difficult year marked by destocking in key markets such as China and the UK.
The company also has plans to revamp the Ricard brand after its poor showing this year due to poor weather and a decline in on-trade volumes. A new RTD drink, Ricard Bouteille, has been tested successfully and is set for a nationwide launch in France this year - the first RTD variant for a major Pernod Ricard brand since the ill-fated Pernod Hex in the 1990s. Despite the launch, the company remained guarded about the prospects for growth at Ricard - it all depends on the economic (and presumably, local) climate.
As for Havana Club, the Cuban rum brand is expected to show further double digit growth in 2003, helped by line extensions last year, while Jacob's Creek should break the 10 million case barrier this year by building on strong 2002 performances in the UK, the US, Australia, Ireland and Japan.
Commenting on the year's results, chairman Patrick Ricard said: "The group's remarkable performance in 2002 fully confirms the logic of the strategy initiated with the acquisition of Seagram's brands. We look forward with confidence to the growth of the business and indeed 2003 has started strongly, but in the uncertain geopolitical and economic situation, we will reserve guidance on performance to the shareholders' meeting [in May]."
