Synopsis

Pernod Ricard has reported a 19% rise in sales in India, providing some relief against drops in bigger markets like the US and China. Overall, the company witnessed a slight year-on-year decline of 0.9% for the first fiscal quarter, with US sales down 10% and Chinese sales plummeting by 25%.

India has emerged as a key source of resilience for French spirits maker Pernod Ricard SA, helping the company limit a quarterly sales decline as demand remained subdued in the US and China, Bloomberg reported on October 15.

The maker of Absolut vodka and Martell cognac reported a 0.9% year-on-year drop in organic net sales for the fiscal first quarter, according to a company statement. The decline was narrower than the 1.24% fall estimated by analysts. The company retained its medium-term outlook, signalling confidence that growth can recover despite continuing market challenges.

Pernod Ricard's sales in India rose 19%, offsetting some of the weakness in other major markets. The company is also preparing for a potential listing of its Indian business, although any initial public offering (IPO) would require board approval.

Citigroup analyst Simon Hales said a possible IPO of the Indian business, which could help reduce debt on the balance sheet, was a development investors were considering positively.

Spirits companies are facing a difficult demand environment as consumers moderate alcohol consumption and household budget pressures trigger a shift towards less expensive brands.

Also read | 'Whisky shortage, cheaper imports to weigh on Amrut's sales through 2030'

Pernod Ricard is also contending with geopolitical disruption, higher costs linked to US President Donald Trump's tariff policies and subdued demand in China.

The Chinese market has been particularly challenging for premium spirits after a government crackdown on official gift-giving cut into a source of demand. Pernod Ricard's sales in China fell 25% year-on-year in the fiscal first quarter.

The company remains cautiously hopeful about a recovery in the country. It is planning a Mid-Autumn Festival campaign to promote Martell cognac, with particular attention to travel retail, a channel affected by the conflict in the Middle East.

In the US, sales declined 10%, partly reflecting destocking as retailers, wholesalers and distributors reduced inventory levels. The company had previously warned that this process would weigh on its numbers on the start of its financial year.

However, some products saw stronger consumer interest. Malibu rum and Skrewball flavoured whiskey gained traction, particularly newer variants such as Malibu Pink and Skrewball Peanut Butter & Jelly.

Europe also continued to weaken, despite expectations among some analysts that the region would stabilise. Sales fell 6%, with Germany registering particularly sharp declines.

Pernod Ricard expects sales to remain broadly stable in the current financial year. Over the medium term, it continues to target organic net sales growth at the lower end of its 3% to 6% range.

Also read | Carlsberg India told to close Alwar unit over pollution breach ahead of $700 million IPO plans

The company has also explored consolidation as a way to navigate industry pressures. However, merger discussions with Brown-Forman Corp., the owner of Jack Daniel's, ended in April after the two sides failed to agree on mutually acceptable terms.

Read More News on

...moreless