Pernod-Ricard : the story behind the Pastis success

atrick Ricard passed away on 17th August  2012. This one of a kind boss transformed a thriving small-medium French business, that specialised in aperitifs, into the number two wines and spirits enterprise in the world. Let’s relive this typically French success story: from the humble French aperitif to the global artistocracy of wines and spirits.

A twist of fate

The year that marked 80 years of his historic brand, Patrick Ricard, 67, died suddenly from a heart attack. “80 years and still pastis”, claimed the publicity campaign launched to celebrate this anniversary, emphasising the agelessness of the aniseed aperitif, whose recipy remains unchanged all these years. This is not the case for the Pernod Richard group, which, under the impulse of Patrick Ricard, has completely transformed: the small French family business has today become the second largest global group for wines and spirits behind the British Diageo. No one would have predicted such a success story. When, in 1978, at just 33 years old, Patrick Ricard was propelled to the head of the recently merged Pernod-Ricard group, few could imagine the qualities that he would acquire over the years. Shy, untalkative, the young director-general did not fit the profile of the average 1980s boss. “He wasn’t anything like the high-powered business leaders. He represented absolute kindness,” confides his friend, Franz-Olivier Giesbert who was at the Journal du Dimanche when he died. What is more, the young Patrick started off with serious handicaps. Firstly, he was not the heir initially chosen by emblematic founder Paul Ricard. His brother, Bernard, was the one to whom the patriarch first entrusted the reigns of the Ricard house. Thanks to a quarrel between father and oldest son, the youngest was ultimately given charge.

Another setback: the heir had no qualifications. His father not believing in studying, he left school at 14. Nevertheless during the thirty years that he would spend as head of the enterprise, he would grow into an enterprising and daring boss. He, who does not speak English, would instigate an international development strategy from the year 2000 via a dynamic purchasing policy. Admittedly, to his great disappointment and despite his best efforts, the aniseed aperitif has not managed to impose itself beyond French borders, with the exception of Belgium, Italy and Spain. “I would have liked to have made Ricard Pastis the French Absolut but the taste wasn’t internationally accepted,” confides Patrik Ricard at Rayons Boissons in 2008. This misfortune did not in any way tarnish the surprising international route taken by this French aperitif specialist, however, that today makes 90% of its turnover in exports.

Seemingly good-natured, this atypical director-general proved to be a smart choice. “He had the make-up of a great leader: firstly a vision which led him to take lots of risks and to give his company a global dimension, and the capacity to surround himself with talented people,” says François Pinault, one of his closest friends, in the Journal du Dimanche.

Brand strategy

Although initially tempted by a diversification into non-alcoholic drinks with the purchase of the French Orangina Company (Orangina, Pampryl, Champomy), Patrick Ricard executed a stratgegic turnaround some years later, letting go of this activity to refocus the group on spirits. He would then never stop expanding his folder of brands through an active policy of external growth. He started off in 1981 with the Bourbon, Wild Turkey, and followed this with Irish Distillers (Jameson), Seagram (Chivas, Martell, Glenlivet) and Allied Domecq (Ballantines, Malibu, Mumm, Perrier-Jouet), before signing his last remarkable feat in 2008: the buyout of the Swedish group V&S, owner of the famous Absolut Vodka.

In total 20 million euros will be paid out in less that 10 years to take over these jewels. During this frenzy of acquisitions, the group aims to increase its range of brands in sink with market expectations. “Consumers want to drink less, but better quality products. This orientation responds equally to the expectations of new markets where the middle classes are looking for statutory brands,” explains the enterprise in its press statement. Today Pernod Ricard sells itself as the global leader in premium and prestigious spirits (sold for more than 17 US $ per bottle in the American market). These brands represent 71% of the company’s turnover. Over the course of these purchases, the group has also built up a portfolio of wine brands from most vineyards in the world (Australia, New Zealand, South Africa, Argentina, Spain, California…) with the notable exception of French wines – apart from Champagne.

“Should we also have ‘still’ wines ?” Francesco Taddonio, wine director at Pernod Ricard, asks himself in an edition of Entreprendre, the groups’s magazine. “It could only be considered on certain conditions: that the wine fulfills the same criteria of consistency in taste over time, flexibility of production, and that it be possible to create a clearly trustworthy brand. In brief, it will not be tomorrow.” The brand strategy developped by Pernod Ricard finds sense in the context of the New-World wines. It proves much more tricky with French wines. Their diversity, complexity and division of vineyards make them much less susceptible to brand development on an international scale.The company does not, however, stop itself from completing its range with Chilean and Californian wines. “If opportunities present themselves, we will certainly look at them, on the condition that they are in line with our financial criteria.” This brand strategy, the company’s red line of development, has recently been singled out by the American weekly, Forbes, which classified Pernod Ricard as the 15th most innovative company in the world. “When it comes to innovation, Pernod Ricard seeks to function like a new technology enterprise,” points out a journalist from the American weekly. For Martin Riley of Directeur Marketing Group: “The innovation is in the daily life of the group. Today there are more than 300 innovative projects. Innovation is everybody’s responsibility at Pernod Ricard. A structure entirely dedicated to innovation, the Breakthrough Innovation Froup (BIG), was also created six months ago. It is a separate structure, outside the traditional organisation of the company, an efficient detector of innovation, a free electron whose mission is to work on breakthrough proposals regarding products as much as services,” explains the director Alain Dufossé.

