Pernod Ricard, France’s biggest distiller of spirits, expects gains in China over the next two to three years as the company introduces less expensive spirits and the existing inventory levels out.
The Chinese government’s crackdown on luxury goods has led to large sales declines for Pernod, with Martell cognac, Absolut Vodka, and Chivas Regal among its brands, according to Bloomberg. In order to get the company on the right track in China, and return to profitability, Pernod will push its less expensive brands, such as Martell Distinction cognac and Ballantine’s whisky, and will also reduce structural costs, saving the company an estimated $205 million, which will be spent on additional advertising.
Incoming CEO Alexandre Ricard, in a talk with investors last week, said of the Chinese market, “There is a big structural shift that happened in China that started a couple of years ago. China is becoming a normal emerging market.”
As for how the shift will affect the brand, Chief Financial Officer Gilles Bogaert said that the company expects “high single-digit” growth in China in the near future with organic annual profit growth of one to three percent. He added, “The only uncertainty is the exact timing.”
image source: pernod ricard