Premiumization has been key to the success of our wine and spirits brands

Philippe Guettat has worked for Pernod Ricard since 1991 and served as Chairman and CEO of Pernod Ricard Asia since 2015. Over the past two years, the globally leading wine and spirits company has been adapting to changes in shopping and drinking habits due to COVID lockdowns – and it has also started to produce a Chinese malt whisky.

Guettat talked about the company’s moves to Jacques Penhirin, a Partner in Oliver Wyman’s Greater China office, and Sirko Siemssen, Global Leader of Oliver Wyman’s Retail and Consumer Goods Practice.

Does inflation keep you awake at night? Or is it just business as usual in the alcohol industry?

Inflation is really starting to have an impact, not only for us but for the entire alcohol industry. There is supply-chain disruption, a lack of manpower, and a higher level of demand. These are all sources of tension, and the costs of cardboard, plastics, and – especially – glass are rising. Also, the grape harvest was not very good this year in France, which has had an impact on the cost of making champagne and cognac.

Is it going to be hard to pass these costs on to the consumer?

It depends on where. It's not going to be easy in countries where there is a highly organized, modern off-trade alcohol industry – in Western Europe in particular. Asia is more fragmented; there’s more on-trade; and we have pricing power because we've been investing in our brands’ equity. We believe our consumers and customers will understand the challenges and continue patronizing our brands.

A central part of this model is premiumization. We have been investing a lot in our wine and spirits brands, and they are very well established. We're tightly controlling the level of supply in order to maintain a healthy level of pricing. We are a reasonable luxury spend with an in-depth presence in different geographies. We are pretty resilient, and there is robust consumer demand. But this time, we might have to raise prices in categories where we normally have less pricing power.

We have been investing a lot in our wine and spirits brands, and they are very well established.

As a multinational company, do you have a radar for the patterns of COVID across various countries? How has the pandemic changed alcohol consumption patterns?

From February 2020 up to the end of that year, we were extremely centralized in our response. After that, our monitoring became more regional, and we adapted to local markets.

In China there’s been some revenge spending. People who couldn't travel have started again to go out, and then they spent more in nightclubs, bars, and restaurants. This helped to compensate. In Southeast Asia, however, people completely stopped consuming when the boarders were closed. Much of the demand seemed to have vanished during that period, but with the impact of COVID softening and boarders reopening nowadays, we are gradually recovering.