Pernod Ricard puts up Imperial Blue whisky for sale

The world's second-largest wine and spirits seller has hired Goldman Sachs to find buyers for the brand which sells 20 million cases in India every year, three people familiar with the plan said on the condition of anonymity. Pernod Ricard could earn as much as ₹5,000 crore from the sale, one of the three people said, while a second person said the sale plan was initiated three weeks ago.

Pernod’s plan to sell Imperial Blue comes two years after rival Diageo sold a bunch of low-margin brands including Haywards, Honey Bee and Romanov, reflecting multinational liquor makers' preference for premium brands that sell less but earn more.

Likely suitors

Goldman Sachs declined to comment, while a spokesperson for Pernod Ricard did not respond to emailed queries.

“The brand would be of interest to private equity as well as other alcohol companies," one of the people cited above said, adding the process is still in the early stages.

Also read | Pernod Ricard India aims to triple net sales in the next decade, says CEO

From Seagram, to Pernod

Imperial Blue was originally owned by The Seagram Co. Ltd, a Canadian liquor maker. Pernod Ricard came to own the brand in India in 2001, after the French company and Diageo jointly acquired Seagram's global spirits and wine businesses a year earlier. Other Seagram brands owned by Pernod include Royal Stag and Blender’s Pride. Imperial Blue competes with top-selling whiskies in India such as McDowell’s No1 from Diageo, Royal Stag from Pernod, and Officer's Choice from Allied Blenders and Distillers.

“It could be a margin play," the third person said, referring to relatively lower margins from brands such as Imperial Blue and Royal Stag. "Many multinationals want to get rid of their low margin profile businesses. Margins on 20-million-odd cases do not sit well with the margin profiles of large MNCs. Pernod has been reducing focus on the brand for a year now," the person added.

A transaction like this may not find too many suitors given its large size, the person said. “A few homegrown companies which operate in this price segment could look at it, which is why they are choosing to dispose of the lowest entry price point for their whisky portfolio in India," the person added.

Demand in India

Pernod clocked total net sales of €11,598 million in FY24, down 1% over the previous year, earnings released last week showed. It reported a 9% sales decline in the US and a 10% decline in China, but a 6% growth in India, attributing it to "broad-based and accelerating performance underpinned by strong consumer demand."

Also read | Jean Touboul replaces Paul-Robert Bouhier as Pernod Ricard India MD

Pernod Ricard India posted a consolidated revenue from operations of ₹25,039 crore in FY23, up from ₹22,741 crore in FY22, according to data sourced from Tofler. In FY23, India surpassed China as its second-largest market by net sales, after the US. Jean Touboul, CEO, Pernod Ricard India, said in an interview with Mint in February that the company was expecting to return to “low-double-digit growth" from next fiscal.

In its earnings report, Pernod Ricard said that it was “continuing active portfolio management notably with disposals of some strategic local brands". It added that its India sales are premiumizing on the back of strong growth on international brands such as Jameson, Absolut and The Glenlivet. It also said it had seen significant growth of Seagram’s whiskies, “led by the higher-style whiskies Royal Stag and Blenders Pride and successful launch of the Single Malt Longitude 77", it said last week.

Challenges

However, Pernod Ricard has also been facing regulatory challenges in India. In July, Reuters reported about the French company’s failed attempt to sell alcohol in Delhi. Pernod’s licence in Delhi was rejected as tax authorities suspect violations of its liquor policies.

Pernod is also facing two antitrust cases in India, and contesting a tax demand for nearly $250 million for alleged undervaluation of imports, the Reuters report said.

India’s organized liquor industry may record revenues of ₹4.45 trillion in FY24, according to a 2023 report by ratings firm Crisil. The country has a clutch of homegrown large liquor companies such as Radico Khaitan, Allied Blenders and Distillers, John Distilleries, Tilaknagar Industries and Inbrew Beverages Pvt. Ltd.

And read | Pernod Ricard not scaling back India business, says COO