How would you describe Pernod Ricard’s FY24 performance?
Pernod Ricard delivered robust results in FY24. Organic net sales were broadly stable and grew c. +1% excluding Russia. We experienced sequential volume recovery throughout the second half of our fiscal year in most markets. We faced a challenging environment in the US and in China, two Must-Win markets. The normalisation in the US was exacerbated by inventory adjustments while cycling exceptional years of growth post Covid. China endured a challenging macro-economic environment, impacting consumer sentiment. These headwinds were largely offset by resilient to strong performances in many mature and emerging markets. An excellent gross margin expansion of 108 bps and organic operating margin expansion of 80 bps has been achieved through strong pricing including revenue growth management, operational efficiencies and disciplined structure cost. I am also encouraged to see a return to volume growth in most markets in the second half of the fiscal year, an important indicator of market normalisation.
Negative currency effects and higher financial costs lead to the Group Share of Net Profit from Recurring Operations declining by 14.5%.
Robust cash generation was achieved with Free Cash Flow of c.€1bn reflecting a decline in Profit from Recurring Operations, and an increase in planned investments in capex and maturing inventories.
What are the key ingredients to this resilience?
Our strengths are threefold: the industry’s leading premium spirits portfolio, the most balanced and broad-based geographic footprint and a winning culture. These competitive advantages drive our performance. Look at our results in India and Germany. India, has become our second largest market in Net Sales as a dynamic economy drives strong consumer demand and premiumisation. In Germany, a mature market, we have grown double-digit on average for the past 5 years, outperforming the market rate and consolidating our leading position. Germany, a pioneer market in our Digital Transformation programme shows the impact of that transformation on our marketing and commercial efficiency.
What about your investments?
We are committed to investing towards our long-term sustainable growth. We maintained our marketing investments to a level of c.16% of Net Sales, and continued to invest in securing long term production capacity with the building of two new distilleries in the US and in Ireland, and also installing energy reduction technologies to support our sustainability ambitions. We also continue to prudently lay down Strategic Inventories in our aging products, to ensure we are able to meet future consumer demand.
What is your view on the future of the global spirits market and the growing appetite for non-alcoholic beverages?
The Spirits industry enjoys favourable long-term trends that sustain future growth. Demographic trends such as the global growth of the legal drinking age population, socio-economic trends such as the increase of the middle and affluent classes across many emerging markets and societal trends such as the increase in economically independent women. Our agile organisation, our unique worldwide footprint, and enhanced growth model powered with tech and data, enable us to swiftly adapt to ever-changing consumer needs and to offer our clients the right product, the right innovation, at the right moment and at the right price. Satisfying the consumer demand for premium non-alcoholic beverages is an opportunity for us to “test and learn” with exciting innovations that include new-to world, brand extensions, and external partnerships. Indeed Pernod Ricard pioneered the non-alcohol spirits market with the launch of “Pacific” in 1982! The Non-Alcohol segment complements growth from our spirits portfolio.
What are the challenges and the perspectives for FY25?
The global environment remains uncertain and volatile. The strength of our business model, our agility and our engaged employees give us confidence as we face the future and aim to return to dynamic and profitable growth. We expect to return to organic net sales growth in FY25 with continued volume recovery, and to sustain our organic operating margin. We continue to focus on our profitable and sustainable long-term organic growth and our active portfolio management, including value creating mergers and acquisitions. We will continue to invest in the desirability of our brands and our future growth through A&P, Capex and strategic inventories. We will maintain our efforts on operational efficiencies, building on our culture of excellence. We will continue to focus on Revenue Growth Management, enhanced by our proprietary digital tools (Key Digital Programs), and will maintain our discipline on structure costs.
