Pernod Ricard is facing headwinds after reporting a -3% organic decline in sales in H1 FY 2024, with sales expected to stay flat for the remainder of the year.
The second largest spirits group still aims to reach the upper end of 4-7% sales growth through FY 2025, but cut its expectations for 2024.
Overall, reported sales dipped -7% to $7 billion (€6.59 billion) with growth in Asia and Europe offset by declines in the Americas. In the U.S. sales fell -7% with value depletions down -6%. The group said it expects to see U.S. performance improve in the second half of the fiscal year on the back of “brand activations” despite high stock levels after a softer than expected 2023 year-end season.
Like other spirits groups, the French spirits company has faced a normalizing market following a super cycle of growth during the pandemic, leading to high inventories. Pernod Ricard’s main rival Diageo said it also expects 5-7% organic net sales growth in the medium-term during its results last week.
Pernod Ricard said it is banking on improving demand in the U.S. and China, along with strict control over costs, to drive margin expansion, with full-year organic operating profit expected to grow at a low single-digit rate.
Across all geographies, the group’s premium portfolio driving high single-digit pricing was offset by lower volumes and an adverse market mix. Asia and the rest-of-the-world region was up 1%, although sales slowed -9% in China. Europe sales decreased by -4%, although net sales excluding Russia were up slightly by -1%. Sales were more positive in India at +4%.
The group’s strategic local brands, which includes Seagram’s, Kahlúa and Olmeca Tequila, was the only division to earn positive results (4%). Strategic International brands (-4%) including Jameson and Absolut and Specialty Brands, (-5%) which includes Smooth Ambler whiskies and Del Maguey Mezcal, were down alongside the wine division. Among individual brands, Havana Club rum (+3%) and Royal Salute whiskey (+8%) fared best.
Investing in its aged spirits portfolio was listed as one of the group’s priorities, doubling capacity for its flagship Jameson brand, investing in single malts in Scotland and expanding its distillation footprint in Kentucky.
Continuing with its growing focus on pre-mixed cocktails, the company announced last week the launch of two new Absolut Vodka RTS varieties, and a line of Malibu Rum cocktails after launching RTDs in partnership with Ocean Spray earlier this month. The global partnership with Coca-Cola to introduce Absolut Vodka & Sprite is slated to hit this year.