French spirits group Pernod Ricard SA expects its operations in India to continue to post double-digit sales growth over the next five to 10 years and to soon replace China as its second-largest market by sales, top executives said.
Pernod Ricard, owner of Absolut vodka and Jameson whisky, also plans to perk up growth in its top two markets, the United States and China, in the medium-term by launching new products and possibly by acquiring some brands.
India, which brings in 9 per cent of group sales, is however seen emerging as a key growth driver, as an expanding class of wealthy consumers prefer premium spirits.
Alcohol was frowned on until recently in India for religious and cultural reasons, but the country is now a hotly contested market for global drinks makers, as the likes of Pernod Ricard and rivals including Diageo look to offset sluggish growth in the developed world.
“Because of the growth in the middle class and the size of the whisky market in India we are confident we can keep posting double-digit growth,” Pernod Ricard finance chief Gilles Bogaert told Reuters in a interview.
“It’s a fair assumption, based on the growth pattern, that India will soon overtake China from a sales standpoint.”
Pernod Ricard’s market share in India rose to 11.2 percent last year from 8.1 percent in 2010, while the share of United Spirits, Diageo’s India unit, fell to 39 percent from 42.7 percent, according to research firm Euromonitor.
“We operate in the high-end of the (Indian) market … this is a segment which is growing at double-digit,” Guilaume Girard-Reydet, India chief executive, said, adding Pernod Ricard will also expand its imported brands portfolio.
The company has set an annual sales growth target of between 4 percent and 5 percent in the medium term, up from 2 percent in the last fiscal year through June.
“To deliver that improvement, we count on several markets in particular (but) we want to improve our performance in the U.S. and China,” Bogaert said.
Slowing sales growth in China, mainly due to a clampdown on extravagant spending, and the United States, has been weighing on Pernod Ricard’s results in the past few quarters, although strong growth in India cushioned the impact.
“Today we are open to more targeted acquisitions, that is to say a brand or couple of brands in a country. We are not open today to do a transformational deal … we don’t need that,” the finance chief said.