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General Information
Pernod Ricard (PR) is a French company that produces alcoholic beverages. In August 2019, Pernod Ricard recorded as the world’s second-biggest spirits group behind Diageo. The French business has been in operation since 1975 It accounts for 5% of global volume market share in alcoholic beverages today. Pernod Ricard has its main brands including Absolut Vodka, Ricard pastis, Ballentine’s, Chivas Regal, Royal Salute, Jameson and Havana club. Alexandre Ricard acts as the Chairman and CEO of the company where it has the headquarters in Paris, France.
Merging and acquisition history of the Group
Acq. – Acquisition, Est. – Established Source: Company website
As reported on 2nd October 2019 the drink giant Pernod Ricard is preparing to merge its two French businesses, Ricard and Pernod in the year 2020 which would also lead to 280 jobs being open to voluntary redundancy. The present model of using two in-house distribution companies in France – Pernod and Ricard lead to the overly complex and lack of agility in the structure. Also, the fallen sales by €60 million (US$65 million) in the past two years due to deflationary pressure from Egalim Law (food and drink regulations in France) have led to this proposal. As reported by the media the group plans to unite the two businesses under the name Pernod Ricard France by July 2020, representing similar models exists in the US and China. This is a part of a strategy to keep the spirits giant’s market share in France, in a project called “Reconquer”.
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Tax Schemes
Tax disputes are more likely becoming a trait for the alcohol industry around the world. The Reuters reported on February 2019 about the pricing dispute involved by E. Leclerc, France’s largest retailer by market share is locked in a dispute over prices with French spirits group Pernod Ricard and has threatened to take its brands, including aniseed-flavoured Ricard drink off its retail stores.
The CEO of Pernod Ricard mentioned the incident of this sort of dispute as a “part of life” normalizing such price negotiations between producers and retailers. This dispute was triggered by Pernod refused to negotiate prices for France at a European level through Eurelec, the purchasing alliance Leclerc has formed with Germany’s REWE. Further, in its side story, the Pernod Ricard sales in France fell 4% in 2017 /2018 year with slow consumption and high prices, lead to 4.5 million cases of bottles sold worldwide rather in France.
Internationally, in November 2018 Kenya reported Jameson whisky released in Sh700 million (USD 6.72 million) tax dispute. The Kenya Revenue Authority (KRA) has been ordered to release detained imports of the popular Jameson Whisky following a disagreement with its importer’s overvaluation of the alcohol. The Justice Wilfrida Okwany further barred KRA from adjusting the custom price of the Pernod Ricard Kenya imports for purposes of tax computation or detaining them pending the hearing and determination of the suit.
After Pernod moved to court since the taxman detained the consignment, which also contains other products, demanding nearly Sh700 million tax arrears from the company.
The KRA in January 2018 sent Pernod a Sh 697 million demand notice covering the period between July 2012 and December 2016 on grounds that an audit had revealed massive under-declaration of the value of its imports. The appeal from Pernod over its objection to the demand from KRA was opposed by KRA arguing that the importing agent enjoyed restrictive benefits of being the only dealer, making it difficult to compare the transactional values.
The IndianEXPRESS reported on January 2018 that PR India allegedly undervalued imports of bottled-in-origin products from related firm Pernod Ricard Gulf, Dubai where both companies owned by subsidiaries of Peri Mauritius Ltd.PR has more than 45% share of the spirits market in terms of value in India. In here, a probe by the Directorate of Revenue Intelligence (DRI) has found that PR India Pvt Ltd has allegedly evaded customs duty of about Rs 612.72 crore in the last 6 years. The spirits giant has made the marketing expenses appear from the buyer side rather importers side and undervalued imported goods by PR India to the extent of Rs 9.41 crore, resulting in alleged duty evasion of Rs. 14.72 crore.
Above are just a few cases from many tax disputes reported continuously around the world for the spirits giant.
