French drinks group Pernod Ricard reported a 9.5% organic sales drop in its 2020 full-year financial results after the Covid-19 pandemic significantly impacted its travel retail and on-trade sales.
Despite ‘robust’ sales growth in the first half of its financial year, the second six months (ending 30 June 2020) were affected by Covid-19. Sales in the fourth quarter fell by 36.2% to €1.238 billion because of the problems the pandemic presented for travel retail and the on-trade.
Pernod Ricard’s profit from recurring operations fell 13.7% on an organic basis to €2.260bn – better than the company’s revised guidance in July of a 15% decline.
Sales in the Americas fell 6%, with double-digit declines in Latin America and travel retail that was offset by ‘good resilience’ in the US and ‘slight growth’ in Canada.
In Asia and the rest of the world, sales were down by 14%, largely led by China, India and travel retail.
Sales in Europe also decreased by 6% with ‘good resilience’ in Germany, the UK and Eastern Europe making up for declines in travel retail, Spain and France.
Alexandre Ricard, chairman and chief executive officer, said: “The group has proven very resilient through FY20 and demonstrated its agility and ability to keep its supply chains operational, control costs and manage cash. I would like to take this opportunity to praise the exceptional commitment of our teams during this difficult time.”
Despite the challenges, Pernod Ricard’s specialty brands delivered a strong performance in FY20, with sales up 7%. The group attributed this to more ‘favourable geographic exposure’ with ‘dynamic’ growth from Lillet, Altos Tequila and Redbreast Irish whiskey.
However, it was the only part of the portfolio to witness growth. Pernod Ricard’s strategic international brands declined by 10% despite ‘broad-based growth’ in H1, driven by Martell Cognac, Chivas Regal, Absolut and Ballantine’s.
The company’s strategic local brands fell by 9%. The portfolio experienced ‘modest’ growth in the first nine months, but a ‘strong’ decline in the final quarter largely due to Seagram’s Indian whiskies, led to the overall decline.
By brand, Martell plummeted 20% in FY20, while Jameson dipped by 1%. Scotch whisky sales overall were down by 11%, with The Glenlivet proving resilient after a strong H1 (up 15%), reporting an overall increase of 2%.
Absolut Vodka faced a ‘challenging year’ with overall sales down 11%, but the brand continued to grow in several markets. Other notable brands to decline included Beefeater (down 7%) and Havana Club (down 6%). Malibu bucked the trend with 5% growth attributed to high off-trade exposure in the US, the UK, Poland and Canada.
Ricard noted the Covid-19 challenges were likely to continue well into 2021.
He continued: “For FY21, Pernod Ricard expects continued uncertainty and volatility, in particular relating to sanitary conditions and their impact on social gatherings, as well as challenging economic conditions. We anticipate a prolonged downturn in travel retail but resilience of the off-trade in the USA and Europe and sequential improvement in China, India and the on-trade globally.
“We will stay the strategic course and accelerate our digital transformation while maintaining strict discipline, with clear, purpose-based investment decisions. We will harness our agility to adjust fast to capture new opportunities. Thanks to our solid fundamentals, our teams and our brands portfolio, I am confident that Pernod Ricard will emerge from this crisis stronger.”
Pernod Ricard invested in super-premium mezcal Ojo de Tigre in July this year, and told The Spirits Business it will “invest heavily” in its recently acquired super-premium-and-above gins going forward.
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Author: Melita Kiely