"There's no question there are some negative numbers" in the bar and restaurant segment, Paul Duffy, chief executive of the French drinks titan's U.S. arm, said at a New York news briefing.
Sales at grocery stores and other retail outlets continue to grow at healthy rates, but there has been "some tick up in trading down" to less-expensive brands, Mr. Duffy said. In an interview, he added, "We wouldn't characterize [the shifts] as a crisis."
The alcohol industry tends to outperform other sectors in economic downturns, but Pernod is the latest company to highlight problems in the U.S. as consumers fret about weak housing and credit markets and other financial woes. Beer maker MillerCoors LLC and distiller Fortune Brands Inc. have reported negative impacts from the economy this year.
The Pernod executives didn't reveal specific numbers, but Mr. Duffy said certain brands are seeing sales drops in the bar and restaurant segment of as much as 8%.
Pierre Pringuet, managing director at Pernod, said the company's strong lineup of brands, such as fast-growing Jameson Irish Whiskey, would help it weather economic troubles in the U.S. and elsewhere. He said Pernod's acquisition in July of Absolut vodka "is exactly what we need to enhance the portfolio" to meet such challenges.
Messrs. Duffy and Pringuet said Pernod didn't plan major changes for Absolut, which it acquired through its $8.3 billion purchase of Swedish-state-owned Vin & Sprit AB. However, they said, marketing for Absolut would focus more heavily on the version of Absolut in the familiar original blue-accented bottle. Absolut in recent years has introduced a number of flavored vodkas.
Making the Absolut acquisition a success is critical for Pernod, which paid a hefty price for the brand. Absolut's U.S. market share has dipped recently amid stiff competition from brands such as Diageo PLC's Ketel One and Bacardi & Co.'s Grey Goose.
Last week, Pernod said it aims for profit growth from continuing operations of about 8% in its fiscal year that began July 1, barring "severe deterioration in the global business environment."
Mr. Pringuet also confirmed that Pernod would be out of the acquisition market for a while, even though he expects industry consolidation to continue. "We will make no more acquisitions before 2011 at least," when the company's debt ratio is expected to return to investment grade levels.
By: David Kesmodel
Wall Street Journal; September 26, 2008
