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Pernod Ricard unveils secret of success

Cape Town - You may know how to spot a good whiskey, but you probably won't know how one family company went from a small Franko player to one of the world’s most dominant wine and spirit groups in just 40 years.

Paul Ricard's family-owned business linked up with fellow French company Pernod in 1975 to begin a decades-long journey of mergers and acquisitions (M&A) that would turn the company into one of the strongest in the wine and spirits industry - but it never lost its family touch.

Owner of brands like Jameson, Absolut, Mumm and Chivas Regal, the company brought in €7.945bn (R111bn) in net sales for group's financial year 2013/14 and has 18 523 employees in 80 countries.

A M&A plan saw the company buying Irish Distillers (Jameson) in 1988, creating a 50% joint venture with Cuba Ron in 1993 (Havana Club rum), acquiring nearly 40% of Seagram Wine and Spirit (Chivas Regal whisky and Martell cognac) in 2001, buying Allied Domecq in 2005 and Vin&Sprit (Absolut vodka) in 2008.

WATCH: Interview with Paul Scanlon, the MD of Pernod Ricard South Africa and Fin24's Matthew le Cordeur


Leaders in industry

These acquisitions brought the company a step closer to leadership in the wine and spirits world, according to Paul Scanlon, the MD of Pernod Ricard South Africa.

Talking to Fin24 in his Cape Town office, he said the company's move from a small Franko player into a major international company was a game changer.

Small businesses wanting to scale up in this style should look for the right brand at the right time with the right people attached to it, he said.

“Every brand that we have bought and the success that we have seen is where we’ve bought a brand with a great heritage, a great product story, a great prominence and also some great people,” said Scanlon.

Like a good whisky, they like to “blend” a culture from one business to another. “That takes a while,” he explained. “Culture doesn’t change overnight. It takes a lot of exercise (and) a lot of meetings.

“We have managed to merge these three cultures from an American/Canadian culture at Seagram, to a British culture at Allied Domecq to a Swedish culture at Absolut,” he said.

Comfortable with R170bn debt

With a debt of about R170bn (£8.4bn), the company has made it clear that it is “no longer on the big acquisition trail”, he said. “We will do bolt-on acquisitions.

“There are many countries in which we could still buy some incredible brands and sell some of our own,” he said.

Pernod Ricard has reduced the level of debt it is comfortable with, explained Scanlon. With the company listed on the French stock exchange, he said it is quite decentralised and has top brands in every major wine and spirits category.

WATCH: SA's strong growth


Growing business in SA

The company’s market share in South Africa has grown in the past 12 months, said Scanlon.

Pernod Ricard’s year-end share price in April 2015 was up 29% at €114 (R1 681.50) and in South Africa it recorded 12% volume growth and 22% value growth.

“We were the best performing supplier or manufacturer over Christmas … and we had the highest gains in most categories,” he said, adding these trends are a reflection of the international performance of the company.

He said Pernod Ricard came “quite late” into the African market, but was “very advanced in South Africa”.

“We’re very much knocking on the number two position in the South African market,” he said. “No doubt in Nigeria and Kenya, we came in quite late to the game, but we’ve invested there in local offices.

“If you watch that space in the next three to four years, I think we will be a very dominant key player in the African market.”

The group held its annual conference over the weekend at the Arabella Golf Estate near Cape Town.


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