How do you describe Pernod Ricard’s FY23 performance?
We achieved a very strong and diversified performance, leveraging our premium portfolio to deliver broad-based growth across regions and categories, sustaining Gross Margins and expanding Operating Margin. We invested in sustainable growth and desirability of our brands, with record levels of investments in A&P, CAPEX and Strategic Inventory and with active portfolio management focused on Premium+ brands. We maintained momentum in our transformation, progressing toward our 2030 Sustainability and Responsibility targets and continuing the deployment of our Key Digital Programmes. This translated into long-term shareholder value with superior total shareholder returns in FY23 of +18%.
Why is broad-based growth important?
Over the years Pernod Ricard has built two unique advantages that drive our success. First, we have the widest and most comprehensive portfolio of premium, western style spirits and second, a global scale, with direct presence in over 70 markets worldwide and with a strong presence in both mature and emerging spirits markets. We are not overly dependent on any particular spirits category or market. So in FY23 we see growth across all regions, with strong pricing execution and resilient volumes, gaining share in most markets, while also enjoying growth across multiple spirits categories with c.85% of growth coming from six categories. Premiumisation continues as Premium+ brands are contributing to c.80% of our growth and our Prestige portfolio grew ahead of the total portfolio at +15%.
What other ingredients of your success can you highlight?
As well as the strengths I highlighted of our unique portfolio and market presence, our performance builds on our growth model, centred around our consumers. This fuels innovation and our marketing investments. The long-term success of our brands requires consistent investment to build brand equity, and our overall ratio of A&P to Net Sales remains constant at c.16%. Our growth model is further enhanced by tech and data. With the deployment of our Key Digital Programmes we are improving portfolio effectiveness, marketing effectiveness, price promotion effectiveness and sales team effectiveness. Collectively these programmes allow our teams in each market to actively manage more brands and to improve the return on investments. Successfully sustaining our gross margins is a key highlight of our performance this year with continuous improvement in operational efficiencies, building on our culture of excellence. And most importantly, our success is the result of the hard work and commitment of our 20,000 employees, who bring to life our culture of conviviality.
Why is Pernod Ricard accelerating its investments?
We aim to deliver long-term, sustainable value creation, and this requires dynamic, top-line growth and strong cash generation. We are investing in production capital and strategic inventories to support that future growth in the very exciting, aged spirits category. We explain that you can expect to see elevated investments for the next two years, as we sustainably invest into production capacity notably in Ireland, Scotland and the USA with €610m invested in FY23 and a guidance for c.€800m to €1bn in FY24 and while also investing in strategic inventories, at levels similar to the c.€500m invested in FY23. As well as building production capacity, these investments reflect our belief that Sustainability and Responsibility amplify performance and strengthen business resilience. Our new distillery builds are expected to be carbon neutral and we are also investing to retrofit existing distilleries with exciting new technologies to assist towards achieving ambitious carbon emission goals.
Alongside production capacity and ageing inventories we have also actively managed our portfolio of brands. FY23 was the most active year in a decade with over €1bn invested to complement our portfolio with attractive, fast-growing, Premium+ brands in North America. During FY23 we welcomed to our portfolio such exciting new brands as Código Tequilas and Skrewball flavoured whiskey, as well as having reinforced our partnerships with Sovereign Brands.
What are the challenges and the perspectives for FY24?
The global trading environment remains challenging as we begin the new fiscal year and we anticipate broad-based and diversified Net Sales growth for FY24. We will adapt to the easing of inflationary pressures, continue to focus on Revenue Growth Management and operational efficiencies. We will continue to invest in our brands’ desirability and future growth through A&P, CAPEX and strategic inventories.
Building on our very strong FY23 performance, we confidently reiterate our FY23 to FY25 mid-term financial framework of aiming for the upper end of +4% to +7% Net Sales growth and +50/+60 bps operating margin. Our confidence is fuelled by the strength of our model and, more importantly, by our winning culture and the commitment of our people.
We achieved a very strong and diversified performance, leveraging our premium portfolio to deliver broad-based growth across regions and categories.”