Alexandre Ricard, Chairman and Chief Executive Officer, Pernod Ricard says he believes firmly in the resilience of global travel retail.

In a recent interview, he tells Luke Barras-Hill that the second largest wine & spirits company in the world intends to fully capitalise on the DF&TR market’s growth potential in the next decade and beyond.

How would you characterise the past 12 months for Pernod Ricard’s global travel retail division in an uncertain economic climate?

Globally, fiscal year 2018/2019 was excellent with very dynamic 6% (organic) growth topline with a particular focus on the four big ‘must-win’ markets: US, China, India and of course, global travel retail. When it comes to global travel retail specifically, we’ve had a very strong year as well. It’s been quite a vibrant environment with strong growth of +6%. This came from all regions, with particular dynamism from Asia.

It has also been a dynamic year when it comes to innovation. We have been very successful with the likes of Chivas; specific exclusives around the Martell franchise like Cordon Bleu; limited editions around the aged range of Ballantine’s; and Royal Salute with a very successful launch of The Lost Blend that really engaged travellers. Single malts is an emerging category, especially in Asia and globally it is very buoyant.

There was a lot of innovation around Glenlivet and the launch of Secret Speyside, our rare malts, some of which come from vanished distilleries, and the premiumisation trend is still going strong.

How do you see the path of global travel retail at Pernod Ricard mapping out over the coming 12 months?

It is difficult to say. I like to sit back before going into a 12-month perspective and look at the underlying, long-term growth ambition of our channel. We know over the next decade passengers will grow. This growth will be mainly driven by Asia and in particular by the Chinese traveller.

From that point of view, we believe we are extremely well positioned and best placed to capture growth due to our global footprint and portfolio. All the innovations I mentioned are driven by brand franchises which are very strong among our travellers in terms of brand equity. Travel retail is a very resilient channel. There are always ups and downs, but it has always grown over long periods of time. Hong Kong is tough, how long it will last? I do not know, but it won’t be for ever.

As you look across the brand divisions, what excites you and where do you see the next big, untapped frontier markets for growth?

I do think premiumisation is here to stay and is still by far a big value creation lever as passenger levels increase. People and travellers will trade-up and gifting will continue to grow. Innovation will remain a key growth driver in travel retail.

During a panel discussion [at the recent TFWA World Exhibition & Conference in Cannes] I mentioned 53% of travellers are willing to try or buy something new, which means that innovation and leveraging existing brand franchises is clearly playing a big part in the growth in travel retail. There is a trend towards lower alcohol content propositions, exclusives, custom-made products, single cask products… the list is quite long.

How big is the online and e-commerce opportunity for Pernod Ricard given the fact that Alibaba and Amazon are entering travel retail and potentially offsetting the cost gains consumers can make?

Alibaba and Amazon are platforms. So is Pernod Ricard. Pernod Ricard is a fully integrated vertical platform with a distribution network and online channel presence, travel retail being one of them. The Pernod Ricard platform is the best way to connect our brands to consumers, travellers, shoppers and so on and e-commerce plays a role. It is still small, a little bit more than 2% of total sales, but it is the fastest growing channel.

Digital is not just the transaction part, but the engagement part; if the two big challenges are footfall and conversion, digital engagement is critical from that point of view and more broadly – data; knowing your consumers and travellers. It is a full 360-degree trail involving physical experiences, digital messages and e-commerce.

Category-wise, I’d like to talk to you about US whiskey and bourbon. You’ve made some key transactions in recent months with Castle Brands and Rabbit Hole Whiskey, among others. Why has Pernod Ricard chosen to really dip its toes into the bourbon whiskey, Kentucky whiskey and US whiskey categories now and are there plans to develop this portfolio in travel retail?

From an M&A point of view, our strategy is clear and simple: number one is leverage dynamic categories, the gin and whisky category and bourbon in particular. In bourbon and US whiskey it drove us to do Smooth Ambler [acquired in 2017 – Ed], TX Whiskey [acquired Firestone & Robertson Distilling Co in August 2019 – Ed], Rabbit Hole [acquired in July 2019- Ed] and Castle Brands with Jefferson’s bourbon [acquired in August 2019 – Ed].

Some of these US whiskey brands are designed to stay regional, others to be national and of course travel retail will be an opportunity for some of these to go beyond the US market. [Since this interview was conducted in early October, Pernod Ricard has completed its acquisition of Castle Brands – Ed].

After Brexit, will consumers continue to pay a premium for spirits given your strategy is very much targeting the super-premium segment?

Our business model is based on two key consumer – and even human – insights. Whether there is a Brexit or not, number one there will always be that deep, human need to celebrate, to share and be together – Créateurs de Convivialité.

The second is premiumisation: people always aspire to better and that is the story of civilisation. There have been many crisis in the world’s history and there will be many more. People will still end up on a Friday evening, at a table, with a brand of their choice.

So you are not scared of having to trade down?

Trading down does happen of course as there are cycles, but the overall, global trend is premiumisation by definition. That is the area we want to play in. The trade down part, standard and value-for-money segments… we do not see any strategic interest. We like selling premium products that have a story.

A condensed version of this Q&A will appear in the forthcoming December print issue of TRBusiness. Click here to subscribe.

To read more from Pernod Ricard Global Travel Retail, a presence at the Trinity Forum in Doha, Qatar, click here.