Pierre Pringuet: The drinks boss hot on Diageo's heels
Pernod Ricard is hoping to overtake its British archrival by emphasising upmarket brands and moderate drinking. Laura Chesters meets the chief
Wednesday 07 March 2012
The popular misconception about Pernod Ricard is that it only sells some of the world's best-known alcoholic drinks. Pierre Pringuet, its opera-loving chief executive would like to clarify. From Beefeater gin to Perrier-Jouët champagne, Pernod is offering far more than just some of the leading brands in the world's drinks cabinet.
"We promote conviviality," the Frenchman says, with a shrug of his shoulders. "It is our group signature even."
Pernod's brands aren't the guzzled-down shots in cheap bars. They are predominantly at the "luxury" end of the drinks spectrum. Pringuet wants the world to enjoy alcohol in the traditional French way. A glass for lunch perhaps. Or perhaps a cognac after supper, as Pringuet himself does at home in Paris in the evening.
Despite consumers cutting back, the company, which traces its roots to 1805 and the French aniseed "pastis" still loved in its Gallic home market, has not produced cheaper options and has maintained its focus on the luxury end of the market. Its Royal Salute brand sponsors elite polo matches while Martell cognac is enjoyed by wealthy Chinese businessmen.
The strategy seems to be working. Last month, Pringuet raised the group's full-year profit guidance after profits leaped 17 per cent in the first half. Now all he has to do is explain the chances of the company, whose brands also include Havana Club rum, Chivas Regal whisky and Jacob's Creek wine, one day moving up from being the second-largest drinks business in the world to overtake long-time British rival Diageo.
Mild mannered but incredibly sharp, Europhile Pringuet spends most of his time in Paris, where he was born and grew up, and lives close to his office in the 16th arrondisement. But travelling, which can occupy up to three months of the year, can take him anywhere from India to South America to China. Prior to the three years at the top he spent time developing the Asia business, having joined the firm in 1987. Working with the Ricard family, which owns 16 per cent of the business, he has seen it grow to more than 70 countries. Pringuet is used to a high level of bureaucracy. he worked for the French government in the agriculture ministry in the 1980s.
Pernod is set to grow and Africa is in its sights. emerging markets are where the growth is. Europe is slowing, although Pernod had positive growth there. in 2010 Asia became its top market. To keep ahead of Diageo it will continue to introduce new brands. But the US is trickier. Diageo is more established and despite Pernod's Jameson doing well, the performance of Absolut vodka and Havana Club rum needs more work.
However, Africa could be there for the taking. Diageo has stolen a march with its lager brands and Guinness, which are sold in sub-Saharan Africa, where beer is drunk more than spirits. And it has begun to sell its spirits via its beer channels. Pernod doesn't have a beer brand to compete. But it may buy a beer brand or local brand to enter the market. Pernod's strategy has been buying local, established brands to introduce its own overseas brands once it knows the market. In the Czech Republic it owns Becherovka, a spirit every family and every bar has a bottle of, while in India it sells cheaper whisky brands, waiting for import duty legislation to change so it can more widely sell its expensive whiskies.
Pringuet says: "We are very pragmatic. We know we need to develop a standard offering as in most African countries, apart from a tiny minority, the super premium brands would not be accessible."
Pernod built up its brand stable during a 20-year spree that included wolfing down part of Seagram, Allied Domecq and Absolut-owner Vin & Sprit. it focused on upmarket spirits. It is still reducing the debt that piled up when it bought V&S in 2008. It will not make any large-scale acquisitions for the next 12 months as Pringuet would like to keep the investment grade triple B- it achieved last summer.
But new contenders, particularly from the East could be planning their own collections of brands. If Pernod cannot be part of the consolidation for at least the next year will it not lose out?
Pringuet admits: "Chinese companies are buying brands from the car industry to the fashion industry. It will be clear that it will happen more often in future in other consumer industries."
The City is happy with Pernod's position. Analysts at Barclays Capital think its higher exposure to the faster-growing cognac and scotch categories and its emerging markets will "drive the shares to trade at a premium to peers".
Things could get trickier for alcohol companies if anti-drinking lobbying continues. But Pringuet says: "We are not in favour of binge drinking or the abuse of alcohol. We believe in moderate consumption."
Doesn't this jar with a business that has hired trendy artist Jamie Hewlett, of pop band Gorillaz fame, to design a new bottle for Absolut vodka as well as glossy adverts glamorising drinking?
Pringuet argues: "Underage drinking or abuse of alcohol cannot be stopped by prohibition. The historic example shows this is not the right way. Ridiculously high prices are not the way. The true solution is education. We need to tell young boys and girls of the dangers of alcohol. We tell them at the age of 10, before they start to think about it. We involve the teachers at school and the family. Do you need to get drunk to enjoy yourselves? No."
And even if people drink less, Pringuet is confident there will still be enough conviviality to make the world go round.
A Frenchman's view on Europe
"The European Union was created to have peace. That was the reason for it to come into existence. There have been so many bloody wars and we must not forget that. I was convinced that there was no solution outside maintaining the euro, even for Greece.
"There can be no doubt the solution is being implemented. In terms of the rescue package for Greece, for me there is no other option.
"The public debt crisis has been solved in my opinion. At Pernod we have no contingency plan for a collapse of the euro and I do not believe it will happen.
"I think the most likely outcome is a limited recession in most of the eurozone for next 12 months and then a slow, gradual recovery. I believe the euro will strengthen. I am a strong believer in the euro, as a man and a businessman."
CV: Pierre Pringuet
1981-86: civil servant
1987: joins Pernod Ricard as development director
2000: made co-managing director with Irishman Richard Burrows
2008: made chief executive
Hobbies: skiing, golf, opera
Lives: Paris with his wife and two children
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