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Pernod Ricard – “no reason to fear Cannabis”

In an interview with Le Figaro, Alexandre Ricard unveiled his new three-year strategic plan for France’s top luxury drink company.

And it has nothing to do with Cannabis.

“We have no investment project (in North America) today,” he told the newspaper. “We analyzed the conditions under which cannabis was legalized, as some believe that it can “disrupt” the market. Our responsibility is to verify that there is no cannibalization of sales of high-end wines and spirits. There is no reason to fear such a phenomenon for the moment.

LE FIGARO. – You took the lead when the growth slowed down. Has his recovery been more complicated than expected?

Alexandre Ricard. – Not at all, it’s even the opposite, even if life is not a long calm river. In July 2015, when we did not have any more growth, I made a commitment to recover it in the range of 4 to 5% in three to five years. We have exceeded this ambition both in value, since the turnover has increased by 6% over the last financial year, and in time, since we have reached it in three years. We have achieved all the goals of a consumer-centric roadmap: our approach to distribution is more efficient and our innovations represent a third of our growth. We have trained our managers to be more responsive and not afraid of failure. The fundamentals are there, we have built something to accelerate. My mission is simple:

What are your ambitions now for Pernod Ricard ?

The heart of our new three-year strategic plan is the continuation of our transformation to consolidate the acceleration of our growth. I can not hide my enthusiasm. We have two extraordinary levers to accelerate: on the one hand, our portfolio is by far the most comprehensive in the industry to cover all the moments of consumption (aperitif, cocktail chic, dinner, party …); on the other hand, we are the only player to have a unique exposure to the emerging middle class across China and India, where we are leaders with respectively 42 and 45% of market share. We are in the best position to capture most of the future growth of the sector. Added to this are intangible levers, such as the state of spirit of our 19,000 employees, aligned behind the strategy to achieve the “extra mile” and proud to belong to a family group. Moreover, the Ricard family continues to build steadily on capital demonstrating its confidence in the group’s ability to create value for all our shareholders.

Are Ricard and France so important to the group?

France is both the nerve center of the group and its roots. Ricard remains the leading brand of spirits in France. I feel a real pleasure to observe the visceral attachment between France and Ricard, even from those who do not drink. I feel pride and emotion to be at the head of a group that has such a link with France. We are one of the few French champions.

The specter of the trade war is scary. Are you worried that it will have an impact on exports of bourbon, scotch, cognac, champagne, tequila …?

The trade war aims to relocate production, it does not concern our sector. We are one of the few industries of appellations of origin. For whiskey, cognac or champagne, we can not relocate production. And we do not want it, because the consumer is attached to this anchorage in the terroirs. Our mission is to give consumers around the world the opportunity to choose from the widest possible range of terroirs. If tariffs were to increase, we would adapt, and consumers could unfortunately pay the price. We are prisoners of our greatest asset, and we work with our counterparts to avoid an increase in customs taxes. Governments do not want prices to go up.

The fashion of “craft” products, alternative to the big brands, threatens the supremacy of the giants of the food. How do you adapt?

Consumers continue to want big brands, even if it’s not all the time. They provide them with insurance, a guarantee and a security that small brands can not always offer. In the United States, for example, more than 90% of the growth in the spirits market is driven by ten brands, and nine of them belong to a large group. That said, small brands are an emerging phenomenon and supply is fragmenting. But we have adapted, with the purchase of Monkey 47 and Ungava gins, mezcal Del Maguey and bourbon Smooth Ambler, and with many innovations.

Becoming a world leader requires multi-billion euro acquisitions, which you now have the means to finance. What are your priorities ?

It is more exciting to make acquisitions one of the consequences of our strategy than an ambition in itself. Thanks to our unique positioning, we want every moment of consumption to be associated with one of the group’s brands. It’s easy to buy, not necessarily to create value. In recent years, we have proven our ability to achieve successful acquisitions in highly profitable niches. We will continue. Ultimately, we will be world leaders in our ability to create value.

Cognac is one of your top three priorities, along with vodka and whiskey. The sector is facing a shortage of raw materials, especially in terms of young eaux-de-vie. How do you plan to handle this handicap?

We do not have a disability. During the difficult years for cognac, Pernod Ricard continued to invest in strategic eaux-de-vie stocks. We are able to deliver volume growth of 7 to 9%, plus our ability to increase prices. Managing scarcity can be a driver of growth.

Alcohol is being warned more and more, and the Court of Auditors is calling for higher taxes. Is this a risk for the spirits sector?

You have to be from the point of view of the consumer. Alcohol consumption has decreased by 60% in volume since the 1960s. 71% of the price of the bottles consists of taxes. Do not exaggerate, it’s quite expensive. Responsible consumption is that of the majority, although I do not deny certain behaviors. There is no conviviality in excess: besides, a bar owner does not serve drunk customers because he does not want to lose his friendly customers. We are for a responsible and moderate consumption. The trend is to drink less and better, the right drink at the right time. Everyone must find their own balance. This is more complicated because there are as many balances as individuals. It does not happen through decrees but through education and accountability.

The cannabis market is legal in North America, some of your rivals are investing in it. Do you have such projects?

We have no investment project today. We analyze the conditions under which cannabis is legalized , as some believe that it can “disrupt” the market. Our responsibility is to verify that there is no cannibalization on high-end wines and spirits. There is no reason to fear such a phenomenon for the moment.

SPIRITS SPIRITS The small shareholders of Pernod Ricard will have enough to drink whey at the general meeting convened this Wednesday Salle Pleyel, in Paris. The French spirits giant, which achieved a turnover of 9 billion euros in the year ended June, reached a high on the stock market, where it is valued more than 37 billion. Alexandre Ricard, its CEO since February 2015, has put the group back on track for growth faster than expected. Better, the grandson of Paul Ricard, the founder of the group, now wants to spend the overdrive. In an interview with Le Figaro, he unveiled his three-year strategic plan, Transform and Accelerate. He is not afraid of the ongoing transformations of the spirits market.

We have two extraordinary levers to accelerate: our portfolio is the most comprehensive in the industry. And we are the only player to have a unique exposure to the emerging middle class across China and IndiaALEXANDRE RICARD, CEO OF PERNOD RICARD

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