Interview, Part Two: Pernod Ricard Chairman and CEO Alex Ricard

In the second part of our interview with Alex Ricard, Pernod Ricard’s chairman and CEO talks about some key challenges the company is facing, as well as future growth opportunities.

SND: While single malt is thriving, blended Scotch has been struggling—even amid the whisk(e)y boom. Why do you think this is?

Ricard: I see three sub-segments in Scotch—if you put the value end aside—and two of them are doing well: single malt and premium blended Scotch. Where it gets difficult, though, is with super-premium blended Scotch. It seems that, in that segment, lifestyle messaging has overtaken quality messaging. The fact of the matter is that blending high-quality Scotch—12-year-old and above—requires strong knowledge and expertise. Obviously, with single malt you’re dealing with just one distillery, while it’s very difficult to produce a super-premium blend of high quality. I’m not sure consumers are fully aware of that. Perhaps super-premium Scotch’s leading brands need to better communicate the art of blending to consumers.

SND: How are things going for Pernod Ricard in China?

Ricard: Cognac has clearly been more resilient there than Scotch, for us and others. Companies have basically repurposed marketing funds from super-premium Scotch to Cognac. What we’re seeing, though, is the opportunity of the emerging middle class. From 2000 until a few years ago, affluent consumers and the prestige end of the business drove growth in China. In the future it will be driven by middle-class consumers. They can’t afford prestige brands, but brands like Ballantine’s and Absolut are increasingly within reach, so we’re investing more behind those brands.

SND: Pernod Ricard was transformed by three blockbuster acquisitions: Seagram (in 2001), Allied Domecq (2005) and V&S (2008). Do you envision more major deals ahead?

Ricard: There are no obvious gaps in our portfolio, as we cover most drinking occasions. That being said, from a strategic standpoint, what we’ve shared with the markets is we have a very active management of our portfolio. We do bolt-on acquisitions. We sometimes dispose of brands as well. This year, for instance, we acquired Monkey 47 and sold Paddy. Longer term, if sizable opportunities were to present themselves, then yes, we’d look at them without a doubt.

News Briefs:

•Francis Ford Coppola Winery has extended its Sofia brand with the launch of Sofia Méthode Champenoise. Featuring a blend of Pinot Blanc, Muscat and Riesling, the new sparkler is made using traditional methods utilized in Champagne, France, where secondary fermentation takes place solely in the bottle. Sofia Méthode Champenoise will be available in limited quantities, retail priced at $23 a bottle. It joins the Blanc de Blancs, Blanc de Blancs Mini, Rosé, Red, Riesling, Chardonnay and the non-alcohol Mr. Youree labels in Coppola’s Sofia range.

•Vintage Wine Estates announced its latest California expansion October 10, having purchased St. Helena-based Delectus Winery and Vineyards. The sale price wasn’t disclosed, but the deal includes the brand, tasting room and all case goods. The winery’s Knights Valley Estate vineyards were not included in the sale. Delectus founder Linda Butler will continue to manage Delectus’ hospitality and trade, while Chris Phelps, winemaker for Swanson Winery and Vineyards, which Vintage Wine Estates acquired in 2015, will take over winemaking duties for the brand. Wine Spectator has more.

•Beam Suntory has made an investment in at-home cocktail technology company Bartesian. Financial terms were undisclosed. Beam Suntory will serve as the exclusive spirits partner for Ontario-based Bartesian, whose at-home cocktail machine is intended to allow consumers to combine spirits with pre-mixed ingredient capsules to create more consistent cocktails. The Bartesian system, which is slated to launch in 2017, is currently available for preorder, priced at $299.

Craft Brewing And Distilling News:

•Longmont, Colorado’s Oskar Blues Brewery is expanding into a host of new international markets. By the end of 2016, Oskar Blues will enter Puerto Rico, Spain, Chile, Luxembourg, the Netherlands and Belgium, which will join the U.K., Ireland, Sweden, parts of Canada and Australia in its footprint. In early 2017, Oskar Blues also anticipates distribution to Brazil, New Zealand and Japan. The company says its sales are expected to surpass 215,000 barrels this year. In addition to its Colorado home base, Oskar Blues opened a 50,000-square-foot brewery this year in Austin, Texas and completed a 21,000-square-foot expansion to double capacity at its Brevard, North Carolina facility. Oskar Blues is partnered with Boston private equity group Fireman Capital Partners.

•Cardinal Spirits of Bloomington, Indiana is releasing its first Bourbon tomorrow. Retailing for $42 a 375-ml. bottle, Cardinal’s 110-proof single barrel Bourbon is fermented, mashed, distilled and bottled entirely on site, according to the craft distiller. It was aged for 14 months in a new American oak barrel. Cardinal sells its wide range of craft spirits in liquor stores across Indiana and northern Kentucky.

•Grand Rapids, Michigan-based Founders Brewing Company will release Lizard of Koz as the second offering in its Backstage Series of 2016. The Imperial stout is brewed with Michigan blueberries, chocolate and vanilla and aged in Bourbon barrels. Limited quantities of Lizard of Koz will be available beginning in December in 750-ml. bottles for about $19 across Founders’ 39-state distribution footprint. Last year, Founders sold a 30% stake to Spain’s Mahou San Miguel for an undisclosed sum.

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