Advertising key for Pernod Ricard

09 September 2011

PARIS: Pernod Ricard, the spirits group, believes advertising is key to supporting its expansion in fast-growth markets and strengthening its position in areas such as Western Europe.

"We have increased advertising and promotional investment behind our key brands in the last two years, probably ahead of the others," Gilles Bogaert, the firm's managing director, finance, told Dow Jones Newswires.

"We believe it was the right moment to speed up, to consolidate our leadership in Asia, to accelerate in the Americas where our market share is a bit lower and to defend our profit pools in Western Europe."

Pernod Ricard's advertising and promotional spending hit €1.4bn in the 12 months to 30 June, an 11% annual improvement, with 76% of these resources going to its "Top 14 brands", like Martell, Jameson and The Glenlivet.

Such expenditure equated to 18.9% of sales, up from 17.9% year on year, and Bogaert suggested this total would "gradually in the future, stabilise".

Looking forward, he argued considerable space for growth remains, particularly given the comparative resilience of high-end brands despite the challenging financial climate.

"In the last 20 to 30 years, premium brands have on average grown far quicker than the market," Bogaert said.

Moreover, rising affluence in emerging markets, and favourable trends in more mature regions such as the US and Western Europe, present opportunities.

"In the US, there is room for growth. [America has] a large spirit business and favourable demography," said Bogaert. "In Europe, our objective is to be able to increase prices more or less in line with inflation."

Acquisitions may also form part of the company's strategy, albeit with an emphasis on smaller brands boasting substantial potential, rather than making major purchases.

"We could do some tactical, small acquisitions. When you detect [possible deals] very early, you can get the asset at a cheap price and grow it," said Bogaert.

"Long-term, if we accelerate growth, whether it is in the emerging markets or with nice complements in some key Western countries, I think that we will look at it."

Data sourced from Dow Jones Newswires; additional content by Warc staff