On September 2, local time, global wine and spirits giant Pernod Ricard Group Pernod Ricard announced that the impact of the New Crown pneumonia outbreak, the group's fiscal year 2020 sales fell 9.5% to 8.448 billion euros, its Central America region fell 6%, Asian markets fell 14%, Europe fell 6%; global travel retail sales fell 27%, including China fell 16%.
Photo courtesy of: Le Wine Guest
The fourth quarter of fiscal 2020 was the hardest hit period for the Group, with sales down 36.2%, which Pernod Ricard attributed to the impact of the outbreak on travel retail and the global ready-to-drink channel (on trade, referring to on-site consumption, such as restaurants and bars).
On the same day, Alexandre Ricard, Chairman and CEO of Pernod Ricard, announced that the Pernod Ricard Group"s organic profit from day-to-day operations, which refers to revenues from the main business excluding those generated through acquisitions, fell by 13.7% at the end of June this year, instead of the 15% it had forecast in July, as the full impact of the outbreak became increasingly evident. Net profit fell by 77%.
Alexandre Ricard said: "During fiscal 2020, the Group proved to be resilient and demonstrated its flexibility and ability to maintain supply chain operations, control costs and manage cash.
The better-than-expected result spurred the company's shares to rise 2.5% in early trading on the Paris stock market, despite the group's proposed dividend cut and a 1 billion euro write-down of its assets, most of which are linked to the Absolut Vodka brand.
China is Pernod Ricard's second largest market after the US, accounting for 9% of Group sales. Since January, the closure of bars and restaurants in China has hit Chivas Regal and Martell Cognac hard. global sales of Martell and Chivas Regal fell by 59% and 17% respectively in the second half of fiscal 2020.
However, Mr. Ricard said that 90 percent of the stores in China have reopened, which effectively means the entire market is operational, as the other 10 percent will be permanently closed.
In the key U.S. market, the group's sales were down 6% this year, but Mr. Ricard noted that the closure of bars and restaurants triggered a strong shift to off-trade ((off-site consumption, such as superstores)) and online consumption. all key brands increased their market share in the U.S., Mr. Ricard said.
Sales in Europe were also down 6%, but Ricard singled out the U.K., where sales were up 2% last year, and the e-commerce business, which was 92% better. Sales in Asia and the rest of the world were down 14%, driven in particular by significant declines in China and travel retail.
Mr. Ricard also expressed concern about the ready-to-drink channel. It's tough some stores will never reopen, he said. But he noted that the epidemic and its effects have created new opportunities, such as cloud parties.
Mr. Ricard declined to forecast Pernod Ricard's results for next year due to continued uncertainty.Mr. Ricard stated that there will continue to be uncertainty and volatility in fiscal 2021, particularly related to health conditions and their impact on social gatherings, as well as challenging economic conditions. Travel retail is expected to remain depressed over the next 12 months, particularly with bookings in July and August down 80 to 90 percent from 2019.
However, the non-ready-to-drink channel will recover in the U.S. and Europe, and the ready-to-drink channel will continue to improve in China, India and globally.
Mr. Ricard stressed that the Pernod Ricard Group will maintain its business plan and seize every opportunity to benefit from the new trends. Sustainability and responsibility will be central themes, he said, as will the accelerated route to market for digitalization.
We will maintain a strategic approach to accelerate our digital transformation while maintaining the discipline to make clear, purposeful investment decisions. We will use our agility to quickly adapt to seize new opportunities.