(by Wu Rong / tr. by Phil Newell)

Pernod Ricard, which owns a number of well-known foreign wine brands, has made new moves in the Chinese market.

Snack Dai obtained from the market the company's recent "price adjustment notice" to first-level distributors in various regions in China, which pointed out that from May 1, Pernod Ricard has adjusted the supply prices of many of its products. Brands involved in price adjustment include Malibao, Alcohol, absolute vodka, etc., with an increase of about 5% for most products.

It is worth noting that this price adjustment also coincides with the company's recent delivery of the last quarter's "report card". Pernod Ricard global executives said that despite the challenging macro environment, high-end international brands, including absolute vodka, are doing very well in China, attractingTiger'sTroveTrailA new generation of consumers.

What products are involved in this latest price adjustment? what do the outside world think of the price increase at this time? what are the expectations of Pernod Ricard executives for China's performance in this quarter? Now, let's focus on it together.

Price adjustment range

According to the price adjustment notice obtained by the snack agent, Pernod Ricard (China) Trading Co., Ltd. told regional first-level distributors that it had decided to adjust the supply prices of a number of products from May 1. The adjusted brands are mainly related to Malibao, Alcohol, absolute vodka, etc., with an increase from 3. 3%.Tiger'sTroveTrail.96% to 9%Tiger'sTroveTrail.09%.

Specifically, the one with the highest rate of increase is Irish Whiskey (5cl).Tiger'sTroveTrailThis was followed by Malibao White Rum Coconut Flavor Wine (5cl), which increased by 8.33%; most other products increased by about 5%.

For the above notice, today's snack generation to Pernod Ricard, absolute vodka online flagship store customer service inquiry, the other side either replied "for the price increase is not clear", or said that "currently has not received the price increase notice."

According to what a liquor dealer said to the snack generation, "there will be a certain lag in the transmission of the price increase of alcohol products to the terminal, and the merchants will first digest the inventory of the products at the original price, which generally will not be reflected in the retail terminal until a month later."

When looking up the data today, the snack generation also found that Remy Martin and Eddington, who were also in the trenches of "foreign wine", had also implemented price adjustments recently.

For example, on social media, some netizens "posted" the price adjustment notice issued by Shanghai Remy Martin Import and Export Co., Ltd. It is pointed out that since April 1, the prices of two batches of Remy Martin cognac vary from 2% to 4.5%, and the prices of the single malt whisky Buhradi series have also increased to varying degrees. Eddington's three McAllen single malt Scotch Whisky and McCullen Huan new gift boxes have also increased prices to varying degrees since April 1.

"except during the epidemic period, it is routine for the liquor and foreign spirit industries to adjust their prices once a year. For example, liquor is adjusted around December every year, and foreign wine brands are adjusting around April." Cai Xuefei, an analyst in the beverage industry, spoke on behalf of snacks.

In fact, Pernod Ricard resumed price adjustment in 2023 after the outbreak. According to media reports at the time, in April 2023, Pernod Ricard (China) Trading Co., Ltd. issued a price adjustment document to raise the prices of almost all of the company's main products, including brands such as Chivas Royal Salute, Granville and Ballantine's.

As of press time for snacks, Pernod Ricard China did not comment on the above price adjustment notice.

Implementation opportunity

Generally speaking, the increase in cost is one of the main reasons for price adjustment. Cai Xuefei said that due to the rising costs of raw materials, labor, transportation and other aspects, as well as inflation, this is what companies often say when they raise prices.

However, Pernod Ricard may have other considerations for implementing price increases in the off-season.

On the one hand, alcohol consumption is nodal. Consistent with the catering and festival cycle, the fourth quarter of the year is the peak season of wine consumption, while the current and summer is the off-season of wine consumption. Cai Xuefei pointed out that the motives for price increases in the off-peak season are different. The price increase in the peak season is due to the large market demand, the price increase can stimulate the market to restock ahead of time, and the price increase in the off-season is due to low consumption, so it is easy to control the price stability. Cai Xuefei believes that better price control is the reason why Pernod Ricard chooses this node to make adjustments.

