Pernod Ricard warns on profit as sales slow in China

Pernod Ricard warned that growth in full-year operating profit would be lower than expected, as weak sales in China continued to weigh on the group’s overall performance. The world’s second-largest spirits maker by sales said that growth in operating profit on an organic basis would now be between 1 per cent and 3 per cent for the full business year, which ends in June. That is down from previous guidance of 3-5 per cent.

The group’s first-half sales were €4.6bn, matching sales during the same period a year earlier on an organic basis. The figure was just shy of consensus forecasts. But Pernod Ricard also said that sales in China during the period fell 18 per cent. Spirits and cognac manufacturers, including Rémy Cointreau have been hit hard by the crackdown. Luxury groups have also reported significantly weaker sales because of China’s policy shift.

To counter the current economic context, Pernod Ricard announced it is seeking acquisitions of wine brands in China, a new area of growth in one of the world’s largest alcoholic-drinks markets now that the nation’s thirst for cognac and scotch has run dry. ”Today, Chinese wine is tiny for us, but 20 years from now?” said CEO Pierre Pringuet. Alexandre Ricard, who will take over Pringuet’s position in 2015 said “The potential is there”.

Perrier-Jouët Champagne, Belle Époque