Pernod Ricard slimming down, expenses, brands

Slimming program

Pernod Ricard (PR) continues its slimming program of staff cuts, tightening expenses and offloading minor non-core brands. About 75 per cent of the company’s income comes from 37 premium brands, the top 14 being:

Two global icons: Absolut vodka and Chivas Regal Scotch whisky.

Seven strategic premium brands: Ricard pastis, Ballantine’s whisky, Jameson Irish whiskey, Havana Club rum, Beefeater gin, Malibu and Kahlúa liqueurs.

Five strategic prestige brands: Martell cognac, The Glenlivet, Royal Salute whisky, Mumm and Perrier-Jouët champagnes.

After this there are 18 key local brands and five major wine brands, including Jacob’s Creek.

Beyond these 37 there are numerous brands that contribute smaller amounts to the PR coffers. One issue that PR faces is deciding whether to promote one of these minor brands in the hope that it will join the 37. Or maybe a quirk in fashion will suddenly turn a local brand into an international must-drink brand.

The alternative is to sell off brands, enabling staff to be reduced, promotional budget dispensed with, and some debt paid off.

The latest PR move is to offload the Spanish Domecq portfolio of brandies and wines. This includes Mexican brandies Don Pedro, Presidente and Azteca de Oro as well as the winery related to the production of Mexican wines in Ensenada.

The buyer was Philippines-based Andrew Tan’s company Emperador Inc. Domecq brandies hold about 50 per cent of the Mexican market but also give Emperador an in to the 600 million South American population.

The acquisition of the Domecq portfolio adds to last year’s purchase of Fundador Pedro Domecq, Spain’s largest and oldest brandy producer, for about $400 million. Emperador is now the largest producer of brandy in the world. The company also owns the Scotch whisky maker, Whyte & Mackay Group Ltd.

Always room for more

The UK is an amazing market. It’s like a squeezebox, expanding for some suppliers while constricting for others. It appears there is always room for more. Australian wine exports are in decline. In the year to the end of September 2016, exports to the UK declined 3 per cent to $361 million and volume fell 4 per cent to 239 million litres.

Meanwhile, Romania is buoyant, with Philip Cox, CEO of Romanian’s largest wine producer, Cramele Recas, saying in an interview that the UK holds strong potential. Cox is predicting a 10 per cent increase in 2016 over 2015. Cox admits to Romania’s ability to provide value (read as cheap) wine but, as is the mantra nowadays, says there are many individual sites that can produce great wine.

The article quotes International Organisation of Vine and Wine (OIV) figures: Romanian wine production had increased by about 37 per cent to 4.8 million hectolitres. The number of registered wine companies is 217.

Apparently more than 30,000 hectares of new vineyards have been planted since 2007. Wineries have increased, with more than 100 new wineries founded in the past five years, a lot of them through the generosity of EU funding.

It is small, and many will say not an issue. But no matter the slice of cheese Australia still has in the UK, there is a multitude of wine-producing countries, including the UK, that are nibbling away at Australia’s share.

For many Australian producers the UK is old hat: been there, done that, and had their arse kicked in the process. Much the same can be said for America. Having said that, the number of exporters to the UK in the past 12 months increased from 319 to 342.

If the UK was good for anything, it was as a preschool for the Chinese market. The number of companies exporting to mainland China increased from 963 to 1275 in the past year, while the number of companies exporting to Hong Kong went up from 364 to 395.

Australia lies second to France for wine imports to mainland China, which from January to October imported about 1.8 billion litres of alcoholic beverages, worth about $4.7 billion. Wine imports were up 18 per cent in value, accounting for $2.55 billion, with Australia’s share about $475 million. French wine accounted for about 45 per cent of the market, with value just over $1 billion.

In the case of China, France has the biggest slice of cheese, but Australia is nibbling away, and others will attempt to get our share.

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