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Overview Pernod Ricard is a global leader in the production and distribution of wines and spirits. It owns some of the most prestigious brands in its operating category. Like many large alcoholic beverage companies, divisions are given independence in brand strategies and operations. It produces and markets wines from Australia, New Zealand, Spain and Argentina. In this sense it has done a good job of tapping into the New World before its major competitors allowing it to jump ahead to establish brands from these countries. Interestingly enough, although headquartred in France, Pernod Ricard does not produce French wine because the French wine industry is so fragmented that Pernod's director general calls it "hopeless" for producers. History Pernod Ricard began in 1975 as an anise drinks manufacturer. It joined the wine industry through the acquisition of many wine manufacturers with strong histories. It has built itself up through several consolidations that began 5 years after its formation and have persisted until present day. It became a major player in the wines and spirits industry with its 2005 acquisition of Allied Domecq making Pernod Ricard the second largest operator in wines and spirits at the time. Currently, in the wine market, Pernod Ricard ranks number 4 in the world. Most Well Known Brands Jacob’s Creek is the best-known Australian premium wine as it exports to 65 countries. It is known for high quality but affordable price. It is a large enough brand to have production all over Australia in order to avoid problems caused by seasonal weather shifts. Montana is the number one exported New Zealand wine. Revenues 2006 Fiscal Year revenue: 6,066 million Euros Competitive Advantage Pernod Ricard is so large that it has a very significant advantage from economies of scale benefiting the entire global value chain (link). It owns several of the world’s most recognized wine labels giving it instant prestige and preference amongst cultured retailers and customers. The strength of most of its brands comes from the fact that they are all supported by a long history in the industry. Brand recognition is so important to Pernod Ricard that its top 15 brands account for 70% of its profits. Struggles The company has been shown to have a weak turnover ratio of 0.9 meaning that every unit of inventory is being used inefficiently. Furthermore, it holds inventory for much longer than its competitors do (488 days compared to 298), making the Pernod Ricard take on much higher storing expenses. Current Strategy Pernod Ricard wishes to continue what it calls the “Premiumisation” of its portfolio. Given that the alcoholic industry provides the ability to increase profit margins by increasing prestige, Pernod Ricard wishes to advance its brand recognition in the upmarket. Furthermore, it wishes to tap into the emerging market of countries that are just beginning to adopt a wine culture such as China and India. Becoming Global Because all its brands operate independently rather than operating under a centralized form of management Pernod Ricard is very global in portfolio assets. It operates in all continents and has strong brands coming from the top players in the New World. It has not, however, joined competitor Constellation Brands in outsourcing or in off shoring. Rather than reducing costs through increased efficiency in the Global Value Chain it wishes to increase profits by increasing profit margins as mentioned above. |
