Companies

Supply chain of spirits was stabilised by Q2, delivering strong performance: Pernod Ricard India

K Giriprakash Bengaluru | Updated on January 21, 2021

Will cater to every consumption occasion with our expansive portfolio, driving premiumisation, says CFO Rajesh Mishra

One of the biggest liquor companies in the world, Pernod Ricard, has made major inroads into the Indian market with the multinational ahead with 45 per cent of the market share in value terms. In an interview with BusinessLine, Rajesh Mishra, the Chief Financial Officer, Pernod Ricard’s Indian operations, speaks about the company’s plans for the country post-Covid.

India has always been a difficult market for liquor companies due to myriad regulations. Has Pernod Ricard achieved the milestones it set out for itself since its entry into India?

The Indian liquor market has its own peculiarity with State-specific regulations. Not only for us but for anyone with pan-India business ambition, it is like managing the business in 29 countries. We have not only reset the quality benchmark of Indian product in the Alco-Bev industry with our offerings but also reset the way alco-bev business was done in India so far, with our business model and ways of doing business becoming a reference for Industry to follow.

Today,Pernod Ricard India has the most comprehensive brand portfolio of International and Indian brands for every convivial consumption occasion and for every consumer segment. About 25 years ago, it was too audacious to dream all these by a new entrant in the market.

Pernod Ricard has always been measured for its success in value terms than in volume terms in India. But without the necessary volumes to back its growth, will it become difficult for it to get to the leadership position in the Indian market?

We operate capture the lion’s share of volume of every segment which generates value and stay away from those that destroys value. Indian consumers are always ready to premiumise. In the past decade, premium segment brands have witnessed much higher growth vs mass-market brands and this trend will catch much stronger momentum in the current decade. We are best positioned to capitalise on this wave with the most exhaustive portfolio of premium brands across categories.

Is the company looking at acquisitions to expand its share in the market since valuations currently might be less than the pre-pandemic times?

Our intent has always been to cater to every consumption occasion with our expansive portfolio, driving premiumisation. Blended brandy category looks promising from a distance but it is value-generation potential to be evaluated. We see an interesting trend emerging with a resurgence of Gin and growing conversation around this versatile white spirit.

Also read: Pernod Ricard hopes to get the fizz back soon in India

We introduced a new brand in the ultra-prestige gin category early this year, which is showing very strong promise. To address our consumer needs in their different moment of consumptions, Pernod Ricard is continuously looking for opportunities and always been open for both, organic/inorganic route to expand its product portfolio.

What are the areas that the company is looking forward to strengthening its operations in India?

The Covid-19 crisis will remain a story with an unclear ending for quite some time. The health and safety of our employees, associates and ensuring the delivery of safe products will remain our top focus area. Reconfiguring and adapting quickly to cater to the needs created by this crisis and potential impact on the change in consumer behaviours is going to be a core focus area.

We would continue to focus on growing our portfolio, widening our leadership gap in our operating segments, organisational capability buildings around supply chain/Data & Analytics/Digitising internal and external journey, plant automation, consumer and business partner relationship architecture.

How badly were Pernod Ricard’s operations hit in India following the outbreak of the pandemic?

Like every other industry, we were also impacted severely in the initial few months of Covid-imposed lockdown. During April-May, 2020 there were no sales. However, in the later months, with partial unlocking, markets started to pick up as we embraced learning to live with this crisis while ensuring health and safety of all our employees, associates and will continue till mass scale cure is available.

Also read: Spirit-maker Pernod Ricard eyes ‘low double-digit growth’

We reconfigured and reset our business operations quickly (from consumer demand to product availability to business enabling operations) towards contactless commerce, with nerve centre management model to set right trigger points to act with speed, agility & adaptiveness. All this enabled us to come back to very close to pre-Covid level of business performance for July-December, 2020.

During an earnings’ call recently, Pernod Ricard’s top executives said while the company’s international brands, Jameson Irish Whiskey and Ballantine’s Scotch Whiskey were able to weather the impact of the pandemic, its local brand, Seagram’s Indian whiskey saw a decline in the previous quarter. Does this mean that there is lesser traction for local, domestic brands in the portfolio and does it qualify for a trend going forward for international liquor companies like Pernod Ricard?

While the domestic brands’ volume declined during first quarters post opening up of lockdown and in the second quarter (Oct-Dec) it delivered a very strong performance, taking delivery almost at the pre-Covid level. First-quarter soft performance of local brands was impacted by supply disruption, as manufacturing plants were not operational at full capacity.

In the second quarter, as supply chain normalised with manufacturing plant reaching to desired capacity level within health and safety norm framework, local brands delivered a very strong performance. The international brands’ volume remained buoyant, there were some signs of travel retail demand shifting to domestic channels owing to the Covid-19 led travel ban.

During 2019-20, Pernod Ricard posted revenues of around ₹21,000 crore selling 55 million cases per year. What has been the year-on-year growth for the company since its entry into India? When does it plan to achieve similar growth or exceed such growth?

In India per year about 25 million consumers enter the legal drinking age, equivalent to one Australia. Average per capita consumption in India is significantly lower than the rest of the world, underlining the opportunity that this country offers. Pernod Ricard India topline has been growing at double-digit consistently with very healthy bottom-line growth, very strong cash conversion and profitability ratio, with a sustained level of investment as per our consistent strategy.

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Published on January 21, 2021
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