Pernod Ricard’s UK sales dipped by 3% in value in fiscal 2024 after the double-digit duty hike on spirits, its managing director has said.
The industry faced the biggest alcohol tax hike in nearly 50 years on 1 August 2023, with spirits duty increasing by 10.1%.
Julia Massies, managing director of Pernod Ricard UK, said the duty hike had “surprised and dismayed” the company, calling it a “lose-lose” situation.
“It has led to consumer prices going up by over a pound, which has sent the market quite logically into decline,” she explained during a briefing for the group’s financial results in London. She also cited the loss of nearly £300 million (US$393m) in tax revenue over the past year.
The market has been down in the off-trade and grocery in particular, she added, citing the move towards bargain hunting and lower-priced products during the festive period last year.
“As a premium operator, it’s not our game to chase prices to the bottom, so we maintained our price points,” she said, adding that the group did “lose some share” and saw declining sales in grocery.
In the UK on-trade, the group increased its share to 15%, Massies highlighted. Its performance was led by Malibu liqueur, Jameson Irish whiskey and Absolut Vodka.
“Over the past few years, the focus has been very strongly on developing our spirits business – we’ve doubled our share in the past 10 years,” said Massies. The group sold the majority of its wine business to the owner of Accolade Wines in July this year.
Standout brands
In terms of brands, Pernod Ricard UK has focused its efforts on “reinvigorating” Kahlúa, Massies noted. The coffee liqueur brand grew by 32% in value in the UK on-trade, according to Nielsen and CGA data to 15 June 2024.
The company partnered with actor Salma Hayek on a new campaign, called Stir Up, with activations in the UK, Ireland and the US.
Altos Tequila has also increased its share by double digits in the UK off-trade. The company recently revealed its first UK advertising campaign for the brand to challenge ‘pre-conceived notions of the category’.
Meanwhile, Bumbu is “now the second-biggest super-premium rum by volume”, she added.
Investment behind Malfy gin
Pernod Ricard has made a number of investments in super-premium-and-above gin in the past, acquiring Italian brand Malfy in June 2019 and gaining a stake in Ki No Bi producer the Kyoto Distillery in March 2020, followed shortly by the purchase of German gin Monkey 47.
Global figures showed an 8% decline for the group’s international gin brand, Beefeater, during the year ending 30 June 2024.
The gin category in the UK has suffered declining sales, with IWSR reporting a 14% drop in volumes last year.
“Gin in the UK had a huge boom and it’s still adjusting,” says Massies, but it is “still a huge category” with approximately 12% share of the market.
“Flavoured gin is declining very strongly and even non-flavoured gin is still continuing to see double-digit declines,” she continued. “We think at some point it will all plateau out. If it does come back to growth, it will be modest.”
She added that the group views gin as “an incredibly relevant category for the consumer” but that it “probably overheated a bit”.
“When we look at our future priorities, we’re not going to be investing in all gins.” However, Malfy is the “gin we are investing in,” adding that the brand has seen an increase in high single digits. “You can find growth in certain parts of that category and, for us, it’s about a play with Malfy.”
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