Pernod Ricard ups marketing spend despite ‘volatile’ environment

The drinks giant experienced “strong” growth in sales and profit over the first six months of its fiscal year, amid rising marketing spend and the continued pursuit of its premium pricing strategy.

Pernod Ricard, the company behind brands including Beefeater gin, Absolut vodka and Jameson whiskey, will be increasing its marketing spend over the second half of its fiscal year to support new innovation launches and “sustain long-term growth”.

Marketing spend increased 16% over the first half, a “strong increase”, chairman and CEO Alexandre Ricard told Marketing Week on a call with press today (11 February). However, because the business’s brands experienced solid growth over the period, advertising and promotion (A&P) as a percentage of sales decreased from 16% to 14%.

Pernod Ricard therefore plans to increase its investment over the second half of the year, bringing A&P spend as a ratio of sales for the whole year back up to a little over 16%, in line with previous years.

Admitting this year will be a “volatile environment” for trade, with rapid cost inflation and ongoing supply chain disruptions, Ricard said the business still expects on-trade sales in outlets such as bars, hotels and restaurants to continue to rebound, alongside “clear off-trade resilience” in retail sales and the gradual recovery of travel retail.

“All this will drive strong, diversified sales momentum across all regions,” Ricard said.

“A ratio of roughly 16% of our sales [will be] invested behind our brands to sustain their long-term growth. We follow brand equity very closely using some quite advanced and sophisticated tools, and brand equity is growing across most of our portfolio.”

The premiumisation strategy that we’ve got is paying dividends.

David Haworth, Pernod Ricard

Innovation launches over the latter six months of the financial year include Jameson Orange whiskey, which launched last month. Marketing activity around the product will “ramp up” through to St Patrick’s Day and beyond, Ricard said.

The business will also be investing “quite heavily” behind tequila brand Avión, after adding Avión Reserva Cristalino to its portfolio earlier this month in response to demand for “prestige” tequila. Heavy investment will also take place on the Martel brand, especially in America.Pernod Ricard using flavoured gins to ‘recruit’ people into wider category

Meanwhile, UK CEO David Haworth said a key focus for the UK business over the next 12 months will be launching products to tap into the cocktail market.

“We’re not really tapping into the cocktail mix at the moment,” he said.

“So we’ve got quite a lot of ideas in terms of launch plans for the next 12 months, in terms of RTDs [ready-to-drink products] to make sure we increase significantly our footprint there, and we will also be coming to market with a couple of very interesting differentiated propositions.”

Pricing premiums

Pernod Ricard will also be continuing with its premiumisation strategy, which has driven the “best market share performance ever” for the UK business despite a “very competitive” first six months.

According to Haworth, pricing among competitors has been “more aggressive” than the business has seen “in a long time”. Nevertheless, Pernod Ricard claims to be the only top 10 supplier to have grown volume and price in 2021.

The average selling price for a 70cl spirits bottle for Pernod Ricard is now £17.75 versus the total market’s average price of £14.78, marking a “significant premium”.

Over the first half, Jameson grew its share of the off-trade retail market by 6%, while The Glenlivet grew 8% and Malfy gin grew 17%.

Meanwhile, in on-trade the business’s premium brands grew 37% in the UK, while the average price of a 25ml shot rose to £3.54 versus a market average of £3.16.Pernod Ricard doubles down on investment in ‘super premium’ brands

“The premiumisation strategy that we’ve got is paying dividends,” Haworth said.

Globally, Pernod Ricard reported an organic growth of 22% in its profits over the six months to 31 December, ahead of expectations and reaching a total of €2bn (£1.7bn).

Sales totalled €6bn (£5bn), with an organic rise of 17%. According to global CEO Ricard, the business qualifies this as “very strong”, with “robust” demand within most markets.

“The execution of our Transform & Accelerate strategy is delivering an excellent and broad-based performance in the first half, with brand share gains in most countries and with all our must-win markets showing very strong growth,” he said. Pernod Ricard appoints UK marketing director to lead digital transformation

“We remain focused on executing our strategy, progressing on our sustainability and responsibility journey, and accelerating our digital transformation. A successful mix of robust fundamentals, the dedication of our teams and our portfolio of brands, has yielded a very strong set of results and seen us through this crisis, emerging even stronger.”