The head of French distiller Pernod Ricard SA expects further price increases in the second half of its fiscal year as inflation pressures persist and demand for its spirits including Jameson Irish whiskey normalizes in the US and China after the pandemic.
(Bloomberg) — The head of French distiller Pernod Ricard SA expects further price increases in the second half of its fiscal year as inflation pressures persist and demand for its spirits including Jameson Irish whiskey normalizes in the US and China after the pandemic.
Pernod increased global prices by about 10% on average during the six months through December, Chief Executive Officer Alexandre Ricard said in an interview.
The CEO said he expects the maker of Absolut vodka and Chivas Regal to have raised prices by a “high single digit” percentage for the full year to counter inflation as sales in its most important markets return to normal following Covid-19 pandemic disruptions.
“We have maintained our margins,” Ricard said of the price hikes.
Pernod on Thursday said first half sales rose 12% on an organic basis to €7.1 billion ($7.6 billion) in half-year through December. Analysts expected €6.9 billion.
The shares rose as much as 4.5% in early Paris trading, the biggest intraday gain since November.
US, China
Distillers have been raising prices to counter higher input costs even as they risk consumers downtrading to less premium brands. Fellow French spirits maker Remy Cointreau SA said in January that cognac consumption in the US normalized in its most recent quarter, while shipments to China surged.
Pernod enjoyed higher than usual sales growth in the US during the pandemic as consumers drank more booze at home and weaker than normal sales in China during strict lockdowns.
“Things are normalizing for us and our industry,” Ricard said, adding that there had been no evidence of consumers downtrading to less premium spirits except for some expensive tequila brands in the US.
The Pernod results suggest continued US demand for premium spirits despite high inflation and weakening economic growth. At the same time, distillers expect the key Chinese market to pick up as the country re-opens following the end of Covid-Zero policies.
“The quality of this growth is very strong. It’s very balanced, broad based and diversified” Ricard said. Growth will continue in 2023, though in a “normalizing environment,” he added.
Profit Beat
Recurring operating income rose to €2.42 billion, ahead of analysts’ estimates.
The company confirmed it would buy back about €750 million worth of its stock in 2023 with an imminent €300 million repurchase.
Pernod said Scotch Whisky accounted for about 22% of sales in the first half, with organic sales growth of 23% and price increases in the “low double digits.”
The company said in December it would invest $250 million over five years to build a new bourbon distillery in Kentucky.
Pernod has also been bulking up in tequila and other agave-based spirits as demand for Mexican liquors soars in the US.
Americans spent more money on tequila and mezcal last year than on domestic whiskeys. Sales are expected to top $13.3 billion next year, overtaking vodka as America’s most-purchased spirit, according to IWSR, which tracks and analyzes drinks market data.
(Updates with CEO comments throughout)
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