Pernod Ricard commits to maintain ad spend despite ‘soft’ sales

The company will maintain advertising and promotional spend at a ratio of 16% of its net sales, as it seeks to ‘dynamically optimise’ this budget through effectiveness tools.

Pernod Ricard has committed to maintaining its ratio of advertising and promotional spend as a percentage of sales, even as it reports a “soft start” to its financial year.

The drinks manufacturer, which makes spirits brands including Jameson, Malibu and Absolut, saw its sales decline 8% year over year on a reported basis to €3.04bn (£2.64bn) for the quarter. It attributed this weaker sales performance in particular to the US and China, where it saw high comparisons from the previous year coupled with weaker consumer demand.

Speaking to investors and analysts, the company’s chief financial officer Hélène de Tissot admitted: “The environment remains challenging.”

However, she said Pernod Ricard remains “confident” about consumer trends and the strength of the spirits market. In line with this confidence, the company has stated its intention to maintain its current level of advertising and promotional spend throughout its 2024 fiscal year.

The business is currently spending around 16% of its net sales on advertising. If sales dip, the absolute amount of money invested in marketing will decline, due to this ratio approach; however, the company has also reiterated its commitment to “dynamically optimise” this budget through digital programmes.

Pernod Ricard looks to effectiveness drive to outperform bigger spending rivals

Speaking to Marketing Week last month, UK marketing director Leanne Bank said machine learning has taken the guesswork out of committing spend for the business. She cited machine learning tools, D-Star and Matrix, as helping to improve effectiveness of the company’s spend.

In the run-up to the festive season, Pernod Ricard is looking to step up its marketing spend versus prior years. Ad spend will be increased by up to a third versus the 2019 festive season.

The company’s focus on effectiveness has allowed it to increase ROI on this spend. Banks said this has freed up spend to put behind increasing the brand equity across its portfolio, rather than the flagship Jameson and Absolut brands.

Pernod Ricard reported UK sales for its first quarter (which ended in September) were “stable” with “strong” market share performances for its brands in the on-trade.

Brand collaborations

Earlier this week, it was announced Pernod Ricard’s vodka brand Absolut was partnering with Coca-Cola’s Sprite to launch a ready-to-drink product. The cans will launch in markets including the UK and Germany at the beginning of next year.

Speaking to investors today, De Tissot said bringing the two brands together was “very exciting”, given the strength each has.

The launch forms part of Pernod Ricard’s strategy of consumer centricity, she said, and fulfils a demand for products in this ready-to-drink format.

The collaboration with the Coca-Cola Company is not the first foray the business has made into brand partnerships. Earlier this year Absolut partnered with Heinz to launch a vodka tomato pasta sauce. The tie-up is shortlisted in the Brand Innovation category at the Marketing Week Awards.