Internationalization of Pernod-Ricard Group

2294 words (9 pages) Essay in International Studies

08/02/20 International Studies Reference this

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Pernod Ricard is made from the merger of two French anise-based spirits companies: Pernod, established in 1805, and Ricard, established by Paul Ricard in 1932.

In the 2015-16 yearly report of Pernod Ricard Group (PRG), Chief Executive Officer (CEO) Alexandre Ricard pondered the achievements of the Pernod Ricard (PR) brands. He expressed that the accomplishment of this worldwide house of brands is tied in with developing the right mindset in its employees, encouraging global viewpoint and grasping a work culture that mirrors the wonderfully French idea of sociability. Besides, he attributed PRG’s continued growth to the sense of creativity, innovation and originality that encompasses nearly anything this organization does. Considering PRG’s expansionary way of continually high growth rates (PRG Annual Report 2007/08) – not withstanding when different organizations endured significant reductions after the Great Recession of 2008-2009, for example, the decrease in beer sales- one would have little reason to question the reality of Ricard’s decisions.

Be that as it may, behind these milder business esteems lies a larger amount of business sharpness. PRG appears to approach each market with an exact and frequently customized strategy.

Beginning from moderately unobtrusive beginnings, A national merger of Pernod and Ricard in 1975, PRG’s one of those uncommon organizations that has possessed the capacity to utilize a blend of various entry and expansion strategies through the span of its history and has there by become both organically and by means of the course of acquisition’s. Development has been quick since 1975 making PRG the second biggest maker of wine and spirits worldwide in 2016 after Diageo.

In 1976, The young organization starts to differentiate its portfolio which, up to this point, for the most part comprises of anise-based aperitifs. They acquire la Compagnie Dubonnet-Cinzano (CDC) and Cusenier, which incorporate Ambassadeur, Bartissol and Café de Paris brands.

Expansions in Europe

Germany 1960 – Due to the large demand of wine and spirits in Germany, a sales subsidiary was set up in 1960. Traditionally, market growth in Germany has been based on foreign and exotic brands that PRG can offer, such as The Havana Club brand. The German subsidiary is highly successful and ranks among the largest subsidiaries in the group in terms of turnover. Additionally, PRG purchased the majority share of high-end German gin brand Monkey 47 in 2016.

Scotland 1975 – In making its initial acquisitions, Pernod Ricard offered need to whisky, a spirit with one of the highest levels of consumption worldwide. Scotland with a very less geographic as well as psychic distance (Johanson and Wiedersheim, 1975) and with a market having the same preferences was an ideal choice. It acquired Campbell Distillers, a producer of Scottish whiskies.

France 1976 – Acquired la Compagnie Dubonnet-Cinzano (CDC) and Cusenier. The Group was able to take advantage of increased resources to develop its distribution networks and brand portfolio.

Spain 1978 – Spanish subsidiary created. Given that the most ideal approach to build up its brands was to distribute its products itself, the Group gradually opened partners in all areas of the world. By obtaining local brands, the Group could extend its portfolio and increment the productivity of this network. PRG signed an agreement for the sale of the Domecq Brandies and Wines in 2016.

Italy 1985 – Acquisition of Italian Beer Ramazotti. As presented in the Chicago Tribune (1985), Ramazotti was one of Italy’s leading producers of spirits and the third largest seller of bitter drinks. Acquisition of Ramazotti lead to a huge net profit, thus giving them a national competitive advantage over other rivals.

Ireland 1988 – Acquisition of Irish Distillers, leading producer of Irish whiskey and owner of Jameson. Whisky is the most highly demanded drinks among the Irish, Jameson is the leading producer of whisky in Ireland. Through Foreign Direct Investment (FDI), PRG achieved a national competitive advantage.

Poland 1999 – Acquired Polish Wyborowa. The product stayed well known locally until 1873 when the export of the vodka was begun to the European countries. In 1927, Wyborowa became the first vodka brand to be a worldwide trademark. After the time of economic transition in the late 1980s and mid-90s, the Poznań refinery, in the same way as other others in the nation, got itself into serious trouble and was near to filing for bankruptcy protection. However, because of the huge universal fame of its significant product, the plant was purchased by Pernod Ricard (Anon, 2018).

