Pernod Ricard – US Business Update & Structural Headwinds Review

1.

What key trends are you seeing in the US spirits market across consumer behaviours, category dynamics and channel trends? What are the more noticeable changes that we’ve seen from coronavirus?

2.

We’ve obviously got a double whammy of a tough macro backdrop and input cost inflation impacting the spirits category, though arguably impacting spirits less than some other consumer categories. What do you think this means for consumer behaviours, volumes and pricing?

3.

Have the price increases you’ve seen come through been driven more by category – because of category exposure to higher costs – or by company? Are some companies generally taking advantage of the inflationary environment more aggressively than others?

4.

You suggested that premiumisation may potentially flatten out rather than reverse. This is quite interesting, because if you look at the beer category, the economy segment or Busch Light within economy, we’re seeing growth and market share gains. Are you suggesting we won’t see this to the same extent in spirits? Could we see any dynamics across categories, including a trade-down from spirits to beer?

5.

You paint quite a rosy picture about premiumisation continuing in the longer term, and I would guess most people are quite positive on the outlook for the US spirits industry. Is there anything that might throw a spanner into the works in terms of this positive outlook? If not, what are the trends you see going forward in terms of category growth dynamics? Should we continue to expect spirits to gain share of alcohol in the US?

6.

Pernod Ricard’s corporate-level performance in the US has had a pretty strong start to the year, or I should say year-to-date with a June year-end. Nine-month sales are up around 10%, ahead of any phasing, which is a pretty decent performance. How much of this is reflective of underlying trading performance? Is this more about lapping coronavirus irregularities in Pernod’s favour, and how do you think this plays out over the next couple of quarters or so?

7.

Why may Diageo be outperforming Pernod in this more recent period?

8.

Is there anything specific to Pernod in terms of the cost pressures we discussed higher up in the Interview? Should we be wary of any categories in terms of cost pressures and the company’s ability to pass those pressures on? Is there anything around volume elasticity that we need to worry about?

9.

How does Pernod look at the US holistically from a top-down perspective? Does it approach its US growth strategy any differently from how competitors do theirs?

10.

There’s a relatively new CEO of the US with Ann Mukherjee. What could she do slightly differently for Pernod? What are her strengths?

11.

There are early encouraging signs with Absolut, as you alluded to. How sustainable are those signs, and is a turnaround really just about better marketing? What have been the historical problems with the brand if the outlook is now looking a little bit healthier?

12.

If marketing doesn’t work, does it come down to a game of having to discount to try and hold your volume market share with a brand such as Absolut?

13.

In addition to marketing, I suppose innovation can improve brand proposition or equity to a certain extent. Where are we now in the flavour cycle with Absolut? What are your views on Absolut Elyx, which you referenced? Is this a game changer at all? Does it create a halo for the brand? Why launch a premium brand under Absolut?

14.

How important is the Absolut brand now to Pernod, at least in the US? What are the scale benefits that it brings for distribution? Was it a game changer at the time of the acquisition, but Pernod is now much more diversified and has scale elsewhere? Does Pernod need Absolut?

15.

Clearly, Jameson has been a significant growth driver for Pernod in the US despite the diverse nature of the portfolio. What are your thoughts on how sustainable this growth may be? Where are opportunities to continue this growth trajectory?

16.

In states where Jameson has a lower penetration, is that a function of not being marketed or sold as aggressively compared to where the brand was initially entrenched? Is there genuine opportunity to take share from someone such as Crown in those areas, or is it a different demographic? Is that why penetration rates are lower?

17.

How much of a game changer could Jameson Orange be in its own right before we think about further flavour extensions? Can flavour extensions work with Jameson, or is there a risk to brand equity? It’s obviously worked with Jack Daniel’s and Crown Royal.

18.

What’s the opportunity for Redbreast within Irish whiskey? You alluded to Jameson being 70% of the category and consumers not necessarily knowing Irish whiskey. I think even Diageo CEO Ivan Menezes has said there’s no such thing as an Irish whiskey category, it’s a Jameson category. Is there an opportunity to premiumise through Redbreast?

19.

You spoke very favourably earlier on the quality of Diageo’s tequila portfolio, particularly in ultra premium. Where is Pernod positioned in the tequila category? What are its opportunities to ride the tequila wave and improve its market share trajectory?

20.

You talked about Pernod’s communication and marketing not being as good as what we’ve seen from Diageo and Bacardi in the tequila category, but it sounds to me that this is theoretically a fixable problem – you said the company has great brands. Alternatively, do you think the roots of the brands are too different for the marketing to fix that and turn it around?

21.

What are the strengths and weaknesses of Pernod’s scotch portfolio? What could the company be doing a little bit better in this category?

22.

I guess Pernod is slightly late to the game in the US whiskey category despite being the number two player in the market. Where are we now, and where do you think the opportunities lie for Pernod in US whiskey?

23.

Cognac is obviously very much dominated by Hennessy in the US. Where can Martell play in the category? Again, this is obviously a category that’s doing very well, but where could Martell have opportunity to take market share?

24.

What’s your opinion on the Cuban rum situation and how this could evolve over time? What could this mean for the opportunity for Havana Club? Is this something that people hope will benefit Pernod?

25.

You mentioned that spirit-based RTD [ready-to-drink] beverages probably require a bit more tax equality with malt-based beverages. You also said RTD could be beneficial for the Absolut brand. How well-placed is Pernod to capitalise on this trend elsewhere?

26.

You were talking about distributor contracts expiring after around five years. What does this mean? How could Pernod renegotiate terms if at all?