Pernod Ricard, the world’s second largest spirit-maker, has seen an 11 per cent de-growth in India business for FY20 (year ending June 2020). The market, however, has witnessed “good resilience” and the company is expecting “sequential recoveries” in off-trade and on-trade channels in the “coming weeks and months”.

According to Alexandre Ricard, Chairman & Chief Executive Officer of Pernod Ricard, the fourth quarter (April-June period) was its “worst quarter ever” (globally) with “most of the on-trade accounts across the world being closed”; a lot of people were locked down and passenger traffic was “roughly down close to 100 per cent”.

Incidentally, the company, in its investor presentation, maintained that for the first nine months of FY20 (July-March) it reported a “low single-digit growth”. A six week nationwide lockdown (beginning March 24) disrupted Q4 with no sales in April.

“India, frankly, I would say it’s good resilience as a market, which (had) a very strict lockdown disrupting our fourth quarter. During the month of April, (there were) zero sales. Despite that, only, minus 11 per cent (de-growth) during the course of the fiscal,” he said, during an analyst conference call.

Consolidating leadership position

Pernod Ricard was able to consolidate its leadership position with a market share “above 45 per cent” and “still growing slightly”.

According to Helene de Tissot, the company’s Director Finance, Production and IT, nearly 85 per cent of outlets have reopened in India, with volumes at around 70 per cent. Production capacities are at similar levels, although India continues to be “still very much impacted by Covid” ; but “much better than Q4”.

“And as you know, obviously, India is still very much impacted by Covid so there were obviously some very strict sanitary measures in place that are impacting us….Obviously, it’s much better than what was Q4. As we mentioned, April was full down, both on-trade and off-trade, and it’s very much an off-trade market, as you know. End of June, volumes were probably circa 50 per cent; now it’s 70 per cent. So it’s an improvement there.”

Incidentally, India is amongst the largest markets for Pernod Ricard both in terms of volume and value sales, say sources. Unlike markets like China or the US, where international brands dominate sales, India performs strongly through its country-specific brands, like Seagram’s whiskies.

According to the company’s investor presentation, Seagram’s Indian whiskies were “severely impacted” and saw a “double-digit decline but positive price/mix”.

Company chairman Alexandre said strategic local brands were down 9 per cent (globally) in FY20, mainly driven by Seagram’s whiskies in India.

He pointed out that globally, economic conditions will remain challenging and the company foresees “a prolonged downturn in Travel Retail”. In July and August, passenger traffic and passenger reservations are down between 80 and 90 per cent.

Pernod Ricard was expecting resilience of the off-trade, whether it’s in North America, across Western, Central or Eastern Europe “ as well as sequential improvement in China, India”.

“In terms of markets beyond off-trade resilience in North America and Europe, we do expect, as I mentioned, to see sequential improvement both in China and in India…. On the on-trade, which is struggling today, we also hope to see light at the end of the tunnel for our customers, and some of them are already seeing light at the end of the tunnel in some markets. And so we expect the on-trade to progressively reopen and gradually recover during FY 21,” Alexandre said.

Market sources say, in India, off-trade channels, shops and stores account for 70-75 per cent of the sales while remaining sale is from on-trade channels.

Referring to consumer trends, Alexandre said the company’s target consumer base (25-35-year olds), reconnected “as soon as lockdown was over”. And beyond social gatherings (in, say, bars), “new opportunities” like virtual parties — though Zoom or Facebook or WhatsApp or Teams — have arisen. While this opportunity is pandemic-driven, it is very unlikely that the trend will go away “completely”.

“I do think the emergence of these virtual parties where people connect through platforms and share a drink, in some cases, is something that has emerged. Obviously, as this pandemic goes away, eventually one day, you’ll see this go, but not completely. I do think that this has created a new opportunity,” he said.

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