Pernod Ricard Chairman and Chief Executive Officer Alexandre Ricard believes his company has a bright future in travel retail after a period of “quite radical” change over the past two years.
The executive was in London this morning (13 February) for a press briefing following last week’s announcement of the company’s financial results for the first half ended 31 December. With +19% growth, Asia travel retail played a lead role in a “very good” overall performance.
During today’s event at the Beefeater Distillery, Ricard reflected on the company’s decision to consolidate its three regional travel retail organisations – Asia Pacific, EMEA and Americas – into a single global entity.
“We underwent a quite radical change. Previously, it was quite regional and devolved. So we created a global unit to have a more co-ordinated and strategic approach, especially in terms of portfolio allocation.”
Ricard noted that travellers don’t think about business units when they travel. The desire to join up the company’s travel retail thinking led to the creation of what Pernod Ricard calls the “travel trail”. “This is created through various touchpoints and transactional points,” Ricard said. “Global travel retail is very strong for us and is our second largest market.”
The global travel retail team is headquartered in London and is headed by Mohit Lal, who spoke to The Moodie Davitt Report at length in November about the new structure and its goals and ambitions.
Ricard said he expected lower growth in the second half of the year compared to the first half. He noted that the +19% growth in Asia Travel Retail in the first half was favoured by a good comparison base. Equally, the slower growth in Americas Travel Retail was impacted by a very high base of comparison.
Assessing the outlook for Global Travel Retail, Ricard said the “underlying fundamentals” were strong. He was also excited about the prospects for promotional campaigns. “These are not price promotions, but instead it is about experiences,” he said. “There will be tastings and many other things our teams are doing across the whole world.”
He also noted the impact of reaching specific travellers through out of home advertising as a result of advances in digitalisation and the accessibility of real-time information. “We can focus on specific times and on specific brands depending on which type of traveller is in the departures or arrivals hall at any moment. Marketing campaigns are a lot more sophisticated than they used to be.”
At the press briefing, Ricard spoke about how the company was targeting Millennials. “The entire company has adapted to this new generation,” he said. “The biggest difference is in loyalty. Earlier generations were loyal to one brand. New consumers are loyal to a number of brands – perhaps four, five or six – depending on the environment, where they are, and who they are with.
“These are called ‘moments of consumption’ and there could be an aperitif moment, a high-energy party moment, or a ‘hanging out with the lads’ moment. So everything we do is about focusing on these moments. We are marketing by moments and not segments.”
Ricard acknowledged the trend of Millennials drinking less but demanding better quality, and being prepared to pay more for it. He said this played well with the company’s reputation and the premium positioning of its brands.
Another key factor is that most of Pernod Ricard’s brands have a “home” – and therefore a story to tell. “Millennials like premium drinks and they also appreciate authenticity and heritage,” he noted.
At the event, Pernod Ricard launched a new expression of its Beefeater gin, which particularly targets Millennials. The vibrant Beefeater Pink fuses natural strawberry flavour, citrus and classic juniper botanicals, and will roll out in 12 countries from March 2018 before launching in the rest of the world, including travel retail.
Although it is not the first pink gin to market (arch-rival Diageo has launched Gordon’s Premium Pink Distilled Gin), Pernod Ricard said it had wanted to get the expression right, while its strawberry flavour helped it stand out from the competition.
Sophie Gallois, Managing Director of Pernod Ricard’s The Gin Hub, commented: “We know that the gin industry is booming and there is a real appetite for new and innovative expressions that offer consumers a different drinking experience.
“In Spain, for example, the pink gin trend accounts for 40% of all value growth within the total gin category, so there is huge potential to tap into. I’m delighted that The Gin Hub is introducing Beefeater Pink. This statement drink showcases the incredible quality of Beefeater Gin, while the fresh addition of strawberry to our vibrant botanicals gives the drink its pink colour.”
Ensuring the right balance
Alexandre Ricard was reluctant to give away any sensitive information about future trends and strategy, but noted that that in a global business with a rich portfolio of drinks there would always be some areas of growth, and some areas of decline.
“My job is to look at our strategy and ensure that from this balance there is overall growth. What you can expect us to keep on doing is to have a dynamic management of our portfolio in terms of mergers & acquisitions.
“We are always looking for bolt-on additions, and we will continue to dispose of any brands that do not fit with our strategy.”