Pernod plays poker with two vodkas

Pernod Ricard is playing poker with the Swedish and Russian governments. At the same time as trying to acquire full ownership of Stolichnaya (rather than just the distribution rights, which it holds until 2010), it is also a prime contender in the auction of Sweden’s Vin & Sprit, the owner of Absolut vodka. Managing director Pierre Pringuet acknowledges he will not be allowed to own both brands but insists: “We must win one of them”.

Stolichnaya is one of Pernod Ricard’s 15 key brands; in the six months to the end of December its volumes rose by 7% and while the sales value was 11% higher. At the Pernod Ricard’s annual meeting in November, chairman and chief executive Patrick Ricard, said that full ownership of Stolichnaya was the prime goal following protracted negotiations.

And that may be the problem. Observers wonder whether Pernod Ricard is becoming frustrated by the drawn out talks and is now equally keen on Absolut. Moscow is gaining a reputation as an increasingly difficult place in which to do business and despite the heavy marketing investment in Stolichnaya since 2005, when it gained the brand as part of the Allied Domecq break-up, Pernod Ricard could walk away if it won Absolut. Pringuet is unable to comment because of confidentially agreements binding potential bidders for Absolut, but says he has the finance in place to do so. However, it is widely believed that the French group has made a highly competitive indicative offer in the first round of bidding for Vin & Sprit.

If Pernod’s bid for Absolut fails, however, Moscow will hold all the aces. Asked if pursuing Vin & Sprit is a tactic for putting pressure on the Russian government to conclude negotiations about Stolichnaya, Pringuet replied: “It is very difficult to put a squeeze on a sovereign state.”

Ron Emler, 30/01/08