Pernod Ricard CEO glosses Absolut sales slide: ‘The US vodka category is suffering’

By Ben BOUCKLEY contact

- Last updated on GMT

Pernod Ricard CEO, Alexandre Ricard
Pernod Ricard CEO, Alexandre Ricard

Related tags: Pernod ricard

Pernod Ricard CEO Alexandre Ricard admits that Absolut is under pressure in a ‘very challenged’ US vodka category where flavored varieties in particular are struggling.

Last Thursday the French spirits and wines group reported its half year 2014/15 results for the six months ending December 31, with sales up 1% to €4.621bn ($5.264bn) and net profit from recurring operations up 1% to €834m.

The company stabilized sales in Asia/Rest of World – here it lapped a year-on-year decline of 4% – but a slowdown in Europe meant flat sales for the half, and despite 2% growth in the Americas, the US weighed on results.

Despite good performance for other Top 14 brands Jameson, The Glenlivet and (off a low base) Martell, Ricard blamed Absolut for the firm’s under-performance in the US, where it expects flat sales for FY 2014/15.

USBourbon, tequila sales boom, vodka sales are sluggish

Absolut was down 6% according to AC Nielsen’s numbers, driven principally by weak sales for flavored varieties, and remains “under pressure in a very challenged vodka category, which is increasingly competitive as well”.

Early this month, Distilled Spirits Council (DISCUS) statistics showed that spirits overall stole share from beer in the US in 2014 (they held a 35.2% share of alcoholic beverage sales, up 0.5%, to net $23.1bn in retail revenues), but the whiskey category led the charge ( Bourbon, Irish and to a lesser extent Scotch) alongside Tequila.

Vodka volumes rose 1.6% supported by traditional unflavored sales, as the DISCUS data below shows, but flavored sales were down, as Pernod Ricard’s CEO confirmed.

“The vodka category is suffering,”​ A.Ricard told analysts. “It’s very, very competitive – both from a pricing point of view, but also from an innovation point of view. I think every single year there are up to 900 brands that come on shelf.

DISCUS

“A couple survive, but 900 come on shelf and grab space. That said, the flavored vodka category is suffering much more than the pure, typical base vodka. We see this as well with Absolut.”

Ricard said the turnaround plan for Absolut involved a new dedicated commercial organization – which he said will benefit premium line extension Absolut Elyx. The company wants to increase the brand’s promotional effectiveness and drive frequency of purchase rather than depth in a tough competitive environment.

Absolut’s ‘Meet Perfection’ campaign launched in September 2014 in the off trade globally and Ricard said it is specifically focused on Absolut's quality. “It’s the best vodka in the world, our job is to make it very well known to our consumer base,”​ he said.

Absoult Elyx: Pernod's super premium play

Absolut Elyx

More broadly, Ricard said the company is stepping-up investment behind super premium brand Absolut Elyx, a brand the company claims is already growing strongly in the States – DISCUS stats show growth is coming in high end premium and super premium vodka – creating a buzz via use of a ‘signature copper pineapple’ to serve the drink, which is made from single estate wheat and manually distilled in a copper still dating from 1921.

Elsewhere in the world, Ricard said Absolut suffered in Germany in H1 due to pricing disputes with retail customers, but continued to grow in Brazil, Africa/Middle East, UK and Eastern Europe.

Within Pernod’s Top 14 Spirits & Champagnes brands Absolut was a sluggish performer in H1 2014/15 – with organic sales down 1%, volumes down 1% and price/mix down 1%.

Other struggling brands on this Pernod list include Ricard (volume sales down 3%), Malibu (-5%), Martell (-9%) and Royal Salute (-8%).

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