Pernod Ricard returns to growth in Q1 despite wine sales decline

By Erin Smith

Published: 23 October, 2014

Pernod Ricard returns to growth in Q1 with organic sales increasing 2% and sales totalling €2,037 million despite the company's Priority Premium Wines category posting a 3% decline in net sales.

Pierre Pringuet, chief executive officer, Pernod Ricard Pierre Pringuet, chief executive officer, Pernod RicardPierre Pringuet, chief executive officer, Pernod Ricard

Pernod Ricard returns to growth in Q1 with organic sales increasing 2% and sales totalling €2,037m despite the company's Priority Premium Wines category posting a 3% decline in net sales.

Pierre Pringuet, chief executive office of Pernod Ricard said: "Pernod Ricard's return to growth in the first quarter illustrates the group's resilience in a difficult context."

The sales growth primarily came from emerging regions including Asia and the rest of the world, which had a 5% increase in Q1, while European sales slumped 2% and Americas sales remained flat. China still remains to be a challenge for Pernod Ricard, but India saw an excellent start to the year with a 21% increase in sales and Africa and the Middle East saw a 22% rise.

Alexandre Ricard, deputy chief executive and chief operating officer said: "For the full financial year we anticipate a gradual improvement in sales, in an environment that will remain difficult. We plan to increase investment behind our priority brands and innovations. As a result, our 2014/15 guidance is organic growth in profit from recurring operations between 1% and 3%."

The Priority Premium Wine business unit saw volumes decline by 5% and sales decline by 3% in Q1. Brancott Estate and Campo Viejo performed well particularly in the UK market, however Jacob's Creek continues to lose ground. Jacob's Creek decline is primarily due to the fierce competition in the UK market.

Kahlua saw a 23% increase in net sales and an 18% in volume for Q1. It would appear that the company's investment in its independent short film titled "The White Russian" starring Jeff Bridges paid off. The brand released the video on September 2, 2014.

Video:

Jeff Bridges, "The White Russian"

The Glenlivet whisky brand also helped drive growth with a 17% rise in net sales and a 12% rise in volume for the first quarter.

Malibu and Havana Club brands were the biggest losers with net sales decline for both brands of 7% each.

The company is hoping to capture further savings and boost margins through project Allegro, which was rolled out at the beginning of the year and is expected to save €150 million over the next three years. The company, as part of that cost savings initiative, announced at the end of August that it planned to eliminate 900 jobs globally.

"The roll-out of project Allegro will contribute to strengthening our operational efficiency," said Pringuet.

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