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Unethical Marketing
There is this controversial joint venture between the group and the Corporacion Cuba Ron that involves alleged trademark infringements related to the Havana Club brand, which the Arechabala family lost after the 1959 Cuban Revolution. Bacardi is fighting back claims that a campaign called “Forever Cuban” for its Havana Club rum is misleading since the liquor is made in Puerto Rico. The criticism comes from a rival company, Pernod Ricard, which market another rum product named Havana Club. The two have been locked this trademark battle for more than two decades now. Bacardi claims that its version of Havana Club is the real deal since the company paid the arechabala family, the original makers which owned the Rights since 1994. While PR insists that Havana club is more authentic since it is made in Cuba in partnership with the Cuban government. Therefore, as the battle continues, PR’s Havana Club is currently not available in the US due to trade embargo, but available globally. Bacardi sells Havana Club in nationwide in the US.
Source: https://www.planetrum.com/blogs/news/7667235-bacardi-vs-pernod-ricard
In the year 2016, Fox News reported that Absolut brand from PR ignites controversy in South Korea by using protest imagery in a new advertisement. The advert has irked political protesters and the annoyed crowd called for a brand boycott. The political unrest prevailed in South Korea in December 2016 after South Korean president Park Gyen-hye was impeached. Huge protests were flooding streets of Seoul to convince the government to end the term of the president. Absolut, owned by PR involved in controversy and turned one of the protest’s most iconic images into a vodka advertisement. PR used an image of protests in Korea and edited to look like a shape of one of its bottles with the tagline” Absolut Korea the future is yours to create”. This was considered unethical and the company was attacked by media and the general public for its unethical marketing strategy.
Source: https://www.bbc.com/news/blogs-trending-38286345
Absolut brand has a history of making many controversial advertisements. Map Advertisement which indicates the wrong information about Mexican and American border too received many negative feedbacks from its customers.
Source: https://www.trendhunter.com/trends/absolut-world-mexico
Among many social concerns, sexuality, sexual differences, diversity and glamourizing sexual aspects through their products is becoming the most common strategy of the alcohol industry. This is done to achieve its propaganda of pouring sensual aspects into alcohol, which in reality not have any proven scientific pieces of evidence. Promoting the brands objectifying women, integrating pleasure and lust into advertisements heavily mislead the customers and also the young generation of the society. PR has been using this strategy through its campaigns like “ Kiss With Pride”.
Source: https://www.bandt.com.au/absolut-continues-lgbtq-strategy-new-kiss-pride/ Kiss with pride campaign by Pernod Ricard
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Corporate Political Activity (aggressive marketing/ lobbying)
The French spirit giant, Pernod Ricard in Korea (PRK) faced investigations from three government agencies – Fair Trade Commission (FTC), the Ministry of Food and Drug Safety and the Ministry of Employment and Labor for offering bribes, violating a business suspension order and abusing employees.
The FTC in Korea has been investigating PRK since earlier in 2018 on an allegation of bribing dozens of wholesalers nationwide to ask them to sell PRK’s whiskies, instead of its rivals.
In January 2018, officials from the antitrust watchdog reportedly raided the PRK headquarters in Seoul. The Fair-Trade Act prohibits companies from unfairly luring or forcing their rivals’ clients to trade with them. The National Tax Service also bans distillers from bribing their clients about liquor supply. In addition to FTC probe, food and drugs safety ministry investigates PRK doing business during its three-day business suspension in March 2018, after the company sold a bottle of Imperial 12-year-old whisky containing a glass fragment. Due to this issue according to the law, the license of the PRK will be revocated or ministry will impose a fine on them.
With this backdrop, many conflicts between the management and labour were reported according to The Korean Times. The labour ministry has reportedly been investigating an executive of PRK, who is alleged to have verbally abused and sexually harassed his subordinates. The company also failed to reach an agreement with the labour union in wage bargaining.
In another incident, Alcohol Justice, the industry watchdog reported the bulk of dollars spent by Big alcohol on lobbying at federal level in first quarter of 2010 in United States According to the data, first three months of 2010 six of the biggest lobbying agencies for Big alcohol spent nearly USD 3 million lobbying both houses of Congress as well as other government agencies, according to various press sources. Press sources suspected USD 180,000 was spent by Pernod Ricard to Distilled spirits Council of the United States (DISCUS) over alcohol-related issues as alcohol taxes, drunk driving and underage drinking. This million-dollar thrown away by Big alcohol for lobbying influenced Congress, individually or collectively, lobbied Federal Trade Commission, the National Highway Institute on alcohol abuse and alcoholism, the Department of Health and Human Services, the Treasury Department, the Department of Commerce etc. The alcohol industry group were reportedly spending on state beverage laws, health policies, renewable power, labour issues, bailouts, and health care reforms. Since the aggressive and money centred lobbying is no new in the alcohol industry with their financial potentials, lobbying power being misused over the years.
