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Pernod Ricard’s FY17 India sales hit by regulatory changes

LiveMint logoLiveMint 31-08-2017 Deepti Govind

Bengaluru: French liquor giant Pernod Ricard SA reported a marginal 1% increase in its India sales for the financial year 2016-17 on Thursday and said growth was hurt by regulatory changes during the year.

In comparison, the company had reported a 12% increase in its India sales during the previous financial year and had even said that the country was its second largest market in sales terms globally.

The government’s demonetisation move in November impacted Pernod’s India growth in the second and third quarters of 2016-17– the company follows a July to June calendar.

The Supreme Court’s ban on all sale of liquor near highways also had a dampening effect on the fourth quarter and is expected to continue, although to a lesser extent, in the first half of 2017-18, the firm said in a presentation on its website.

Indeed, trade restrictions and taxation on spirits in various states–-including the highway ban and prohibition in states like Bihar—hindered growth of the spirits market in India in 2016, according to research firm Euromonitor International’s latest report.

Pernod, which owns brands like Chivas Regal whisky and Absolut vodka, said it has an over 45% market share in terms of value in India. It also said the implementation of the goods and service tax (GST) on 1 July is putting its margins under pressure. It expects that pressure to be offset by price increases in 2017-18.

Pernod’s strategic international brands, which include Jameson whisky and Malibu rum among others, grew 4% in 2016-17 versus a flat performance last year. But sales of its Chivas Regal brand of whisky declined both in 2016-17 and the previous year, although the extent has lessened.

Sales growth of its strategic local brands was also hit by policy changes in India since Indian whiskies, like Imperial Blue, are part of that business segment. Pernod’s strategic local brands segment grew 1% in 2016-17 compared with 5% in the previous year.

But overall, it expects an improvement in its India sales growth in 2017-18 versus the previous year, starting with the second quarter. It also expects sales of its Chivas Regal brand, in particular, to improve.

India’s spirits market grew at a compound annual growth rate (CAGR) of 3.4% between 2011 and 2016 in terms of sales volumes and is expected to grow at a CAGR of 4.2% between 2016 and 2021, Euromonitor said in its report.

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