Ukraine 2001 – Created Pernod Ricard Ukraine as a sales subsidiary. According to Kyivpost (2006), Pernod Ricard Ukraine was created in July 2001 after it purchased out Armenian Cognacs and started bringing in the group’s superior brands. Pernod Ricard faces rivalry in the nation basically from joint endeavors, for example, Alef, Markom, and National Alcohol Traditions, the distributer of Diageo in Ukraine. Just the last two import their very own products.

UK 2005 – Acquires Allied Domecq in partnership with Fortune Brands. The Group once again doubles in size and becomes the world No.2 in Wine and Spirits by incorporating Mumm and Perrier-Jouët champagnes, Scottish whisky, Beefeater gin and Malibu liquor (The Guardian, 2005). These products are of strategic international importance which helped them in achieving an edge over national competition but at the same time involved FDI.

Nordic Countries 2008 – Acquisition for €5.7 billion of the Swedish group Vin & Sprit, owner of Absolut Vodka, which was dominant in the spirit market in Nordic countries (Sweden, Norway, Finland, Denmark and Iceland), making Pernod Ricard the world co-leader of the industry (Gowen Smith, 2008). Additionally, a new regional devision of the PRG was born which focused on the Nordic markets under the combined management of Ketil Eriksen (CEO of V&S since 2005) and Michel Mauran (CEO of the Nordic Markets and PRG Denmark since 2005)

Expansion in North and South America

US 1981 – It acquired Austin Nichols, a US spirits player in 1981. PRG made this move to capture the huge market of the United States, the world’s biggest Wines & Spirits market. According to Bloomberg (2018), Pernod Ricard USA, LLC was formerly known as Austin, Nichols and Co, Inc. and changed its name to Pernod Ricard USA, LLC in December 2001. Pernod Ricard USA, LLC produces and distributes spirits and wines. Its products incorporate vodka, Scotch whisky, single malt Scotch whisky, Irish bourbon, alcohols, gin, tequila, champagnes, and shining wines. The organization offers its items through distributors in the United States

Cuba 1993 – Pernod Ricard and the Cuban organization Cuba Ron create Havana Club International, a 50/50 joint venture to advertise Havana Club rum. In 1976, Cubaexport assumed control over the brand and restored it to offer abroad. In any case, it was in 1993, when Pernod Ricard collaborated with Cuba Ron, that the item started to get steam around the world — aside from in the U.S. due to the exchange ban on Cuba.

Canada 2001 – Acquisition of Seagram. Another major acquisition was that of Seagram spirits (an international house of brands originally based in Canada), whose assets such as Chivas Regal Scottish Whisky and Captain Morgan Rum, were divided between PRG and its competitor Diageo in 2001. After an 8 billion USD purchase (New York Times, 2000). After the 40% purchase of Seagram’s business activity, PRG doubles in size and moves into top three global groups for wine and spirits.

Mexico 2017 – Announced partnership with Del Maguey Single Village mezcal as a Sales Subsidiary.

Expansion in Asia and Africa

Pernod Ricard Asia is in charge of 16 business units in the Asian region. The first Asian Representative Office was built up in Singapore. In the wake of watching a huge market like Asia where the local demands were like their product offering, PRG proceeded with the arrangement creating subsidiaries.

Japan 1985 – Creation of Pernod Ricard Japan via Greenfield Strategy, with the main product being wine.

India 2001 – Another case of an ongoing key market where PRG bunch through greenfield operations is India. Here the organization worked more than 30 production sites in 2016 (with a key quality in whisky). The main target of PRG was the white-collar class section, especially in the spirits market.

Africa 2013 – Pernod Ricard further develops subsidiaries in Africa, opening several in many African countries. Analyzing the market size, people’s taste and preferences, PRG established a number of sales subsidiaries in the above regions to market as well as sell their wide range of products.

