Pernod Ricard, one of the world’s leading spirits and wine companies, has posted its Q1 FY25 sales results, revealing an organic decline of -5.9% and a reported decline of -8.5%.
Total sales amounted to EUR 2,783 million, impacted by an unfavourable foreign exchange loss of EUR 103 million, predominantly due to the devaluation of the Argentinian Peso, Turkish Lira, and Nigerian Naira. However, there was a minor offset by a positive perimeter impact of EUR 22 million.
Key Performance Overview
Challenging Market Conditions
The Q1 results were significantly affected by macroeconomic challenges. Consumer sentiment remains weak, especially in China, where sales declined sharply, and the U.S. market also underperformed, weighed down by both lower demand and inventory adjustments. This led to softer-than-expected quarterly sales, compounded by challenges in Asia’s Travel Retail market. Adverse weather conditions in Europe during the summer further dampened sales in that region.
Despite these headwinds, Pernod Ricard’s diversified geographic footprint and portfolio allowed for robust performances in key markets like Japan, Canada, Poland, Brazil, Turkey, and Nigeria, which helped mitigate declines in other regions.
Geographical Performance
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Americas (-5%)
- USA (-10%): The U.S. market experienced a normalization in the spirits sector. Sell-out values decreased by around 5%, while net sales reflected the effects of inventory adjustments. Despite this, Jameson’s performance remained competitive, and there are strong activation plans in place ahead of the festive season. Growth is expected to gradually improve over the fiscal year.
- Canada: The region posted strong growth, particularly from newly acquired RTD (Ready-To-Drink) brands.
- Brazil: A strong performance, bolstered by favourable year-on-year comparisons.
- Mexico: Decline due to weaker tourism affecting on-trade sales.
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Asia and Rest of the World (-8%)
- India (+2%): Despite technical sales phasing, India’s underlying growth remains solid and is expected to fully recover in Q2. Jameson, Royal Stag, and Blenders Pride all grew in double digits.
- China (-26%): Sales dropped significantly in China due to weak consumer demand, worsened by macroeconomic pressures during the summer and the Mid-Autumn Festival. Martell Cognac and Scotch whiskies were hit hard, though premium brands like Jameson and Beefeater posted growth. With the ongoing economic strain, Pernod Ricard expects a sharper full-year decline than last year.
- Japan: Continued to perform well, gaining market share.
- Korea: Faced declines amidst ongoing economic weakness.
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Europe (-3% ex-Russia, +1%)
- Europe’s performance was steady, especially in Poland, Germany, and France. Adverse summer weather affected Western European sales, but overall, the region performed robustly. Key brands like Ballantine’s, Mumm, and RTDs (Ready-to-Drink) maintained solid momentum.
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Global Travel Retail (+3%)
- Global Travel Retail, excluding Asia, grew with strong sales for Absolut, Jameson, and Ballantine’s. However, consumer sentiment among Chinese travelers remained weak, and the outlook for this segment remains cautious.
Brand-Specific Performance
- Strategic International Brands (-10%): This decline was mainly driven by Martell’s weak performance in China, Royal Salute in Korea, and The Glenlivet in the U.S.
- Strategic Local Brands (+1%): There was continued momentum from Seagram’s whiskies and Kahlúa.
- Specialty Brands (-9%): The decline here was attributed to the U.S. market, though there were positive results from Bumbu, Redbreast, and the Spot Range of Irish whiskies.
- RTDs: This category continued to flourish with double-digit growth, spearheaded by Absolut and Ace Beverage.
Outlook for FY25
Pernod Ricard remains confident in its long-term growth strategy despite the slow start to the year. The company is leveraging its broad portfolio and global footprint to drive recovery. While China’s decline and inventory adjustments in the U.S. continue to present challenges, markets like India, Brazil, and Japan provide a counterbalance.
For the full year, the company expects:
- Organic net sales to return to growth, buoyed by improving volumes.
- Stable organic operating margin, with a goal of reaching the upper end of its medium-term financial framework of +4% to +7% organic net sales growth and a +50 to +60bps increase in operating margin.
Strategic Initiatives Moving Forward
Pernod Ricard is poised to activate strong marketing investments, particularly in key brands such as Jameson, ahead of the festive season. With robust plans in place and a focus on market leadership in high-potential regions, the company aims to regain momentum over the coming quarters. The performance in India, Brazil, Japan, and Travel Retail are expected to play pivotal roles in offsetting the declines from China and the U.S.
As the year progresses, continued monitoring of macroeconomic conditions, especially in Asia, and efforts to manage foreign exchange volatility will be essential. Moreover, strategic measures, such as mitigating the impacts of China’s temporary duty deposits on imports, will also be critical in safeguarding Pernod Ricard's financial performance.