Bloomberg News

Pernod Remixes Ricard to Reverse Brand Decline

May 20, 2012

A glass of Ricard pastis, produced by Pernod Ricard, is seen in a bar in Paris, France. Photographer: Fabrice Dimier/Bloomberg

A glass of Ricard pastis, produced by Pernod Ricard, is seen in a bar in Paris, France. Photographer: Fabrice Dimier/Bloomberg

Pernod Ricard SA (RI)’s 80-year-old pastis brand is feeling its age.

Ricard, the French aniseed liquor created in Marseille in 1932, is falling out of favor with younger drinkers who prefer beer or cocktails. The serving style hasn’t changed: mix one part Ricard with five of water to create a pale yellow, opaque concoction traditionally drunk as an aperitif.

“It’s an iconic brand, like Coke,” Philippe Savinel, head of the company’s Ricard unit, said just after visiting an exhibition of Ricard advertising and design at the Musée des Beaux Arts in Paris. “But we have to consider some new way of drinking it.” That may include cocktails, mixes and even flavored Ricard, he said.

Updating the brand risks upsetting loyal, though aging, customers. The Ricard name is well-known in France, adorning ashtrays, mirrors and water jugs in thousands of bars, and the brand has been instrumental in helping the company reach a market value of 20 billion euros ($26 billion). As sales of anise drinks slide, though, particularly in its home market, the company says it needs to reinvent Ricard.

The anise category has fallen 1.1 percent over the last five years in France, compared with a 1.6 percent gain in spirits, and is set to decline further, according to Euromonitor International. Pernod says Ricard sales have dropped 8 percent this year after a French tax increase on spirits that hit drinks over 40 percent alcohol by volume, like Ricard, more than lower- alcohol beverages. Overall, the French spirits market fell 4 percent, the company said when releasing its first-quarter results in April.

Generation Gap

“It’s a declining category,” said Trevor Stirling, an analyst at Sanford C. Bernstein in London. “It’s a generational thing -- older people drink a lot more pastis.”

While Savinel says 66 percent of Ricard customers regularly choose it over alternatives, younger people often find it old- fashioned.

“When I go out with my friends I drink beer or whiskey and coke,” said Mathieu Camilleri, 27, who works in a high school in Sollies-Pont, France. “I remember my granddad drinking Ricard when I was a kid. I associate Ricard with the south of France and the traditions of the region.”

Paul Ricard created the Marseille pastis, made from star anise and licorice extracts, in his kitchen. The company, which ranks behind Diageo Plc (DGE) as the biggest distiller by market value, made 7.6 billion euros ($9.7 billion) of revenue last year from global brands such as Absolut vodka, Chivas Regal whisky and Martell cognac. It competes with Beam Inc., Brown- Forman Corp. and India’s United Spirits Ltd.

Tomato and Mint

“Some years ago, we said ‘Ricard -- only Ricard,”’ Savinel said, referring to the classic serving recommendation. Some French drinkers already blend the spirit with tomato juice or mint syrup, and Canadians occasionally pep up their Ricard with cranberry juice. Still, Ricard’s strong aniseed taste could dominate a cocktail more than neutral spirits.

Competitors have benefited from suggesting new ways to consume their drinks. Davide Campari-Milano SpA (CPR), for instance, has rejuvenated the Aperol brand by promoting cocktails such as the “Aperol Spritz,” a mélange of the bitter liquor, prosecco, orange juice, and soda water. That has helped boost the brand’s revenue to about 152 million euros from 23 million euros since Campari bought it in 2003, analysts at Nomura estimate. Aperol is a “more accessible, lighter alternative to the stronger and more bitter Campari brand,” they said in a note to investors.

Medicinal Taste

Countries with a taste for anise drinks already produce their own varieties, such as raki in Turkey and ouzo in Greece, and taxes make importing Ricard to those countries costly, Savinel said. Those drinks are also mostly seen as “old- fashioned,” according to Stirling.

Consumers in fast-growing emerging markets such as China and India find the taste of aniseed medicinal, ruling out the prospect of piggybacking on the demand for other Western-style spirits. International expansion could also dilute Ricard’s profitability; the brand has extremely high margins, according to Stirling. Pernod doesn’t disclose the details.

Pernod shares have risen 6.3 percent this year on strong sales of its cognac and whisky. Campari is up by 2.7 percent and the Bloomberg World Beverages Index has jumped by 6.6 percent.

Ricard has outperformed competitors in France, its biggest market by far, where it’s the bestselling anise brand, according to Stirling. A strategy of raising prices to offset volume declines has worked for the distiller, which also produces the smaller Pernod pastis brand in France.

Bottle Design

Pernod Ricard also claims success from the changing the brand’s bottle last year, squaring the bottom and embossing the Ricard name on the sides. This sets it apart from supermarket- brand competitors, the company says.

Though Ricard has retained the yellow and blue primary colors it has always used, it has brought in new versions of its iconic water glasses and jugs, historically used as marketing materials since a ban on direct print promotion in the brand’s early days.

The imagery and packaging are key to marketing the drink, according to Chairman Patrick Ricard. “You’re more able to communicate the spirit of the brand if you refer to the roots,” he said at the Paris exhibition marking the 80th anniversary of the brand his father created.

To contact the reporter on this story: Clementine Fletcher in London cfletcher5@bloomberg.net.

To contact the editor responsible for this story: Celeste Perri in Amsterdam at cperri@bloomberg.net


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