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Pernod Ricard's growth slowed by European discounting

Published:  23 July, 2008

Pernod Ricard's third-quarter sales preview has predicted that the drinks giant's organic growth will slow due to tough discounts in the European region.

The preview, released by analysts Bernstein Research has claimed that the company will experience "a slight headwind to overall sales growth" in Europe, where sales in the third quarter of FY07 were artificially high because of consumers purchasing products ahead of price increases in Spain, the UK and Germany.

Bernstein Research did state that emerging Central and Eastern European markets would continue to expand, with an underlying growth rate of 8% estimated for the region.

The Asian market - the next biggest contributor to Pernod Ricard's sales - was also predicted to grow at a rate of 12%, led by the continued strength of the Chinese market.

Latin America was also reported to be performing well, although the overall growth of the Americas region would be hindered by a slowdown in the US.

Bernstein Research also claimed that the beverages industry was "undervalued" compared to other European CPG sectors.

It admitted that the industry was dependent on emerging markets and was exposed to increasing commodity costs; but said these concerns were applicable to all sectors and that "beverages has stronger pricing power because of oligopolistic market structures in emerging markets".