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Alexandre Ricard, Pernod Ricard Global Chairman and CEO, discusses the company's sales results and outlook in the Chinese market.
AKIKO FUJITA: Well, the gradual return to bars is providing a lift to the company behind Jameson Whiskey and Absolut Vodka. Pernod Ricard saw sales in the first half of the year jump about 10%, with total revenue and operating profits returning to pre-COVID levels. In the US specifically, the company saw sales jump 16%.
Let's bring in the global chairman and CEO of Pernod Ricard, we've got Alex Ricard joining us today, along with Yahoo Finance's Brian Sozzi. And Alex, it's great to talk to you today. It does feel like things are sort of slowly starting to return. And yet, with so many of these businesses, especially bars, we've been asking that question about the impact the Delta variant is having on traffic coming into. How do things look like right now from where you stand?
ALEXANDRE RICARD: Listen, we've had a great year, as you mentioned, with our net sales growing by 10% over the last 12 months, which is an excellent performance, growing from every single region around the world, with the obvious exception of global travel retail for understandable reasons. And as you mentioned, our sales in the US grew by 16% and hit the $2 billion net sales milestone for us there.
This is driven first of all, by the remarkable resilience of the off-trade of home consumption but as well, and we're seeing this happen, is also impacted positively by the reopening of the on-trade. And consumers are really eager to go back out and socialize and meet friends and so on and so forth in the on-trade but it's also driven by the remarkable acceleration of e-commerce. So all-in-all, we did have a great year. And we expect despite sanitary restrictions, we do expect to see good sales momentum continue for this current year because of what I explained, especially resilience of the off-trade and reopening of the on-trade.
BRIAN SOZZI: Alex, Brian here. China a key market for the liquor industry, of course, you are included in that. How big a headwind will it be to your business now that China is in fact, trying to crack down on wealth?
ALEXANDRE RICARD: Well, my understanding when I listen to the news on Yahoo Finance is what China is trying to do, they're trying to support the growth and emergence of middle-class households. And in fact, this Chinese middle-class households are indeed the core of what we focus on in China. So the fact to support income for a middle-class Chinese household from that point of view could be seen as a positive.
ZACK GUZMAN: And when we look at kind of the forward guidance here you know, we've seen some companies kind of be hesitant to look a little bit farther out and give any quantitative guidance. You say that the quarter or the year is going to be dynamic. I mean, talk to me about maybe what's making it difficult, I know Delta's out there but what are kind of the biggest question marks you have around why you wouldn't want to be more specific there?
ALEXANDRE RICARD: You know, there are huge swings by channel as you can imagine. So we go from if I take the example of the on-trade, in some markets, you see declines of 60%, 70%, 80% turn into growth rates of 150%, 200%, or even 300%. So there are huge swings by channel.
The situation varies quite significantly from one market to another. So there's also a mix of markets, a mix of brands, a mix of formats in an environment, which you know, is still quite volatile and where the sanitary crisis is still not over. So where we're confident enough and clearly mentioned that we expect to see good sales momentum, we clearly expect as well a very dynamic Q1 off of a low base. Last year Q1 was down 6%. But to start giving more specific numbers at this stage would not be extremely prudent.
BRIAN SOZZI: And Alex, what is the consolidation in the liquor industry, it has continued, it's continued throughout the pandemic. What is not in your portfolio that you would like to see in your portfolio?
ALEXANDRE RICARD: Listen, we have a clear strategy of dynamic management of our portfolio. So we're on the hunt for great emerging craft, super-premium brands that are out there. We've been very active over the last few years and as you mentioned, as well during the pandemic we've made a number of partnership or acquisitions such as Malfy Gin, Monkey 47 Gin. Amazing American whiskeys, Rabbit Hole Bourbon, which is great. Jefferson Bourbon which is amazing. TX Whiskey, which is also fantastic or Smooth Ambler, just to name but a few but as well, Del Maguey, which is a leading craft mezcal brand out there. And I could go on and on, including other opportunities we've partnered with in Europe, such as Italicus, which is an Italian bergamot liqueur.
And you should expect to see more of that in the coming months and years. We intend to be quite dynamic. We have a pretty extensive portfolio of brands. We don't have any very specific white spaces. We're probably underexposed to some categories such as tequila, of course. But we have two amazing tequila brands with Tequila Avión and Tequila Altos. So anyways, we are out there on the lookout and you should expect to see more of that in the coming future.
BRIAN SOZZI: Alex, why does tequila, why is that still so hot?
ALEXANDRE RICARD: Listen, you always have cycles. Tequila is a great segment. You can do great cocktails with tequila, margarita is one of the best selling cocktails in the US. So right now tequila is hot but cognac is quite hot as well. And US super-premium and above whiskey is quite hot as well. So there are many categories that are quite hot.
It is driven by big strong brands. It is also driven by cocktail and mixology. We saw a lot of that. It is now increasingly driven by convenience as well through the e-commerce channel. And so we're quite positive on the segments I mentioned.
AKIKO FUJITA: Been interesting to see the shift in the space there during the pandemic. But Alexandre Ricard, it's good to talk to you today. Global chairman and CEO of Pernod Ricard. And our thanks to Brian Sozzi too for joining in on the conversation.