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Pernod Ricard Ukraine ushers in new elite alcohol brands

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Jan. 26, 2006, 1:20 a.m. |
Global wine and spirits producer says major acquisition last year makes it possible to introduce a number of popular alcohol drink brands to the Ukrainian market. of popular alcohol drink brands to the Ukrainian market.

The Pernod Ricard group, founded in 1975 as the result of the merger of two French companies, has become the number-two wine and spirits producer and distributor in the world - and No. 1 outside the United States, according to the group’s Web site.

In July 2005 Pernod Ricard, in partnership with American group Fortune Brands, acquired the U.K.’s Allied Domecq Group, increasing Pernod Ricard’s sales volume from 50 million to 77 million cases a year and upping its annual trade turnover from 3.5 billion euros to 5.6 billion euros.

“The total transaction was the largest in the industry, $14.5 billion, putting the group second in the world after (U.K.-based) Diageo in terms of sales volumes,” said Ara Grigoryan, managing director of Pernod Ricard Ukraine, a subsidiary of the parent company.

The acquisition also enlarged Pernod Ricard’s already extensive portfolio of alcoholic beverages by 15 brands, with such well-known drinks as Ballantine’s, Beefeater, Malibu, Kahlua and others.

Now, Grigoryan said, Pernod Ricard Ukraine will supply these brands in Ukraine.

“In Ukraine, we sell 27 brands, and this year we intend to sell more than one million liters,” he said.

Pernod Ricard Ukraine was created in July 2001 after it bought out Armenian Cognacs and began importing the group’s premium brands. In 2004, the Ukrainian subsidiary opened a branch in Odessa.

“In the category of Armenian cognacs, we control about 65-70 percent of the Ukrainian market,” Grigoryan said, “but in the premium alcohol segment our market share is 25 percent and growing.”

Pernod Ricard faces competition in the country primarily from joint ventures such as Alef, Markom, and National Alcohol Traditions, the distributor of Diageo in Ukraine. Only the last two import their own products.

But Grigoryan says his company’s major source of competition on the Ukrainian market is not legitimate businesses but illegal importers.

“In March and April 2005, when the government was implementing programs to eliminate contraband, we felt that the situation was changing. But at the end of the year, the level of illegal alcohol increased even more,” he said.

Grigoryan said that illegal imports of alcohol brands make up about 45 percent of the volume of legally imported brands. He said that since the group’s profits are consolidated, any illegal importation or duty-free movement of the group’s products into the country cuts into Pernod Ricard Ukraine’s distribution and import margins.

Pernod RicardGroup maintains production sites in Russia, Poland, Armenia and Georgia, but not in Ukraine. “In Ukraine we do not have such plans [to produce wine or spirits] yet,” Grigoryan said. “We are optimistically waiting for the political and economic situation in the country to stabilize. Unlike Ukraine, Russia’s political situation is more predictable.”
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