French spirits heavyweight Pernod Ricard is forecasting a “gradual but prudent recovery” in the US and China from 2026.
Speaking to analysts yesterday (6 February), following the early release of its first-half results, CEO Alexandre Ricard explained the rationale behind the group’s 3-6% net sales growth target for its 2026/27 to 2028/29 financial years.
Ricard said: “Following three years of normalisation, what we did take into account to be pragmatic is a gradual but prudent recovery for the US and China… starting by the way, next year.”
In its first-half figures for its fiscal 2025, released earlier than expected on Thursday, the Martell Cognac distiller cut its annual net sales forecast.
Having previously projected a return to growth in full-year organic net sales, the business said it now expected a “low-single-digit” rate decline in its 2024/25 financial year, which runs to the end of June.
The Jameson Irish whiskey producer said the decision was made amid “ongoing challenging macroeconomic environment” and “intense geopolitical uncertainties” that it said are hitting the spirits sector.
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By GlobalDataIn the call with analysts yesterday, Ricard explained that it was seeing “a record low consumer confidence level”.
He added: “Per capital consumer savings rate is at its highest level, not only in China, but it’s a worldwide record level in terms of big economies at roughly 35%.
“The resources are there, the purchasing power is there, but the confidence is just not there. So, we do expect at some point in the future, when is another question, some type of rebound.”
Ricard told analysts the company was facing “headwinds” that were “cyclical”, noting that global consumer trends like “moderation”, were being “mainly driven by economics”.
He said that for US middle class consumers, “disposable income has been under pressure after a couple of years of huge inflation and therefore their discretionary spend has gone down.
“Then finally regarding specifically Gen Z, so Gen Z drink less, but they do drink better. So they definitely drink less beer and wine to be fair, and penetration we do see has gone down for these two segments at the same time and in parallel penetration for spirits amongst that segment of the population has gone up by three points over the last decade.
Ricard added: “But regarding the rest of the Gen Z population, basically what we see, and we have all the data to suggest it, they will drink less frequently…and when they do, they will trade up, if they have the right purchasing power to stronger upper value spirit brands, which is the segment in which we operate. So all in all we do believe, and we’re not the only ones, that the headwinds we’re facing are mainly cyclical.”
Pernod Ricard had been due to issue its half-year numbers next week. Its board met yesterday and approved the release of the “preliminary” data. The accounts will be approved next week, it said.
In the figures released yesterday, first-half net sales sat at €6.18bn ($6.41bn), down 6% on a reported basis and 4% lower on an organic basis.
In the first quarter of the year, Pernod Ricard had seen reported sales drop 8.5% and organic sales decrease 5.9%.
The company said the “sequential improvement” came amid “good performances in some mature and emerging markets”. They had partially offset “the declining but improving US and a continuing very weak China”.
In China, CFO Helene de Tissot told analysts the company had seen a “worsening situation” in the country linked to “technical suspension of the duty-free regime impacting travel retail [in] Asia. To be more specific, China duty free and Cognac in China duty free”.
Earlier in the call, Ricard explained the group had been facing suspension of duty free on Cognac in China as a result of the country’s anti-dumping measures, which took effect towards the end of 2024.
De Tissot said the future was “difficult to predict” in China but added: “If we were to still be in that situation of a suspension of the duty-free regime, that will probably would put us more in a kind of a soft trend for next year in travel retail.”
Discussing Pernod Ricard’s ongoing growth strategy for the market, Ricard said the company was looking to push other brands in its “premium” portfolio as Martell continued to suffer.
He said: “Martell is still 85% of our business in China but we see that the other 15% are growing. So, obviously we’d love for Martell to grow as well, but in the meantime, as Martell is suffering in China and we’ve adapted our strategy behind Martell in China, including from a marketing standpoint, we are investing behind the rest of the portfolio behind the likes of absolute behind the likes of Olmeca and behind the likes of Jameson and a few other brands.”
