Pernod Ricard hit by China slowdown

Slowed growth in China has hit Pernod Ricard as the company reported a slight sales decline for the first quarter of 2013/14.

Net sales for Pernod Ricard totalled €2,013 million for the first three months of this financial year, an organic decline of -1%.

The company blamed high comparatives for the first quarter of last year as well as the slowdown in emerging markets and an “unfavourable mix” for the decline. The poor results led the firm to revise down its target for full-year growth after previously settings a goal of 6% .

Pierre Pringuet, Pernod Ricard’s chief executive officer, said: “Our first quarter was adversely affected by the slowdown of emerging markets and unfavourable technical effects. However, we remain confident in the diversity of our portfolio and the strength of our distribution network. We anticipate organic growth in full-year profit from recurring operations between +4% and +5%.”

Although Pernod’s “Top 14” posted a -5% decline, particularly due to a fall in sales for Martell and Ballantine’s in Asia, there was some positives with the group’s Premium Wines increasing 1%, driven by Brancott Estate and Campo Viejo.

The Chinese slowdown has largely come about as a result of the government scaling back government-sponsored banquets and gift giving, which had pushed up sales of high-end spirits in the country. The cutbacks came as the government responded to allegations of corruption and overt displays of wealth among state officials.

Pernod Ricard has previously said that it expects the Chinese market to start growing again in early 2014, although the Wall Street Journal reported that Remy Cointreau CEO Frederic Pflanz said last week that he didn’t know yet when the situation would change.