On the other hand, it may be directly related to the financial cycle of the enterprise. Ouyang Qianli, a researcher in the beverage industry, pointed out that many overseas wine companies settle their accounts for the previous year at the end of March, so they often choose to raise prices in April. "this is slowly established by most enterprises."

"Pernod Ricard generally releases its annual results up to the end of June around September, and price adjustment can, to a certain extent, stimulate market hoarding and drive overall performance and profits." Cai Xuefei said.

However, the market's acceptance of the price adjustment of the foreign wine giants remains to be tested.

Cai Xuefei said: generally speaking, from manufacturers to consumers, the price adjustment itself has a certain lag, and it should also be viewed in the light of product rebates and promotions; the terminal will also adjust or control the transaction price according to the actual situation. If consumers are not willing to buy, the market may not be able to implement price adjustment at the same time.

He believes that as a wine company, it is necessary to increase innovation while raising prices, and to find space and opportunities through long-term strategies such as products, channels and marketing.

"wide differences"

Interestingly, Pernod plus global executives are well aware of the current changes in the market environment. Just last week, the company released its results for the third quarter of 2024, which seems to give more clues to the implementation of the price adjustment in China.

At the meeting, Helene de Tissot, chief financial officer of Pernod Ricard, said that Pernod Ricard had a solid leadership position in the Chinese market, but last quarter's results still reflected the impact of adverse macro factors on consumer sentiment.

She pointed out that although terminal sales have increased, the overall product trading volume has declined due to the above factors during the Spring Festival this year, which is in line with expectations. Last quarter's results showed that Pernod Ricard's sales in the US and China fell 11 per cent and 12 per cent, respectively.

However, from a product point of view, there are also many brands that stood out in China last quarter. Martell Mingshi has performed steadily, she said, with strong growth in China for high-end international brands including Jameson, Absolut, Olmeca and Beefeater.

Among them, Zummel and absolute vodka are the brands involved in this price adjustment in the Chinese market.

"I would say that these brands are widely different from other products, including in terms of channels and from a health point of view, and obviously they are not so affected by the holidays." Helene de Tissot said that about five years ago, Pernod Ricard had identified opportunities for these brands and formed a special team to provide additional support to them. "I think they did a great job."

In response to analysts' questions, Helene de Tissot further pointed out that compared with products such as cognac, the drinking scene of these international high-end brands is different. Pernod Ricard has also attracted new consumers and a new generation of consumers in the Chinese market, and these brands have become more affordable.

Her statement has also been confirmed at the marketing level.

Guo Binchen, CEO of Pernod Ricard China, said earlier that DIY (do-it-yourself) drink and Live House (small live performance) model have become two new growth points in the market, and the company is also using diversified channels and more types of social media platforms to reach young consumers.

Today, the snack generation looks at the official WeChat account of absolute vodka China and finds that its content orientation is quite pleasing to young people.

For example, the copywriters on the official WeChat account include "what do young people drink after work", "add a new flavor to the night and restart the sense of officialdom", "if you are tired of repeating your life, why not take an adventure in the city for yourself" and so on. Prior to this, the brand also signed a partnership with artists, and it is also intended to further attract the attention of young groups, especially women.

On the other hand, in addition to being "confident" about the performance of the above brands, Pernod Ricard global executives have also made a "guarantee" on the current results in the new quarter-they need to show investors in the last three months of the fiscal year. How Pernod Ricard achieved its performance guidance.

"considering that the fourth quarter is traditionally not a peak season, and the competitive pressure we face this quarter, the performance in the Chinese market for the whole fiscal year is expected to be quite close to that so far this year." Helene de Tissot said.

She stressed that while the Chinese market remained challenging in fiscal 2024, Pernod Ricard was confident that net sales in the fourth quarter had improved compared with the previous nine months and kept net sales growth generally stable for the full year.

Helene de Tissot also noted that Pernod Ricard is confident about the positive momentum of its global business in the fourth quarter, as in most markets the company has come out of the supercycle of the epidemic and will have a higher year-on-year base in that cycle. Today, with the exception of the US market, most countries have normalized their year-on-year base.