India: Pernod Ricard exploring sale of its popular Imperial Blue whisky brand

French spirits giant Pernod Ricard is exploring the sale of its popular Imperial Blue whisky brand in India, aiming to shift its focus towards premium offerings like Glenlivet, Jameson, and Chivas Regal, according to a report by Livemint.

The world's second-largest spirits company has enlisted Goldman Sachs to facilitate the sale, which could fetch up to Rs 5,000 crore, the report said citing sources. The sale process began about three weeks ago, it added.

Imperial Blue, which sells 20 million cases annually in India, could draw interest from private equity firms and other alcohol industry players, though the process is still in its early stages.

The potential sale of Imperial Blue comes two years after Pernod Ricard's competitor, Diageo, divested several low-margin brands, including Haywards, Honey Bee, and Romanov. This trend underscores the shift among multinational liquor companies towards premium brands that, despite lower sales volumes, yield higher profits.

Imperial Blue, originally part of The Seagram Co Ltd portfolio, became a Pernod Ricard brand in 2001 after the French company Diageo acquired Seagram's global spirits and wine businesses. The brand competes with other popular whiskies in India, such as McDowell’s No1 from Diageo and Officer's Choice from Allied Blenders and Distillers.

Despite Imperial Blue's significant market presence, its lower profit margins have made it less appealing to multinational corporations focusing on higher-margin products. The report said that Pernod Ricard has been gradually shifting its focus away from the brand over the past year. The brand's size and market positioning might limit the pool of potential buyers, with only a few domestic companies likely to consider the acquisition.

Pernod Ricard reported total net sales of 11.59 billion euros for FY24, a slight decline of 1 per cent from the previous year. While sales in the US and China fell by 9 per cent and 10 per cent respectively, the company saw a 6 per cent growth in India, driven by robust consumer demand.

The company's revenue from operations in India reached Rs 25,039 crore in FY23, up from Rs 22,741 crore in FY22, making India its second-largest market by net sales, after the US.

In its recent earnings report, Pernod Ricard highlighted its ongoing efforts to manage its portfolio, including the disposal of certain local brands. The company noted that its Indian market is becoming more premium, supported by the strong performance of international brands like Jameson, Absolut, and The Glenlivet.

Seagram’s whiskies, including Royal Stag and Blenders Pride, also saw significant growth, bolstered by the successful launch of the Single Malt Longitude 77.

However, despite its success in India, Pernod Ricard faces regulatory challenges. In July, the company's licence to sell alcohol in Delhi was revoked due to alleged violations of local liquor policies, as reported by Reuters. Additionally, Pernod Ricard is currently involved in two antitrust cases and is contesting a tax demand of nearly $250 million related to the alleged undervaluation of imports.

India’s organised liquor industry is projected to generate revenues of Rs 4.45 trillion in FY24, according to a report by ratings firm Crisil. The market includes several prominent domestic players such as Radico Khaitan, Allied Blenders and Distillers, John Distilleries, Tilaknagar Industries, and Inbrew Beverages Pvt Ltd.

04 September, 2024