As the grandson of one of Pernod Ricard’s founders, Alexandre Ricard always knew there would be a role for him at the world’s second biggest drinks company. He was told as much when he turned up, fresh from being a student, for his first interview at the group in 1996 despite a somewhat disastrous performance.
“That interview with Pernod Ricard was bad,” says the 41-year-old Frenchman in a soft American accent, gained during his studies at the University of Pennsylvania.
“The HR director basically looked at me and said: 'Listen, given your name, obviously we’re going to find a position for you’.” Ricard could have been forgiven for taking the easy route and accepting the albeit lacklustre offer. But he had different ideas.
“I thought: 'Is that it? Is that the way you attract and recruit talent in Pernod Ricard?’” he says.
The young Ricard had also had interviews with several consulting firms and investment banks, which had given him a far more enthusiastic response. So, he temporarily broke with tradition and spent seven years in the “outside world” working for what was then called Andersen Consulting, followed by Morgan Stanley (Xetra: 885836 - news) , a career which included a spell working at Canary Wharf in London.
He recently bumped into that same HR director, who is now retired, at a memorial for Pernod Ricard’s charismatic former chairman and Alexandre’s late uncle, Patrick Ricard.
“I told him [the HR director] that very first interview in 1996 was probably the best thing that ever happened,” he says, during a short stop-off at a private members’ club in central London, before jetting off to Boston in time for dinner.
It was 2003 before he finally joined the family firm, created in 1975 through the merger of two aniseed-based spirits makers. One of them was Ricard, the company behind the eponymous yellow “Pastis de Marseille”, which was invented in 1932 by his grandfather, Paul Ricard.
“I tell you one thing, when I was back at Morgan Stanley at Canary Wharf, I was working day in, day out, 24/7. I thought that joining Pernod Ricard would be a little bit easier but no, it was the same thing,” he laughs.
Ricard started off in the company’s audit division and progressed to head up Irish Distillers, the maker of Jameson whiskey. Later, he oversaw distribution at the €23.1bn (£19.4bn) company, which is in France’s CAC-40 index.
With an MBA under his belt and a head for numbers, Ricard always seemed destined to lead the drinks giant, in which the family still holds a stake of 13.1pc and controls 18.9pc of the voting rights.
With the sudden death of his uncle last summer, the succession was accelerated. Ricard was named deputy chief executive and will take over from current boss, Pierre Pringuet who is not a member of the family in January 2015.
The company he will inherit from his colourful uncle, who always remained a loyal drinker of pastis even as its wider popularity diminished, is quite different from the one created in 1975.
Back then, 90pc of Pernod Ricard’s business was in France and 90pc of its activity still revolved around aniseed-based spirits. Now, just 8pc of its sales are in France and 94pc of its portfolio, which includes Absolut vodka, Chivas Regal and Beefeater gin, is made up of non-aniseed drinks.
In 2001, it joined up with its closest competitor to carve up the spirits and wine portfolio of Canada’s Seagram. Pernod footed $3.2bn (£2.04bn) of the overall $8.15bn bar bill and added brands such as Glenlivet scotch whiskey and Martell cognac to its drinks cabinet.
Five years later, it teamed up with Fortune Brands of America to swoop on Allied Domecq, the former British drinks company that owned Beefeater gin and Perrier Jouët Champagne, in a €10.7bn takeover.
Pernod’s last big deal was in 2008, when it bought Vin & Sprit, the producer of the world’s number one vodka brand, Absolut, for €5.7bn.
The shopping spree left Pernod with a major debt hangover. The deal pushed net debt to more than six times earnings before interest, taxes, depreciation and amortisation (ebitda) just as the global financial crisis hit. For a while, it meant Pernod had to remain firmly on the wagon as it sought to pay down debt. “Debt became an issue after September 2011,” Ricard says.
In the group’s last financial year to June 30, it succeeded in reducing net debt by €635m to €8.7bn a ratio of net debt to ebitda of 3.5. Ricard says the company, which owns 17 distilleries in Britain and employs 1,600 in the UK through its subsidiary Chivas Brothers, now has the “financial flexibility to proceed with bolt-on acquisitions”. In theory, that financial flexibility could stretch the purse for deals to as much as €1bn.
