Pernod hit by whisky sales drop in China
Distiller blames decline on leadership switch
CHIVAS Regal distiller Pernod Ricard saw whisky sales fall in China and weaken across Asia as a whole as it missed market sales expectations for the first quarter.
The company said China’s leadership transition hit entertainment of officials, and worries about the economy have alsoweighed on sales.
The news comes after the publication of weaker export figures for the industry and is likely to heighten concerns about the sustainability of the whisky boom in emerging markets.
But insiders point to the presence of a Scotch Whisky Association delegation currently in China and plans to open at least another half a dozen distilleries in Scotland as positive signs.
Rising demand among Asia’s growing moneyed classes has boosted whisky sales in recent years. But in the three months to the end of September sales of Chivas Regal blend were down 6% in volume and flat in value terms year-on-year. Meanwhile Ballantine’s was down 10% by value.
Among its top brands only single malt Glenlivet prospered with a 24% sales rise.
Commenting on Asia, Frenchbased Pernod told investors: “Scotch whiskies experienced a slowdown (particularly in Korea, China and Thailand).”
On China, it said: “Given a more difficult economic backdrop, the first quarter proved challenging for Scotchwhiskies, the decline of which was in line with themarket.”
Pernod declined to give a figure for the sales fall in China, but a spokeswoman saidwhisky sales had been hit by the once-adecade change in leadership.
Entertainment of Chinese officials tends to occur in the ontrade, which is more important forwhisky than for cognac. This is largely on hold until after next month’s Communist Party congress. Meanwhile concern
While there has been a levelling off in Scotch whisky exports, the industry is confident about the future
about an economic slowdown has particularly affected younger consumers, who are morelikely to drinkwhisky than their cognac-sipping elders.
Pernod, which also produces Absolut vodka and Mumm champagne, reported a 5% rise in underlying sales for its first quarter to the end of September, when analysts had expected upwards of 6%.
The world’s second-biggest spirits group behind Diageo predicted a rise in underlying profit of close to 6% in the year to June 30, 2013, compared to9% last year.
Pernod chief executive Pierre Pringuet said: “In a less favourable macro-economic environment we realised a good overall performance in the first quarter. We remain confident in our capacity to continue to grow.”
Investec analystMartinDeboo said: “We read the first quarter as a miss to consensus [forecast] that willcompoundmarket fears on a slowdown in Asia.”
Other luxury goods retailers have been hit by the Chinese slowdown. Luxury leather bag makerMulberryblamedChinese sales for a profitwarning earlier this week. This follows Burberry’swarning that Asian demand isweakening.
Whisky export figures for the first half of 2012 published earlier this monthwere downon 2011 although shipments to Chinawere up 1.6%.
A Scotch Whisky Association spokeswoman said: “Scotch Whisky exports have experienced record growth in recent years. While there has been a levelling off, the industry is confident about the future.”
One sign of this confidence is plans by Pernod and Diageo to build enormousnewmalt distilleries. There are also smaller distilleries being built in locations including Ardnamurchan, Barra and Fife.
Meanwhile, Andrew Macleod Smith, a Scot who oversees production at the fledgling London Distillery Company, is preparing to run off the first spirit from its stills in the comingweeks.