Pernod Ricard plans targeted adspend push

19 February 2010

PARIS: Pernod Ricard, the spirits group, is planning to heighten its marketing expenditure in key emerging markets, and to take a targeted approach elsewhere, as it seeks to drive growth in the financial crisis.

The company's net profits declined by 5.4% over the first half of its current fiscal year, to €648m ($881.4m; £565.2m), with the continuing economic malaise in the US and much of Western Europe affecting sales.

The owner of brands including Absolut vodka, Jameson Irish Whiskey and Jacob's Creek wines said sales had fallen by 3% overall, including a 2% drop in sprits and an 8% decline in wines.

Revenue fell by 10%, dropping to €3.79bn ($5.16bn, £3.3bn), from €4.21bn.

However, earnings were boosted by a strong company performance in Eastern Europe and France, and sales growth in China and India was also described by the firm as "dynamic".

Looking ahead, Pernod Ricard said it would shift some of its advertising and promotional spend to target markets such as Asia, and towards certain "priority" combinations of brands and markets, such as Absolut in the US.

Overall adspend dropped from €731m in the first half of the 2009 fiscal year to €642m, with adspend as a ratio of sales dropping 30bps from 17.3% to 17.0%.

More positively, the Paris-based organisation said this ratio will be increased over the full financial year.

Sales of Absolut fell 6% during 2009 in the US, compared to a 4% rise for Smirnoff, the vodka owned by Diageo, its major rival.

Pernod Ricard suggested company-wide sales would rise and that underlying profits would up by 1-3% over the first half of 2010, as a result of improving economic conditions.

"We've just done a very good January with strong growth in sales volumes and we are on course for a second half that will see growth in terms of sales and, as a result, in terms of profit," said Pierre Pringuet, its ceo.

Data sourced from Bloomberg/Reuters/Pernod Ricard; additional content by Warc staff