Expansion in Australia and New Zealand

Australia 1989 – Acquisition of Australian wine maker the Orlando Wyndham Group, which produces Jacob’s spring. Australia’s scope of wine areas and assortments, involvement in innovative winemaking, inviting business condition and solid base for exports to scratch markets were key drawcards for French winemaker Pernod Ricard. Pernod Ricard Winemakers is one of Australia’s biggest winemaking organizations. It is home to a portion of the world’s and Australia’s best-known wine brands including Jacob’s Creek, George Wyndham and St Hugo. Since entering Australia in 1989, Pernod Ricard has extended the local wine industry and elevate Australian wines to worldwide markets. It gained Orlando Wyndham and begin repositioning its brands. Brett McKinnon, Global Operations Director, Pernod Ricard Winemakers, says the organization picked Australia since it was quick to expand on the local business’ creative methodology and characteristic preferences.

Australia has an amazing accessibility of space to grow and build up the wine business, keeping up quality while reacting to increased demand. ‘In the 1980s, Australia was driving a huge change in the worldwide wine industry,’ he says. ‘Rather than going up against old-world, customary thoughts of what wine ought to be, Australia’s wine industry was the first to adopt a buyer-friendly strategy that made wine more available, reasonable and moderate for ordinary purchasers. Quality item, extraordinary brands and a steady business condition made Australia an appealing speculation area for Pernod Ricard.

A complementary strategy for Pernod Ricard Winemakers has been to invigorate Australia’s tourism industry by bringing Chinese and other Asian visitors to South Australia’s Barossa Valley.

New Zealand 2004 – Acquisition of Framingham Winery. Set up in 1991, Framingham owns and markets the premium Marlborough Wine brands Framingham and Tyler’s stream. The organization delivers a scope of aromatic white wines including Sauvignon Blanc, Riesling and Pinot Gris, as well as its Pinot Noir red wine. Framingham claims and works a modern winery and cellar door sales facility near Renwick in the core of Marlborough’s Wairau valley. Framingham will compliment and increase the value of Orlando Wyndham’s current image portfolio. Likewise, Framingham will profit by Orlando Wyndham’s wine making and advertising skill and in addition PRG’s overall distribution network. Framingham sources premium grapes from its very own vineyards and a select number of agreement cultivators in the Marlborough area.

List of Greenfield Operation Countries

  • New Zealand
  • Japan
  • India
  • China
  • South Africa
  • California (USA)
  • Greece
  • Croatia
  • Ireland
  • Germany

Conclusion

From the above factors it is observed that Pernod-Ricard Group evaluates the external environment of the place as well as the internal environment of the firm before merging or acquiring it. It takes into consideration factors like Psychic distance, National Competitive advantage, Market Strength, Market Size and Demand before laying out a strategy for the Internationalization process. Due to the above reasons, they have emerged as one of the largest producers and distributors of wine & spirits.

 

References

  1. Levitt, T 1983, ‘The globalization of markets’, Harvard Business Review, 61, 3, pp. 92-102.
  2. Johanson, J, & Wiedersheim-Paul, F 1975, ‘THE INTERNATIONALIZATION OF THE FIRM — FOUR SWEDISH CASES’, Journal Of Management Studies, 12, 3, pp. 305-322.
  3. Morgan, R.E., Katsikeas, C.S., 1997. Theories of international trade, foreign direct investment and firm internationalization: a critique. Management Decision 35, 68–78.
  4. Porter, ME 1990, ‘The Competitive Advantage of Nations’, Harvard Business Review, 68, 2, pp. 73-93.
  5. Ghemawat, P 2005, ‘Regional Strategies for Global Leadership’, Harvard Business Review, 83, 12, pp. 98-108.
  6. https://www.pernod-ricard.com/en/our-group/our-key-dates/
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  8. Anon, (2018). [online] Available at: 9. http://juicyshoot.com/qvodka-anecdotes.htm [Accessed 25 Oct. 2018]. Available at: 10. https://www.kyivpost.com/article/content/business/pernod-ricard-ukraine-ushers-in-new-elite-alcohol-23760.html?cn-reloaded=1 [Accessed 25 Oct. 2018]. Available at: 11. https://www.theguardian.com/business/2005/apr/21/4 [Accessed 25 Oct. 2018].
  9. Gowen Smith, B. (2008). Absolut success for Pernod-Ricard. Retrieved from https://www.bevnetwork.com/pdf/may08_absolut.pdf Available at: https://www.just-drinks.com/news/pernod-ricard-acquires-nz-winery_id69372.aspx [Accessed 25 Oct. 2018].
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