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    Pernod Ricard India growth rate falls to 5% during July-Dec 2019

    Synopsis

    The maker of Absolut vodka and Chivas Regal Scotch, French firm Pernod Ricard reported net sales growth of 5% for the six months ended December 2019, compared to 24% a year ago. The chairman cited weaker macroeconomic environment, leading to some temporary downtrading in India.

    ricard-reutersReuters
    Mumbai: French firm Pernod Ricard said weak macroeconomic conditions led to consumers shifting to lower priced alcoholic drinks in India, where the world’s second biggest spirits firm expects to expand in low double digits.

    The maker of Absolut vodka and Chivas Regal Scotch reported net sales growth of 5% for the six months ended December 2019, compared to 24% a year ago.

    “This year, the first half has been impacted somewhat by weather condition – quite tough weather condition with flooding, which obviously had an impact, direct impact on consumer consumption. And also a somewhat weaker macroeconomic environment, leading to some temporary downtrading in India. I think the GDP growth rate is as low as it’s been in a number of years,” Pernod Ricard chairman Alexandre Ricard said while announcing full-year earnings on Thursday.

    India, US, China and global travel retail are the four “must-win” markets for the Paris-headquartered company. In India, it gets a significant chunk from premium and semi-premium brands, mainly Royal Stag and Imperial Blue.

    Rival Diageo-owned United Spirits Limited (USL) has more than 100 brands, mostly in the mass segment, but has been increasing pushing premium products such as Johnnie Walker and Black & White. Since the British spirits firm acquired USL more than five years ago, the contribution of the premium segment to its overall sales has gone up to two-thirds from 45-50% in 2014.

    USL, in its earnings call last month, said the economic slowdown in India was impacting category growth, but it also saw a return of premiumisation, with each sub-segment in its portfolio growing faster than the one beneath it. Diageo’s overall net sales in India grew 2% but prestige and above segment, where it competes with the French rival, went up 5.1% during the quarter to December.

    Pernod Ricard is also facing pressure on its margin, linked to adverse product mix and significant headwinds in terms of cost of goods sold, especially grain neutral spirits. However, it has seen positive impacts of tax reform in India, it said.

    “India has decided to reduce its corporate income tax rate from close to 35% to 25%, which is a very positive move to support investment there and to align it to the OECD (Organisation for Economic Co-operation and Development) standards,” said Pernod Ricard’s finance head Helene de Tissot.


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