How Slowdown Is Impacting Liquor Sales in India

Pernod Ricard’s India sales growth tumbled as a slowing economy may have prompted consumers to switch to cheaper brands.

The maker of Chivas Regal scotch and Absolut Vodka saw sales of its India division grow 3 percent year-on-year in the quarter ended September, according to its earnings statement. That compares with a 23 percent rise in the preceding three months and a 20 percent revenue growth in the fiscal ended June.

The management attributed the muted growth to higher sales a year ago and slowing demand in India. Chief Executive Officer Alexandre Ricard, in a phone interview with Bloomberg, said the pace will moderate from last year in India and China in an uncertain environment. It guided for low double-digit growth in the medium term in India.

Macquarie, in a note quoting the management, said flooding in key states of Maharashtra and Haryana, and downtrading in select regions impacted Pernod Ricard’s India earnings. That comes as Indians are consuming less amid liquidity shortage and a slowing economy, dragging GDP growth to its lowest in six years.

While Pernod’s earnings have no conclusive implications for rival United Spirits Ltd., Macquarie said there is a risk of a potential general slowdown in the alcoholic beverages market.

Pernod Ricard is the market leader in India’s premium liquor sales category—called prestige and above segment. According to Macquarie, growing sales of Imperial Blue whisky helped the company gain share from Diageo Plc-owned United Spirits Ltd.’s McDowell’s No. 1. And Pernod has been aggressive in its pricing in Maharashtra, the brokerage said, adding that it lowered the cost of its mass-market Royal Stag brand by 11 percent per unit. And it’s been growing at a faster pace than United Spirits in the last two years.