Leading drinks company Pernod Ricard today reported €2,384 million in first-quarter net sales, down -14.3% year-on-year and -7.6% on an organic basis.
Within this, travel retail performance remained soft, with sales down -15% on the same period a year ago. The group noted the business will benefit from the resumption of Cognac sales in China duty free from Q2, following the resolution of China’s anti-dumping investigation in July.
Beyond China, travel retail in Asia remained weak in Q1, notably in South Korea, which was hit by weakness in the domestic market.
In Europe and America, “underlying performance has been strong over the summer while sales were impacted by phasing”, said a company statement. The Global Travel Retail division is still expected to return to growth in the full financial year.
Speaking to investors today, Pernod Ricard EVP Finance & IT Hélène de Tissot said it was too early to say whether demand for Martell Cognac in China travel retail will return to previous levels once sales resume.
“There is a close link between China domestic demand and travel retail demand and we know demand in domestic is soft. So we will be cautious; demand will probably be a bit lower [than previously].” She added that she expected Martell to resume with similar space and shelf allocation in travel retail in China compared to the period before the anti-dumping investigation.
Among other ‘must-win’ markets, net sales in the Americas fell by -12% (-16% in the USA), though Pernod Ricard said that sell-out performance in the USA continued to improve versus the market. Canada sales grew sharply though Brazil and Mexico posted declines.
Asia-Rest of the World posted a -7% fall in net sales, with India +3%, buoyed by sales growth on Royal Stag and on International Brands, led by Jameson.
In China, net sales contracted by -27% “in a still challenging macroeconomic environment”. The company noted: “We remain cautious on the demand environment, ahead of the important CNY period.”
Sales in Europe dipped -4% year-on-year, with Spain stabilising, Germany’s declining at a slower rate than last year and France and UK “in modest decline”.
Among Strategic International Brands sales fell -9%. This was mainly driven by Martell in China and Jameson and Absolut in the USA, which were hit by inventory adjustment, by Ballantine’s in South Korea travel retail and Royal Salute in Taiwan.
The Q1 performance was also affected by an unfavourable foreign exchange impact of €143 million mainly linked to US Dollar, Indian Rupee and Turkish Lira and by a negative impact of €54 million mainly linked to the disposal of the wine business. ✈
