Chapter 3. Our strategy : Winning in our four battlegrounds

01. Safeguarding the bottom line in a time of crisis

How do you react and adapt strategies when a global pandemic impacts all aspects of your business? With a close eye on resource allocation, cash and liquidity, Pernod Ricard implemented a comprehensive action plan to safeguard financial stability and focus spending on areas that will both protect short term business performance and prepare the future growth of the Group.


EVP Finance,  IT & Operations

What key actions did Pernod Ricard take to limit the impact of the Covid‑19 pandemic ?

After taking our first measures in China and Global Travel Retail in January, we went into crisis management mode from March 2020. We established fortnightly Risks and Opportunities forecasts to give us an updated view of our expected performance in the new Covid‑19 environment and set a global direction while leaving decision‑making to local teams on how best to keep, cut or reallocate resources. This enabled us to be more agile, moving fast to protect our business while retaining the agility to prioritise our investments should opportunities emerge.
Keeping costs down and maximising cash was a key priority. We put in place a strict operational framework to optimise resources. This purpose‑based budgeting focused on controlling spend, such as limiting our investments to targeted Advertising and Promotion (A&P) that would most effectively engage with consumers in confinement, and on mitigating our costs by setting strict operating guidelines and very strong discipline notably through recruitment freeze and travel ban. Operational excellence has also been more important than ever. Over the past four years, a number of initiatives rolled out throughout the Group to improve collaborative sales and operational planning have allowed us to maintain stocks and keep supply chains running throughout the crisis. And in the US and European markets, such as the UK and Germany, where the Off‑trade grew quite strongly post‑Covid, we were able to seamlessly adapt to meet rising off‑trade consumer demand.

What can you say about the Group’s liquidity position ?

The business is showing its resilience. We have robust fundamentals, a healthy free cash flow generation and a strong liquidity position with over €5.3bn available of which €3.4bn was undrawn bank credit lines on 30 June 2020. Our credit ratings were upgraded in October 2019, confirming a very solid investment grade rating for Pernod Ricard and consolidating an already very good access to the capital markets. With the crisis,  we have anticipated our bond debt refinancing due over FY20  and FY21 by an active management of our debt portfolio and securing attractive funding rates on the new money we have raised. In March 2020, we repaid an €850m bond and in June 2020 US$500 of bond debt due in April 2021. In total, we issued in FY20 €3.5bn of new bond debt. The average coupon of the new bond debt raised in FY20 was 1.02%, well below our average cost of debt. Furthermore, the new issuances have enabled us to increase the average duration of our bond debt from 5.5 years to 6.2 years. Securing a solid and diverse liquidity position is very valuable in such a challenging and uncertain market environment.

How has the Group continued to deliver on its ‘Transform & Accelerate’ strategy ?

In the current context, we are very keen to pursue opportunities to go further and faster in areas like dynamic portfolio management, route‑to‑market and digitalisation.
We pursued the acquisition of selected high-growth assets in attractive categories such as premium and super-premium American whiskey – Jefferson’s (Castle Brands) and TX – and entered into a partnership with Rabbit Hole. We closed a number of acquisitions in the gin category with Monkey 47, Malfy and Inverroche and entered into a partnership with KI NO BI. We formed new partnerships with Italicus and Casa Lumbre, a Mexican incubation structure for Ojo de Tigre. All of these bolt‑on transactions will enable the Group to boost its growth while the sale of brands such Café de Paris are expected to help enhance our portfolio profile. We’re also building the future by investing in projects in key geographies such as China and, with a view to enhancing our route‑to‑market, we integrated Bodeboca, an e‑commerce wine and spirits platform, leader in the Spanish market.
We are also fast‑tracking our digital transformation, developing online platforms that link people to new conviviality experiences and using data‑driven tools to improve the effectiveness of our brand marketing and activations.