Pernod Ricard eyes more price hikes in second half, confident on China

By Dominique Vidalon

PARIS (Reuters) -Pernod Ricard on Thursday said it planned more price increases in the second half of the year in China and the United States to protect its profit margins against the high costs of freight, energy and glass.

The owner of Martell cognac, Mumm champagne and Absolut vodka also predicted robust annual sales growth and said it was confident about its prospects in the Chinese market as it re-opens from COVID lockdowns.

The world's second largest spirits group after Diageo reported forecast-beating first-half profit and sales, helped by price hikes of around 10%. Its shares rose 5%.

Chairman and CEO Alexandre Ricard told Reuters demand was "soft" during Chinese New Year festivities in January due to COVID restrictions but noted China has since dropped its zero-COVID policy with restaurants and bars reopening.

When asked about price increases for the second half, Ricard told analysts: "It is very important to protect our margins in a highly inflationary environment...I would not be surprised if we ended the year with a high single digit price impact."

NORMALISING ENVIRONMENT

Pernod Ricard said it expected its global sales to grow this year but in a "normalising environment".

During the COVID pandemic Pernod Ricard and its rivals benefited from people drinking more expensive types of alcohol at home.

There have been, however, growing signs the spirits industry growth was stabilising, notably in the United States, as positive effects from the pandemic fizzle out.

Pernod reported profit from current operations of 2.42 billion euros ($2.6 billion), an organic rise of 12% which topped analysts' expectations of 8.2%, for the six months ended Dec. 31.

Sales at Pernod - whose rivals include Remy Cointreau - also rose 12% to 7.12 billion euros, beating analysts' expectations of 9.7%.

The strong first-half reflected a 5% rise in the United States, Pernod's top market, with growth driven by strong price hikes across its portfolio.

In China, first-half sales grew 4%, reflecting a strong first quarter with solid demand for Martell cognac during the Mid-Autumn festival but a soft second quarter due to COVID-19 restrictions.

($1 = 0.9342 euros)

(Reporting by Dominique Vidalon; editing by Emelia Sithole-Matarise and Jason Neely)