Pernod Ricard, the world’s second-largest Western spirits producer, is initiating a sweeping internal restructuring to navigate a challenging market landscape.
According to internal slides reviewed by Reuters, the French company is reorganizing its portfolio into two primary divisions—Gold and Crystal—as part of an internal initiative dubbed "Tomorrow 2". The move comes as the spirits industry faces pressure from inflation, shifting consumer habits, and punitive international trade tariffs.
Adapting to Economic Pressures
Consumers in key markets such as the United States and China have curtailed discretionary spending in response to economic uncertainty. For Pernod Ricard, the impact has been especially severe in China, where high anti-dumping tariffs have sharply dented sales of its Martell cognac. In response, the company has already announced layoffs in China and aims to cut EUR 1 billion in costs by fiscal year 2029.
"Tomorrow 2 is designed to further advance the simplification of our organisation," said CEO Alexandre Ricard in a memo to staff. As part of this overhaul, Pernod Ricard plans to consolidate administrative functions across brands rather than managing each label independently. Though the company has acknowledged that the transition will lead to job "departures," it has not specified how many employees will be affected.
Gold and Crystal Divisions
According to internal documents, the restructured business will now operate through two divisions:
- Gold: This division will encompass premium brands such as Martell cognac, Jameson Irish whiskey, and various champagne labels.
- Crystal: This unit will include Absolut vodka, Havana Club rum, and French aperitifs.
The changes are set to be rolled out during the final quarter of 2025. The company emphasized that these transitions will involve formal consultations with employees and labor representatives in applicable markets.
Industry-Wide Contraction
Pernod Ricard’s restructuring is part of a broader contraction within the global spirits industry. Rivals such as LVMH, Remy Cointreau, Diageo, and Brown-Forman have also reduced workforces, scrapped growth targets, and initiated cost-cutting programs in response to waning post-pandemic demand.
Diageo, the largest spirits maker globally, plans to slash USD 500 million in expenses and divest assets by 2028. Meanwhile, Remy Cointreau has similarly scaled back its revenue forecasts, underscoring the difficulties faced by premium alcohol brands as consumer preferences evolve and price sensitivity increases.
Investor Reactions and Market Outlook
Pernod Ricard reported a 3% decline in third-quarter sales in April. Since the start of 2023, its stock has plunged nearly 50%, reflecting investor skepticism amid persistent sales declines and geopolitical trade tensions.
While the restructuring is intended to make Pernod Ricard more agile and efficient, the ultimate success of "Tomorrow 2" will depend on whether the company can stabilize its core markets and adapt to new consumer dynamics.
Source: Reuters