Subscriber login Close [x]
remember me
You are not logged in.

The City: Pernod keeps on growing

Published:  18 January, 2007

We try harder.' The Avis slogan is one Pernod Ricard would like to adopt now that the takeover of Allied Domecq is complete, says Ron Emler. Chairman Patrick Ricard even believes it might be possible to catch Diageo in about 10 years' time in terms of volumes. Equally, Paul Walsh of Diageo is pleased he has a readily identifiable no.2 against which to measure his group's performance in global wines and spirits.

The 7.4bn Allied takeover was completed at the end of July (disrupting this year's holiday plans among Pernod Ricard staff) and is already said to be bedding down well, but the e20m of associated costs meant that Pernod Ricard's net profits for the first half of this year fell by 7.2%. But if you exclude currency effects (notably the dollar, which is beginning to move in favour of European exporters), operating profit was up 2.1%, with volumes and margins of the group's key brands improving notably. Net debt is below forecast levels, and with a queue forming to buy Allied's former fast-foods division, it could fall even faster than predicted. So the French group is moving in the right direction, especially since its shares are up by more than 30% since Christmas.

And although Pernod Ricard says that the main focus is extracting the synergies from the Allied Domecq takeover, it is ready to look at further deals to strengthen its portfolio. Only last week it paid e100m to SPI Group of Switzerland, which owns the Stolichnaya vodka brand, to secure the worldwide distribution rights (excluding Russia and parts of Eastern Europe) and for first refusal if the brand ever comes on the market. That cements it in the Pernod armoury.

As part of the break-up of Allied with Fortune Brands, Sauza Tequila is passing to the US group, so Pernod Ricard is still looking to fill that hole in its portfolio, especially in vital North and Central America. And there will be an audible cheer in Paris in the (unlikely) event that Diageo decides not

to exercise its option to buy Montana. New World wines are one of Pernod Ricard's targeted growth areas (note that it has set up a subsidiary in Chile).

Don't discount Champagne, either. Both Mumm and Perrier Jout came with the Allied deal, but Pernod Ricard is running the slide rule over Taittinger. If it did make such a move, the cost could be in the region of e500m, but it would make the French group an even more significant force in a high-margin market, despite the inevitable frowns it would cause about the group's debt. But there would be smiles in French government circles if a Gallic' future for Taittinger was secured.