Pernod Ricard benefits from range rationalisation and EDLP to grow sales

16 February, 2016

Success in the UK and Spanish markets drove a 1% H1 growth in Pernod Ricard’s European sales.

A strong performance in the UK made up for falling sales in France and Russia, leaving Europe in growth overall.

On a global basis, Pernod Ricard grew H1 sales by 3% to €4,958 million, with the US, India, Africa, the Middle East and Australia the best performing regions, while profits were also up 3%.

China, South Korea and travel retail all saw declines, but chief executive Alexandre Ricard was encouraged by overall growth.

He said: “It’s a solid outlook, a solid H1 performance, perfectly consistent with our full-year guidance and perfectly consistent with our long-term strategy delivering continued market share gains, innovation and higher medium-term top-line growth.”

Pernod Ricard said it has grown its share of the UK wine, premium spirits and Champagne market from 11.2% a year ago to 11.7% today.

Its share of the premium spirits category is said to be up 0.5%, wine is up 0.3% and Champagne is up 1.6%.

Denis O’Flynn, managing director at Pernod Ricard UK, said: “We are growing value ahead of volume and the premium strategy is clearly paying off for us. It’s a good, solid first half.”

At a briefing this morning, O’Flynn presented Nielsen figures for the 26 weeks to October 31, 2015, showing Absolut up 15% in value and Jameson up 10%.

In wine, Jacob’s Creek is up 16% in value, Brancott Estate is up 9% and Campo Viejo is up 6%.

O’Flynn told OLN that Pernod Ricard has benefited from range rationalisation and a migration from deep discounting to everyday low prices (EDLP) at the grocers.

He said: “The landscape is changing and it’s as yet unclear as to whether the grocers have any one particular strategy. They seem to be adopting different strategies.

“In outlets where the high to low mechanic has been changed not quite to EDLP but to a mid to low mechanic, our base rate has gone up and we have benefited from that.

“We have benefited from range rationalisation too. Outliers have been taken out – around 30% [of SKUs] – and that didn’t really affect many of our brands. We have stayed relevant. It is premium and higher styles that stay and more mass-produced ones tend to fall out.”

O’Flynn is confident that Pernod Ricard can continue to grow in this new retail landscape.

“Our base rate is up and our range is still relevant, so I’m positive,” he said.

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