Pernod Ricard net sales grew +13% to $13.2 billion in FY 2023, but in its earnings report today the liquor company warned that sales would soon see a decline in China and the U.S.
Like other major spirit groups, the French company blamed high comparables in the same time period last year for the predicted decline in sales in the next three months through Q1 FY 2024. It expects a positive outlook for the full year.
The group experienced its most active year in terms of investment (over $1 billion) in over a decade, with a focus on premium-plus brands and attractive categories in North America, including its acquisition of brands Skrewball and Codigo 1530 Tequila, and a majority stake in Canadian RTD company ACE Beverage Group, as well as upping its stake in Sovereign Brands. The company expects those acquisitions to contribute to organic growth in H2 2024, and to help offset negative numbers in the earlier start of the year.
“Our focus right now is obviously to integrate those brands in the U.S. and in Canada as efficiently and as dynamically as we can,” said finance chief Helene de Tissot.
As for further investments, the company plans capital expenditures in its “strategic” inventories “to support growth of the very dynamic aged spirits category.”
The Americas saw 2% growth, with “stable net sales” in the U.S. at 2%.
In recent years, the company has focused on “fast-growing, high-potential” craft brands like Del Maguey Mezcal, and since last year has put even more focus on American whiskey through its American Whiskey Collective, a business unit dedicated to the company’s American whiskey portfolio that will pursue growth by investing in the “new fashioned” brands’ innovation.
Its push behind premium products is evident, as premium-plus brands continued to drive 80% of growth. Six categories drove 85% of growth including Scotch Whisky (+34%), Irish Whiskey (+13%), cognac and brandies (+17%), vodka (+8%), gin (+4%), and Indian Whisky (+10%). The group highlighted the impending launch of its first co-branded RTD with Ocean Spray set to debut next month.
Sales growth reflected a 1% rise in volumes and 8% increase in prices. With inflationary pressure easing up, price increases designed to protect the group’s margins will be implemented “in a more moderate manner,” said Tissot.
Despite the positive results, Pernod Ricard’s shares fell by about 4% when they were announced, as investors were concerned about China and U.S. declines. The company expects 4% to 7% net sales growth through FY 2025.