French spirits maker Pernod Ricard has issued a sobering forecast for its business, warning that weak demand in the U.S. will continue to drag on sales for years, with no meaningful recovery anticipated until the next decade. The company’s latest financial report shows a 3.9% decline in annual sales to £8.10 billion for the year ending June 30, marking the third consecutive year of falling revenue.
U.S. and China drive sales slump
The U.S., historically one of Pernod Ricard’s most lucrative markets, has become a significant drag on performance, with sales plummeting 14% over the past year. The company attributed the decline to a broader “spirits market slowdown,” driven by economic moderation and subdued consumer confidence. The company’s outlook remains pessimistic, forecasting no rebound in the U.S. until after 2029. Meanwhile, China, another critical market for Pernod Ricard, has also underperformed, with sales dropping 19%. The decline is partly due to “continuing weak consumer sentiment,” a reflection of China’s broader economic slowdown, which has dampened demand for premium imported spirits. Additionally, EU brandy tariffs have further complicated the company’s operations in China, increasing costs and reducing competitiveness. Pernod Ricard now projects group sales growth of 3% to 6% from 2027 to 2029, though it expects to land closer to the lower end of that range.
The financial markets have reacted sharply to these developments, with Pernod Ricard’s shares in Paris falling 5% on Thursday, deepening a year-long decline that has seen the stock lose more than a third of its value.
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Shifting strategies in a changing market
Pernod Ricard’s struggles reflect broader challenges facing the alcohol industry. Earlier this year, the company abandoned a potential ÂŁ22 billion merger with Brown-Forman, the maker of Jack Daniel’s. Analysts suggest that the company’s current valuation presents an opportunity for investors. Chris Beckett of Quilter Cheviot noted that Pernod Ricard has a “credible strategy in place” and that its stock is trading at a “very low and undemanding valuation.”
One of the key pillars of Pernod Ricard’s strategy is its push into ready-to-drink (RTD) products, a category that grew 12% over the past year. These pre-mixed cocktails, often sold in cans or bottles, cater to younger consumers. The shift mirrors a broader industry trend, with rival Diageo also investing in RTDs. Pernod Ricard’s move into this segment is an acknowledgment that consumer preferences are evolving. The company has acknowledged the need to adjust to “evolving market conditions,” but the timeline for a full rebound remains unclear.
