Pernod Ricard exits Imperial Blue to bet big on premium spirits

This week, the company completed the sale of Imperial Blue whiskey, one of India’s best-selling mass brands, to Tilaknagar Industries. Chief executive Jean Touboul said the move freed up resources for high-margin categories and accelerated Pernod Ricard’s decade-long shift towards premiumisation.

“The divestiture (of Imperial Blue) and the launch of Exclamation! are part of the same strategy, which is about premiumization; we want to move consumers up the pricing ladder,” Touboul said. Mint The company on Tuesday announced the launch of its India-made spirits brand ‘Exclamation!’.

Imperial Blue sold approximately 20 million cases annually and contributed approximately 20% of net sales in India, but with lower profitability of approx. ₹400 price point. Sold for bulk price ₹3,442 crore. By comparison, the company’s largest brand, Royal Stag, sells 32 million cases annually, while Blenders Pride sells 10 million cases; a regular box contains 12 bottles of 750 ml.

With the launch, Pernod Ricard is removing the bottom tier of its portfolio, paving the way for growth in the mid-premium tier, particularly in around-priced brands. ₹700 to ₹1,100 per 750 ml, where the company sees faster consumer trade.

Exclamation!, price as follows: ₹700 in Haryana and ₹The 940 in Rajasthan will cover whisky, brandy, rum, vodka and gin and will sit between Royal Stag and Blenders Pride in terms of pricing. It will launch in five markets by December and expand to 14 states by June next year. Pernod Ricard plans to grow the brand to one million cases in the first 12 months.

“Introducing new brands is beneficial; it will increase competitive intensity for established companies. Secondly, the chosen category is ideal: the mid to upper prestige segment where growth rates are the highest for the industry. Volume growth is also strong, ranging from high single digits to low double digits, and margins are better. Targeting this segment, which offers strong growth potential and room for meaningful innovation, is a viable strategy,” said Karan Taurani, EVP, Elara Capital.

Levers and barriers to growth

Pernod Ricard’s strategic shift comes as India consolidates its position among the world’s fastest-growing alcohol markets.

According to London-based consultant IWSR, India’s alcohol industry will grow 9% in value to just under $40 billion by 2024; this moved the country into the global top five in terms of value, an increase of over $3 billion in 12 months. Volume growth reached 6%, placing India in eighth place globally, just ahead of the UK and Spain. Mint It was reported in June.

But the industry is also dealing with shifting regulations. Earlier this year, India and the UK finalized a free trade agreement (FTA) that will reduce import duties on Scotch whiskey and gin from 150% to 75% initially and to 40% within a decade.

Touboul said the FTA would reduce retail prices of bottled origin Scottish brands such as Chivas Regal, Ballantine’s and The Glenlivet by 10-15%, depending on state taxes. “More people will have access to these products and we expect higher growth.”

After the sale of Imperial Blue, imported brands accounted for around 20% of Pernod Ricard India’s business, while Scotch’s share was 12-15%. Brands such as Jameson, imported from Ireland, and Absolut, produced in Sweden, are excluded from the UK origin categories and will not benefit from tax relief.

India is the company’s second largest market after the US and has surpassed China in net sales in fiscal 2023. Pernod Ricard sells mass-market labels such as Royal Stag, Blenders Pride and 100 Pipers, as well as premium brands such as Chivas Regal, Ballantine’s, The Glenlivet and Jameson Irish Whiskey.

Even as premium consumption increases, state tax regimes remain a problem. In June, Maharashtra, a major alcohol consumption market, increased excise duties on Indian Made Foreign Liquors by more than 50%; Taxes on domestic and imported quality drinks also increased. Pernod Ricard received a 35-40 percent price increase in the state.

“More than 10% of our net sales come from Maharashtra, which used to be the top market but has fallen in our state rankings due to tax hike,” Touboul said. “The retail price increase due to the excise revision was around 65-70%. We borne some of this. Even after mitigating this, consumers still saw a 35-40% increase in retail prices. Naturally, most traded down as they could not afford this jump.”

Rival United Spirits Ltd, Diageo’s Indian arm, has also increased prices in the state by 30-35%.

Pernod Ricard is the largest liquor company by sales in India and United Spirits Ltd. competes with.

Appearance

Pernod Ricard India announces consolidated revenue from operations ₹26,773.23 crore, up 7% annually in FY24, according to Tofler. The company operates 24 manufacturing units in 18 states. FY25 numbers were not available.

Despite regulatory fluctuations and price pressure in key markets, Touboul remains optimistic in the medium term. Pernod Ricard expects low double-digit growth in India over the next five to ten years. “If you grow in the low double digits for 10 years, you triple the business,” he said.

He added that consumer demand was “good” and indicators at the beginning of the festival season had turned positive. “Credit card usage and macro indicators indicate that consumption is stronger than in previous years,” he said.