Emerging Markets
Pernod Ricard’s strong exposure to emerging markets has been of great benefit to the company during these trying economic times. Sales in certain European countries, such as Spain and Greece, have been weak. Strong sales in China and India (where Pernod Ricard recently became that country’s most profitable spirits company) have been able to offset the lack of European consumer spending, though. As the middle-class in these emerging markets continues to grow, so too does the demand for premium aspirational brands.
Asia has been a very profitable and fast-growing region for the company, as it will continue to be far into the future. Pernod Ricard, though, has now begun to set its sights on a new market: the African continent. Africa has always been a tough continent to penetrate, largely untouched by many brands we are familiar with in North America and Europe. With a combined population of over a billion people, the Africa of today could very well be the China and India of two decades ago, primed for many decades of explosively-quick consumer spending growth.
Boring Industry’s Exciting Initiative Boring investments are not without a little excitement, though. Although size and scale in the liquor industry are critical to the long-term success of a company, that can sometimes be a double-edged sword. As companies grow, creativity can often suffer when management becomes less inclined to take risks and try new things.
To address that concern, Pernod Ricard recently created Our/Vodka. Described as “one part global and one part local,” Our/Vodka is a small-business initiative inside of the much larger global company. Operating autonomously of Pernod Ricard’s usual managerial oversight, Our/Vodka is a combination micro-distillery, bar and store that will be found throughout the world. The first test market for this concept will be Berlin, Germany (Our/Berlin).
All Our/Vodka drinks will make use of the same general global recipe, but each local distillery will use locally-sourced ingredients to make their local vodkas. In the future it will be possible to see an Our/London, Our/New York, or any number of other Our/Local City businesses located throughout the world. Each location will create their own local vodkas using local ingredients and catering to local tastes. Although Our/Vodka is just in a single test market for the time being, the idea certainly adds a little excitement to the mix.
Boring Bottom Line The liquor industry in general has been one of the particularly boring spots in the stock market. But in these exciting times of market crashes, European uncertainty and Washington-inflicted artificially-created crises, I will take boring any day of the week. And it does not get much more boring than the liquor industry and Pernod Ricard.
The article Boring Liquor’s Exciting Opportunity originally appeared on Fool.com and is written by Matthew Luke.
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