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Animal welfare in threat
The Pernod Ricard Group has been involved in some controversial issues in animal welfare concerns. One of these concerns the group being the major funder of bullfighting in France, including financing bullfighting clubs and sponsoring corridas according to the NGO Alliance anticorrida. One of the examples where the company sponsorship came into media spotlight was when a bull attacked Dominique Perron, president of his local Paul Ricard bullfighting club at Bayonne festival in the year 2015. Media was highlighting his speech on “spirit of conviviality” before the attack, which brings followers of the controversial pastime together.
Many Animal welfare organizations have requested the consumers to boycott the brands belong to Pernod Ricard since bullfighting is not an entertainment but an abnormal pleasure in the suffering and death of another sensitive prisoner who doesn’t have a slightest chance to escape from a deadly field.
In the meantime, in September 2019, PR have declared that they have established a new policy banning animal testing. The company further stated that it requires that all its supplier companies abide by the same policy barring animal experimentation, multiplying the impact of the victory for animals who suffer in laboratories. As reported by PeTA (https://www.peta.org/), before the policy went to affect the company and its experimentation facility conducted or donated products to animal experiments using more than 1000 rats. In one test PR have supplied apple extract to experimenters who force-fed it along with rat or human faeces to rats, then injected them with carcinogen that induces colon cancer, and then used them for dissection.
One of the major funder in bullfighting and former major animal tester, PR claimed in October 2012 that their key brand Absolut Vodka products are vegan, that they do not contain any animal products in production. They have forgotten the fact that the blood is already strained along with their brand names!
Source: facebook
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The exploitation of women by PR
Women considered being most vulnerable in any industry for being misused, objectifying in marketing, labour exploitation and abuse. Alcohol industry uses the advantage of the vulnerability of women massively for their marketing and promotion of brands objectifying them and using them as liquor girls at party events.
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Sponsorships to recruit young
The impact of marketing through sports sponsorships have a positive relationship on alcohol consumption and its associated harms. It has received considerable attention, both in terms of research and public policy. The WHO has advised through its best buys to abide by self-regulation to ban sports sponsorships by alcohol companies. Even though, alcohol giants continue sponsoring sports events todate.
Chivas, a premium brand of Pernod Ricard collaborated with the world’s biggest football club brand, Manchester United, a three-year global partnership deal from 2018/19. This 40% sponsorship will be aiming to recruit more young vulnerable kids for alcohol use.
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Closely looking at Cannabis?
The link between addiction industries is no longer a secret. The connection between alcohol-tobacco-cannabis industries is widely discussed due to its harmful outcomes the world is already experiencing. The statements from the CEO of the Pernod Ricard shows their ambiguous behaviour towards the interest in the cannabis industry.
In August 2018, as reported by the Spirits Business, CEO of PR, Alexander Ricard says that “there is no evidence that the increasing legalization of cannabis will result in market share loss for premium spirits”. Further, he said that the PR and its rivals are looking at cannabis industry closely for potential competition for alcohol market from cannabis.
Same time it is worth to note Diageo too has also said that it is “monitoring “the development of cannabis in North America “very closely”, and that so far its legalization has not negatively impacted its business.
We see the same statements from Big alcohol when it is questioned about the link to Marijuana. But it is well known that US drinks group Constellation Brands channelled an extra USD 4 billion into Canadian cannabis producer Canopy Growth Corporation, signifying the biggest investment in the cannabis industry to date. Further distributor Southern Glazer’s Wine and spirit have established Great North Distributors, a wholly-owned Canadian subsidiary that will be the exclusive representative for cannabis company Aphria.
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Sustainability Issues
In the year 2013, A freedom of Information request submitted by Herald Scotland revealed that eight whisky distilleries had been rated “poor” by the Scottish Environment Protection Agency (SEPA) for their over-abstraction of water from natural sources.
According to the report, three distilleries owned by Diageo and two Chivas Brothers, owned by PR were among those which breached their licenses and siphoned off too much water.