Simplicity and conviviality

Another strength that Patrick Ricard knew to maintain and grow was a robust enterprise culture, never diluted by successive acquisitions. It rests on a decentralised structure, favourable to the defense of the values it brings together. Simplicity and conviviality are part of the management foundations at Pernod Ricard. “If the group adopted ‘creator of conviviality’ as its slogan, it’s the reflection of a culture. Patrick Ricard’s personality is a case in point,” discloses Pierre Pringuet, acting director-general at Paris Match. The group’s workers are sensitive to this. The group’s first opinion study on its 18 000 employees confirms this, with a record participation rate of 80% : 95% of employees say they are proud to belong to the group, 93% adere to its values and 80% of them believe that the conviviality is a daily reality.

The self-taught director-general surrounded himself with employees of varying profiles, but always people armed with qualifications. The group set out to encourage the evolution and training of its employees. It even set up its own training centre in 1992, the CFPR (le Centre de Formation Pernod Ricard), based in the Voisine Chateau in the Rambouillet forest near Paris. This centre provides all types of training, adapted to the specific needs of the wines and spirits sector: marketing; finance, human resources, purchasing, quality, law, communication, public speaking and personnel and management development… The site also allows employees from the group to meet and exchange ideas and experiences, thus maintaining conviviality and reinforcing the mentality of the group, a vital element of management for a decentralised group like Pernod Ricard. Last year, 700 interns were welcomed at the training centre. In 2010/11, investment in training in France represented 2.85% of the wage bill.

A new entity, Pernod Ricard University, also came to life last year, in order to locally filter training, of the same level as Voisine, in the countries where the group is establishing itself. On 30th August this year, a few days after the passing of Patrick Ricard, the group announced a strengthened turnover of 8.21 million euros for 2011-2012 (+8% compared to 2010-2011). “The group has ratified the best growth rates since the 2008 economic crisis. It is the result of a clear and constant strategy: strong investment in our brands, innovation, premiumisation and geographic expansion. Despite the economic uncertainties, we are confident in the group’s ability to deliver a similar solid growth this year,” commented Pierre Pringuet.

The Administration Council have also announced the appointment of Alexander Ricard, Patrick Ricard’s nephew, to the duties of director-general of the group from 1st January 2015. He will take over from Danièle Ricard, named president of the Administration Council following the death of his brother and of Pierre Pringuet, current director-general of the group. A decision which would have no doubt thrilled Patrick Ricard, who had already put his nephew in prime position to carry the torch and write the new pages in the family saga – always with the Ricard mentality of course.

Key figures

2011-2012 turnover: 8.21 million euros (+8% compared to 2010-2011) Current operational result: 2.11 million euros (internal growth: +9%) Net result share of group: 1.146 million euros (+10%) 18 777 employees (on 30th June 2012) A decentralised organistion in: 6 brand societies 701 market societies 7 geographical regions 98 production sites The main stages of the group’s development: 1975: Creation of Pernod-Ricard by the merging of two french leaders in aniseed spirits: Pernod, whose creation dates back to 1805, and Ricard, created by Paul Ricard in 1932. 1984: Development of the non-alcoholic drinks sector. The group acquired the Compagnie Française des produits Orangina. 1988 : acquistion of the main Irish Whisky producer, Irish Distillers, owner of prestigious brands including Jameson. 1989: acquisition in Australia of the Orlando Wyndham group (wines, notably the brand Jacob’s Creek). 1993: Creation of international Havana Club by Pernod Ricard and the Cuban society Cubaron, a joint venture 50/50 for the commercialistion of Havana Club rhum. 2001: acquisition of 39% of Seagram assets for $3.2 million in order to recfocus on wines and spirits. Programme of handover of assets in the non-alcoholic sector; sale of Orangina, Jfa Pampryl and SiaS Mpa. Chivas regal, Martell and the Glenlivet expand the portfolio of initial brands. Pernod-Ricard therefore double in size qnd become one of the top 3 Wines and Spirits operators in the world. 2005: acquisiton of Allied Domecq, in partnership with Fortune Brands for $10.7 million. Pernod Ricard doubles in size again and becomes the world no. 2 for wines and spirits. 2008: acquisition of the Swedesh group Vin&Sprit, owned by Absolut, for $5.7 million. Pernod-Ricard become no. 1 in the world in the sector. Patrick Ricard gives up his executive duties at the head of the group, but remains president of the Administration Council. 2012: Patrick Ricard dies aged 67. His nephew Alexandre is announced as the president of the group starting 2015.