Chivas Regal-maker Pernod Ricard yesterday predicted that sales will gradually improve this financial year, notably in its second-largest market, China
The world’s second-biggest spirits group behind Diageo said improving demand in China, particularly for its less expensive Martell Noblige cognac, helped it achieve a 2% rise in underlying first-quarter sales.
This beat forecasts, as well as Diageo’s 1.5% quarterly sales decline.
But the owner of single malt whisky Glenlivet, as well as Mumm champagne and Absolut vodka, cautioned that the environment remained difficult, notably for whisky in China and vodka in the US, and that higher investments behind its brands could hold back profit growth.
A return to sales growth in China, where underlying revenue still fell 9% in the first quarter, largely hinged on the strength of demand for premium tipples during the Chinese New Year celebrations that start on February 19.
“The Chinese New Year will be the judge,” said Deputy Chief Executive Alexandre Ricard.
Pernod makes 12% of sales in China, its largest market after the US.
Like its rivals, including smaller peer Remy Cointreau, it has been hurt by a government clampdown on luxury gifts in China, in addition to the slowdown in economic growth in the country.
Diageo and Remy have, however, forecast improving sales this year as they navigate past problems in China.
Pernod said revenue for the first quarter to September 30 was £1.3billion , a like-for-like rise of 2% and a rebound from a 2% decline in the fourth quarter of 2013/14.
In China alone, Pernod posted a sharp improvement in first quarter sales, which fell 9% year-on-year after a 38% sales slump in the fourth quarter.
Brazil achieved double-digit sales growth but US sales fell 3%, reflecting a soft market for Absolut vodka amid fierce price competition. In Europe, where Pernod makes 35% of revenue, sales were still down 1%.
In France, revenue grew 2% with market share gains for Ballantine’s and Absolut, but cool summer weather hit demand for the Ricard aniseed-based drink, whose sales fell 4%.
Sales declined in Germany due to disputes with retailers but in Russia sales rose 8% as Pernod increased shipments to the country, a move analysts have tied to the ability to face possible future government restrictions on imports.