Pernod Ricard: Strategy analysis

Résumé du document

Pernod Ricard is the second largest group on the wines and spirits' market. For the financial year 2007/2008 the Group generated €6.589 billion in sales (95 million cases) with a net profit of €840 million. Pernod Ricard manufactures and distributes a wide range of alcoholic beverages.

The Group was created in 1975 after the merger of two of the biggest French producers of alcohol and it took the name of Pernod Ricard SA. Some of the most famous brands of Pernod are the following: Ballantine's, Chivas Regal, Jameson, ABSOLUT, Beefeater, Havana Club and Ricard. There is a steady increase of the sales from one year to another as we can clearly see in the chart on the left.

Currently, Pernod Ricard is number 1 in Europe and Asia and number 2 on the American continent after his biggest rival, the British group Diageo. Since the end of 1990's the group has widely diversified its portfolio by making numerous acquisitions of other famous alcoholic brands. In 2001 it acquired a share in Seagram, in 2005 the Allied Domecq Company and in 2008 Pernod bought the Swedish company Vin&Spirits (Absolut vodka).

The alcoholic beverage industry is composed of three major types of beverages: spirits, wine and beer. But we will consider only the first two, as Pernod Ricard does not produce beer.
First of all the spirits market is the one with the highest growth during the recent years. The demand of the European, Asian and American consumers for whisky and vodka has grown up. Surprisingly, there is positive effect of the high prices on the demand which is explained by the strategies undertaken by the leading companies.

Extraits

[...] As a leader in this market, Pernod Ricard has the power to influence the industry as a whole. Small negative influences could not affect badly the well-being of the Group. But eventual new entrants should be very careful Porter's Five Forces In order to assess the attractiveness of the industry we will consider the Porter's 5 forces. Competitive rivalry There's an increased competitive pressure in the traditional markets like North America and Western Europe which have reached their maturity. So the rivalry will become even fiercer on the emerging markets because the demand for premium brands is soaring and the growth will be even higher. [...]

[...] The attractiveness of Pernod Ricard investment has seduced many investors from all over the world. This dispersion of shareholders constitutes a barrier for an effective decision making. However, the company is still a family Group and the influence of Ricard family in the company management is the majority. Thus, they own more than 17% of the voting rights in the General Meeting. Bases for competitive advantage: focused differentiation: From the customers' perspective, Pernod Ricard beverages have high perceived product benefits: customers associate these brands (for instance, MUMM champagne and MARTEL cognac) with high quality products. [...]

[...] The market is no longer national, but it has become global. The world leaders are fighting over gaining new shares. That is why the external growth in this business is really important. This is the main problem that manufacturers will have to deal with in the future. They have do adapt their strategies to the changing environment Key success factors possessed by the Group are Image the image of the company is associated with quality and high prices. Decentralised business model One head office that controls a dozen of direct subsidiaries, each of which is fully responsible for its products. [...]

[...] It has become part of the company's life. The adding and removing of sub-divisions as well as cooperating with other multinational companies have always been essential for the Group. Last but not least we must take under consideration the importance of the external shareholding that may affect the decision making process of the company. Apparently, the family Ricard still has the majority in the General Meeting, in particular thanks to the shareholders agreement ensuring it to 17% of the capital. [...]

[...] The spirits sector is much more profitable than that of the wine market, which is characterized by a structural decline of consumption. Technological environment: In almost all business sectors innovation plays an essential role. The alcoholic beverage market is not an exception. The customers are expecting more and more quality products, so the companies must invest in staff training and new equipment. Customers are looking for new experiences and flavours so producers are making different flavoured alcoholic beverages. For example, we can mention about Absolut vodka, which has an enormous range of flavours (vanilla, raspberry, mango, peach and etc). [...]