Pernod Ricard to overhaul business as it looks to boost profits 5% and overtake Diageo

By Martin Green

Published: 03 June, 2015

Pernod Ricard believes it can increase underlying sales and operating profit growth to 5% in the medium-term by focusing on consumers rather than brands and categories.

Alexandre Ricard, who took over as chairman and chief executive in February, said the world's second largest supplier was completely overhauling its business model to put a "laser focus" on consumers.

He said: "We are moving from a brand-centric approach to a consumer-centric approach. This is the cornerstone of our priorities. We need to strengthen our consumer focus, leverage new technologies and spend more time with them to better understand their needs.

"Consumers are no longer loyal to one specific brand, but to a range of drinks for different occasions. The winning brands will stand out for a set of emotions consumers identify with and relate to."

Gilles Bogaert, managing director of finance and operations, said the group enjoyed 5% annual growth before the economic crisis and believes it can return the business to these historical levels.

He said: "We are today a strong number two but not the leader. On the road to leadership we need to focus on our top line performance, accelerate growth and seize growth opportunities.

"We want top line growth to be higher than the industry. Our historical growth has been 5% over the last 15 years, and our mid-term goal is to get back to that, to get up to 4% or 5%. We are growing at 2%. That's better than a year ago when we were flat. In 2015-16 we want to get closer to our mid-term objective, but it will take a while."Next year gross margin will still be under some pressure, although a bit less than 2014-15. Pricing will still be shy."

The Absolut and Jameson supplier wants to overtake Diageo to become the world's biggest spirits company, but Ricard refused to say when this might happen.

He said: "I will not give a timeline for when we will become global leaders. We want to drive the best top line growth in our sector. We need to drive growth quicker than our industry.That's our first priority. This is the mother of all battles, the growth from which everything flows."The father of all battles is mindset, reconnecting with our entrepreneurial mindset, taking calculated risks, turning global strategy into local actions. We must be the first to seize opportunities."

Pernod Ricard said the majority of acquisitions are likely to be "bolt-on" deals like the one that saw it snap up Californian winery Kenwood.

The key areas for driving growth are the US, China, India, Africa and the Middle East, according to Ricard.When asked about Europe, he added: "Europe is one-third of our business. Some markets are doing well, others have gone through struggling times, and eastern Europe has been a clear growth driver, that has stalled a little bit, specifically in Russia. We are in 1% growth this year. Germany is performing well, despite a tough first half.

"The UK both driven by market dynamics and the outperformance of our team, which is doing a really good job in the UK, is doing well. In Spain for the first time in a long time we have year-to-date growth. There are green shoots of recovery."

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