Campari and Pernod Ricard, difficulties in the American and Chinese markets

s the health trend leading to lower alcohol consumption and thus to declining economic figures for the major groups in the sector? Looking at the results of Campari and Pernod Ricard it would seem so, but at a closer look the reasons for this trend appear different. In the first nine months of 2024, Campari reported slightly higher revenues (+3.4% to €2,277m, +2.1% on an organic basis) and a modest decline in profit margins (Ebitda down 2.1% to €559.8m, EBIT down 4.7% to €468.5m, and pre-tax profit down 6.1% to €417.2m). Pernod Ricard, after also ending the year to 30/6/2024 with revenues slightly down (-4.4% to €11,598m, -1% on an organic basis), Ebit down 6.9% to €3,116m and net profit down 33.7% to €1,514m, saw revenues drop 8.5% to €2,783m (-5.9% on an organic basis) in the first quarter of FY2024/2025 (July - September 2024).

It is clear that for both groups the third quarter of the calendar year (usually favourable due to seasonality, but the summer of 2024 was marked by adverse weather, especially in Europe) was not positive, and this was due to two factors: a weak US market (the US Iwsr Navigator platform, which monitors local alcohol consumption, saw an overall drop in volumes of 2.8% in the first 7 months of 2024, with the only exception of the ready-to-drink segment, but only in some states) and a Chinese market strongly impacted by macroeconomic weakness. It is worth mentioning here that for Campari, the US is the main market (28.4% of group sales in the first 9 months of 2024) and that Pernod Ricard generated 42.4% of sales in Asia and the non-European and US markets in the quarter July - September 2024. No turnaround is expected in these markets for now.

What to do? Campari has decided to launch a brand reorganisation strategy (with the aim of disposing of non-priority and lower-margin brands) and a cost containment programme; it expects (in the medium term) mid-to-high single digit organic revenue growth. A similar situation for Pernod Ricard, which in the medium term estimates an increase in revenues on an organic basis at the top end of the 4% - 7% range and an increase in Ebit margin of between 50 and 60 basis points.

For the financial year ending 30 June 2025, it indicated 'a return to organic sales growth' and support for operating profitability. The French group, like Campari, has also embarked on a strategy of focusing on its core brands by divesting those considered no longer strategic.