Pernod signals end to Australian cheap wine

Published: 23 July, 2008

Pernod Ricard has signalled an end to the era of cheap Australian plonk, as the ongoing drought has halted the country's wine glut.

Announcing full-year results at the Beefeater Distillery in London on July 26, Pierre Pringuet, Pernod Ricard's managing director, said: "I am afraid consumers will be disappointed because the end of cheap wine is near.

"This question of oversupply of wine (in Australia) is behind us - we might face a situation of shortage. New developments depend on irrigation."

Pringuet, who was promoting the drinks giant's bid to push consumers towards premium products, argued that the shortage of grapes would help the group restore the "true value" of Jacob's Creek, one of Australia's biggest wine exports. "The competitive pressure on price is about to disappear."

AC Nielsen figures show that the price of Jacob's Creek in the UK - its main market - has been flat over the past few years, with the brand selling at 4.27 per bottle on average.

The Australian government has forecast a drop in yields of 30% for 2007/08, due to the drought.

Pernod share fell by 5% to 152.59 yesterday after the group reported organic growth of 8.6% for the financial year ending in June. This was below analysts' expectations.

Its wine business has also been growing more slowly than the spirits side, with sales up 1.3%, compared to 11% growth for spirits.

Meanwhile, Pringuet has joined the board of directors of Iliad - a major player in France's internet and telecommunications market - as an independent board member. His appointment will be subjected to approval of the next General Assembly.

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