INTEGRATED ANNUAL REPORT FY22

What is driving the growth behind the RTD category?

Fredrik Syrén: RTDs are not new - pre-mixed drinks available in bottles and cans have been around since the 1990s, but this is a new wave of RTDs for a new kind of consumer. The RTD category growth is now driven by more premium offers for people who love high-quality drinks such as cocktails but want the convenience of enjoying them outside bars and restaurants. Additionally, RTDs offer consumers choice, in terms of a wide variety of innovative products, different seasonal flavours and an extensive spectrum of formats, from bag-in-box to large- and small-format bottles or single-serve cans. RTDs have had strong momentum in recent years and will remain the fastest-growing category for the next several years, with +11% CAGR until 2026 for long drinks and cocktails.

Francesco Ottaviano: The growth isn’t surprising, as RTDs align with current consumer desires for accessibility, ultra-convenience, instant gratification and the ability to extend conviviality to all environments. Other factors underpinning growth include the pandemic, which closed many restaurants and bars, as well as economic uncertainty, which has led consumers in certain regions to cut back on going out.

How is Pernod Ricard seizing this opportunity?

Fredrik Syrén: The RTD category is a proven pillar supporting the growth of our spirits brands. The category offers a unique opportunity for several of our brands to serve unmet consumer needs for convenient drinks, recruit new consumers through approachable product propositions - two-thirds of RTD drinkers are new to the brand franchise - and increase ubiquity in stores by multiplying consumer touchpoints. RTDs also offer our brands a way to show they can be enjoyed in multiple moments of consumption, and hence strengthen consumer loyalty.

Francesco Ottaviano: Our consumer research shows significant potential for the Group’s spirits portfolio in the RTD category. Our primary strategy is to leverage our spirits brands and support category premiumisation by focusing on quality drinks in convenient formats. We take a global approach to RTDs, including a global portfolio strategy across brands. We develop propositions that complement each other for the different moments of consumption. We are going to build scale in a focused way, giving priority to five key markets where the category is big, and from there we will expand further.

Creating long-term growth is key to the Group’s Transform & Accelerate strategy. Where do RTDs fit into this?

Fredrik Syrén: RTDs are a key tool for expanding beyond our core business and into new sectors that can deliver long-term sustainable growth for the Group. They allow us to recruit new consumers to our brands and to increase loyalty to the franchise. So RTDs are both incremental sales for the Group and a supporting pillar for the growth of our strategic international brands. Our target is for RTDs to contribute 10-15% to the Group’s total sales growth over the next five years.