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Worldcrunch

How France's *Pernod Ricard* Pastis Became A Global Liquor Juggernaut

Paul Ricard was a visionary: in the early 1920s, he was already dreaming of selling his aniseed liquor around the world. Eighty years later, his vision has become reality, and what was a little liquor from the South of France is today one of the world's most luxurious brands.

PARIS � Ten years ago, Pernod Ricard, France�s biggest distiller, still made most of its revenue selling its famed �pastis� aniseed liquor.

The 80-year old brand, a staple of southern France, has always been associated to quintessentially French events like the Tour de France and the sunny caf�s of Marseille�s Vieux Port.

Today, Pernod Ricard is No. 1 for spirits in China and the second-biggest in the U.S., with two thirds of its sales outside of Europe. In the past 10 years, the company has become an alcohol behemoth, multiplying its sales by four and its profits by six selling vodkas, whiskeys, cognac and high-end champagnes. Fourteen international brands � 12 of which were bought since 2001 � are sold in more than 70 countries around the world.

Early 20th century, pastis was bootlegged in the Provence countryside, a legacy of the anti-absinthe prohibition banning all aniseed flavored alcohols. In 1932, Paul Ricard decided to launch his own pastis brand. The son of a wine-seller toured bars to convince owners and give customers a taste, modifying his recipe as he went. He understood the importance of direct distribution, and took great care in the training of his salespeople, whom he believes are essential to his business. He had a paternalistic approach, building housing for his employees, holiday resorts and retirement homes. A precursor of sorts, he organized retreats on Mediterranean islands, to promote cohesion and team building.

Early on, Ricard understood the importance of product distribution and promotion, organizing events and publicity stunts. In 1956, during a gas shortage due to the Suez Canal crisis, he replaced his delivery trucks with camels, each bearing one of the letters R-I-C-A-R-D.  Today, massive promotional events, organized distribution networks and strong corporate culture are still Pernod Ricard�s pillars.

Global ambitions 

Ricard merged with French competitor Pernod in 1975, but the company only started spreading its international wings in 2001 when it bought a large part of Canadian distiller Seagram�s beverage division. Pernod Ricard doubled in size, acquiring the famed Chivas and Glenvilet whiskeys as well as the Martell cognac. A similar acquisition of Allied Domecq for 10 billion euros in 2005 added Ballantine�s, Beefeater, Malibu and the Mumm and Perrier-Jou�t champagnes to the cellar.

The purchase of Swedish vodka brand Absolut in 2008 was the crowning achievement in this flurry of high-profile operations - at a price. At the eve of the global financial meltdown, Pernod Ricard financed the 20 billion euro acquisitions through cheap debt. The acquisition was finalized just three months before the financial crisis struck.

Pernod Ricard�s house of cards could have easily collapsed under the weight of debt. To convince investors, it had to prove it could make difficult choices, selling about 1 billion euros in assets in 2009-2010, and making the most of its size and high-end strategy.

The company has kept a very decentralized organization. Six brands, including Absolut in Sweden or Chivas in Scoland, are responsible for the production and global strategy of their own products.

Seventy different companies around the world handle distribution and sales. This tight distribution circuit is the key to its success, especially in regards to its main rival, world leader Diago. Pernod Ricard is managed by a holding, with simple yet effective strategies for luxury branding: new packaging, higher prices and massive promotion. Most spectacular was the �renovation� of the Martell cognac, which is now the company�s most profitable product. This helped Pernod Ricard conquer emerging international markets, filled with rich clients looking for status symbols.

The company�s goal is to continue reaching out towards the world without putting its strong corporate culture in jeopardy.

Read the article in French in Les Echos.

Photo- Mathieu Aboudharam

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About this article source Website: http://www.lesechos.fr/

France's top business daily, Les Echos covers domestic and international economic, financial and markets news. Founded in 1908, the newspaper has been the property of French luxury good conglomerate LVMH (Moet Hennessy - Louis Vuitton) since 2007.

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