Pernod Ricard: Spreading the spirit of sharing

Pernod Ricard’s Guillaume Girard Reydet was heading the French spirits giant’s Polish unit when he was asked whether he would like to move to India. The former rugby player had some notion about the cricket-crazy country. He was friends with some Indians who would come to play cricket on the grounds where he volunteered as an assistant coach to train a rugby team. He says he took up the offer, arriving at the decision in less than 12 hours. This was in 2015. Reydet, managing director of Pernod Ricard India, told Fortune India in an interview the world’s No. 2 spirits company is focussing on premiumisation as it sees demand for premium brands rising not just in metro cities, but in tier 2 and tier 3 cities, too. Edited excerpts:

How do you see the Indian market at the moment? Do you think it is evolving fast?

I think it is evolving fast. I want to say that in our business we are not selling spirits, we are selling sharings. If anyone is able to share a nice drink, alcohol or non-alcohol, the quality of the sharings and the quality of the moment with either your family, or your friend, or your colleague, is something most important for us. This is evolving very fast, meaning that people now have less time, they are working very hard, and they have so many things to do. So when you want a good moment of pleasure, you want a premium moment. That means that you might want to share a good whisky, not a low-end brand. Premiumisation is there: Everyone is seeking premium moments. We initially thought it is only in metros and mini metros, but even in tier 2, tier 3 towns, people are seeking premium brands and premium moments.

Which are the faster-growing segments in India?

Whisky is still growing very fast and the saliency of whisky remains very high in the country. We have a fair number of brands in the whisky category. There are a lot of premium brands which are either imported or manufactured in India. The whisky category remains by far No. 1. The gin category is booming. We have vodka, which is also booming. The wine category is also growing very fast. The distribution of wine is growing very fast, too, so you will find wine in places that you could not find it earlier. We still have a lot of country liquor in India. But people are shifting out of country liquor to other categories, which is a big move. It doesn’t mean that country liquor does not exist. It is still the No. 1 category in India, but it is slightly decreasing.

It is believed the next wave of growth is going to come from tier 2, tier 3 towns and cities. Is it going to be the same for you?

Yes and no. I will say both. Depending on where you live in India, you will get different access to liquor. The number of licences pan-India is very limited. So, if you [have] max broadly 70,000 licences in a country like India, it’s almost nothing. In a lot of states in India, you will find a liquor store every 50-70 km. You also have a state like Goa, where you might find one almost every few hundred metres. This diversity is there, but the number of licences is very limited. That’s something which creates some issues. For us before thinking about tier 1, or tier 2, or metros or mini metros… regulators in any state have to set proper regulation, with a proper number of licences so that anyone with friends will be able to find a place to share a drink in an environment where women and men feel comfortable, and safe. This remains an open question in a large number of states. Eventually, we need to share, that’s most important. There has to be a proper footprint of liquor stores, cafes, restaurants, bars which will be properly balanced with consumer needs.

Licences are one thing; what do you think are the challenges of operating in this country?

I will speak about excise duty and regulation first. Our industry needs regulation. We do know it is something that is absolutely critical. I don’t want alcohol to be at a price point so low that people will get nonalcoholic drinks at the same level of price as alcohol. That is something, which we are not keen on at all. So, sure, excise duty is a part of the answer for that. On the other hand, if you ask me about prohibition, I don’t feel at all we are a sin industry. We are doing our manufacturing of proper spirits; we are distributing them in a way which is fully compliant. Duties should not at any point of time be a sin tax. Prohibition is a political topic, I am a professional. But how can we speak about freedom if we have to explain to anyone what you will eat and drink will be in my hands? We do need rules, but thinking that people can themselves make a proper choice is fair.

After activist investor Elliott Management disclosed a more than 2.5% stake in Pernod Ricard last December, there has been pressure on the company to improve its profit margins so they are more in line with rival Diageo. What about India?

India is a good country for us. We are a business which is managed on the long run—let’s say a brand like Chivas [Regal], which was started by the two Chivas brothers in 1801-02, it is a more than 200-year-old brand. To build a brand like that you need time. It cannot move from one year to another one. To get this ability and get this capacity to reach a level of stock of whisky, to reach this level of quality of whisky, to get to this level of awareness of the consumer, loyalty from the consumer, all this takes time. We are not commodities, we need time. We have ambitions to be No. 1. The group is very glad with the performance in India. We almost double the size of the company every five years. We still have a long journey ahead of us. The focus on the consumer from our side is very strong. This company has been built with Indians for India; we were one of the first firms to bring manufacturing and export here. Around 93% of our products are made in India.

This was originally published in the May, 2019 issue of the magazine.