Ricard will inherit a company with a more robust balance sheet, but he will also take over at a time of change in the global drinks industry. Major acquisitions are fewer and those assets that are left are not straightforward as Diageo discovered last year when it failed to clinch Jose Cuervo tequila despite protracted talks with the owners, Mexico’s Beckmann family.
Beam (NYSE: BEAM - news) , the owner of Jim Beam bourbon, Maker’s Mark and Sauza tequila, is one of the few prize assets left, but would inevitably cause competition issues for any one of the drinks majors if they tried to go it alone. Both Pernod and Diageo have been linked with Beam in the past. As The Telegraph revealed in December, Diageo took a look at Beam with Japanese drinks maker Suntory last spring.
Ricard, who has retained his investment banker’s caution, will not comment on potential acquisition targets, but he has picked out the fast-growing US market as one region where the company is “under-exposed”.
After the acquisition of Absolut in 2008, he stresses that in his eyes, Pernod’s portfolio has “no obvious gaps”. But he does admit that for an outsider in the drinks industry looking in, bourbon is one potential hole. “If you look from an industry point of view and not a consumer point of view, you might say there’s no bourbon, no tequila,” he says.
Pernod’s net sales reached €8.6bn in the last financial year, while profit grew 6pc to €2.2bn. But the company still lags some distance behind Diageo, whose net sales reached £11.4bn during the same period while profit hit £2.6bn on the same measure.
Ricard says it is his ambition for Pernod to become “the leading company in the sector” but it is unlikely to go on another debt-laden acquisition binge to get there.
“History is full of examples of companies merging and creating worldwide leaders and destroying value at the same time. The underlying fundamental of any ambition we have is value creation,” he says, adding proudly that if you chart Pernod’s share price back to 2000, it has created €17bn of value for shareholders, including for the family.
Pernod will also continue to keep an eye out for bolt-on acquisitions in the emerging markets. Some 46pc of profits are generated from developing markets, but worries about China cast a shadow over the group’s full-year results last month.
Pernod’s growth in Asia has slowed since last year and China in particular decelerated in the second half. The results provoked further jitters in the markets over the Chinese economy after a string of other consumer groups, including Diageo, warned about the impact of the recent change in the Communist leadership and efforts to crack down on entertaining by government officials.
Ricard does not share the concern, responding with the verbal equivalent of the Gallic shrug.
“On China, we always were clear on the fact there would be a slowdown and the transitional period would last for a year that’s exactly what happened in 2003 [during the last leadership change].
“That year is not over yet, so we’ll see what happens thereafter. Our view based on the feedback we get on the ground is [the market will come back] in 2014. The underlying fundamentals are good. The ingredients of a continued and sustained growth are there.”
Ricard has also recently found himself being questioned on Africa.
The company has been operating in South Africa since 1993, but started a serious push into the wider continent only in the past two years.
It now has six offices on the continent, including in Nigeria, Kenya and Namibia, and some 200 sales staff, but it has come relatively late to the game compared with the likes of Diageo, which bought stakes in African breweries and is using those businesses to help distribute its spirits to a growing middle class. The battle for Africa is set to intensify, with Diageo scheduled to hold an investor day in Nairobi next month, where it will set out its ambitions for the continent.
Analysts have questioned how Pernod will fare in Africa without a beer business and established distribution networks.
Ricard says the company’s expertise has never been on the distribution side in any case. That job is best left to existing local distribution companies with the necessary know-how to navigate Africa’s sometimes challenging infrastructure, he argues.
While Africa offers an exciting new frontier, Pernod faces challenges on the home front. Sales in France fell 7pc last year after what Ricard describes as the “terrible” 15pc increase in duty introduced by the French government in January 2012.
“France needs to make sure as a country they don’t become irrelevant on a global level,” he says.
But even if his motherland’s contribution to the group’s bottom line continues to wane, the fact it is a French company remains fundamental to its success.
“The French touch of our brands across the world clearly has a positive impact,” he says, with a touch of characteristic Gallic charm.