Bonjour, new guests from small-town India
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Pernod Ricard, the world’s second largest wine and spirit-maker, has seen a rebound in India operations for the second quarter (period ending December 2020). India operations have seen a 2 per cent growth, while businesses (turnover) remain down by 6 per cent for the first six months of the fiscal, the company management said in its recent earnings call. The company follows a July to June fiscal.
Calling India “the third largest domestic market”, the company management has stated that the “sanitary situation is improving very progressively throughout the course of the first half” with “easing of restrictions on public gatherings in Q2”.
India business saw a 13 per cent decline in Q1 FY21 (quarter ending September). The off-trade is “now broadly open” in most regions, and the company’s production capacity has “overall normalised” during the first half.
“For the full fiscal year 2021, we expect sales to return to growth organically. Thanks in particular to the dynamism of the U.S. China and India,” Alexandre Ricard, Chairman and Chief Executive Officer, Pernod Ricard, said during the recent earnings call.
According to the company management, investment in these three geographies (India, China and the US) that have returned to growth are likely to “keep accelerating in the second half” depending on the underlying demand.
Brand Performance
In terms of brand performance, “Seagram’s” Indian whiskies “are in decline”, but with teams in India are putting a strong emphasis on Royal Stag and Blenders Pride in particular.
Also read: Supply chain of spirits was stabilised by Q2, delivering strong performance: Pernod Ricard India
Strategic international brands have returned to growth, principally led by “Ballantine’s” (whiskey) – which has seen double digit growth here – along with Jameson, and the Glenlivet. The other brand, 100 Pipers is also performing well.
Absolut vodka sales are down 12 per cent (globally) “impacted by its very strong exposure to both travel retail and on-trade channels across the world”. “In Asia, overall stable with good growth in China and Korea, as I mentioned earlier on and as well in India, which offsets decline in Thailand, clearly due to lower tourism,” Ricard added.
Tax Increase
According to Helene de Tissot, Director Finance, Production and IT, there has been “some significant increase in taxes” across states. The taxes, called corona tax by the management, currently impact consumer prices by 10-15 per cent. Difference in tax rates also impact volumes across select states.
“There was some significant increase in taxes. By the way, probably as soon as May at the end of the six weeks full lockdown that was put in place in India. We call them corona taxes. And they are probably a bit lower than last time we talked. We are right now more talking about the range of 10 to 15 per cent impact on our consumer prices, because of those taxes that are supposed to be temporary,” she said adding that: “The situation is obviously very different from one state to the other. So this is impacting our volumes in those states.”