The Pernod Ricard Magazine No 55 • Spring-Summer 2010 Latin America New Land of Growth STRATEGY Interview with General Management GUEST Pascal Lamy Director-General of the WTO FEATURE Latin America, New Land of Growth ADVERTISMENT PUBLISHED OUTSIDE OF FRANCE n°55 Spring-Summer 2010 6 STRATEGY Interview with General Management 12 sHAREHOLDERS GROUP NEWS 14 GUEST Pascal Lamy Director-General of the World Trade Organization (WTO) 28 fEATURE dossier page 18 18>45 LatinAmerican Dynamism Latin America, New Land of Growth 30 Mexico 34 Brazil 38 36 Social and Environmental Responsibility Argentina Companies at the Forefront news 46 news news entreprendre No 55 • Spring-Summer 2010 3 editorial 4 entreprendre No 55 • Spring-Summer 2010 Dear Readers, After Entreprendre’s successful issues highlighting the history of spirits, followed by vodka and its iconic brand, ABSOLUT, Pernod Ricard invites you to discover its ongoing expansion into international markets. In this issue, our subsidiaries in Mexico, Brazil and Argentina open their doors to tell you about the growth of Pernod Ricard’s wines and spirits in Latin America. Also, as you’ll find out in the interview with General Management, Pernod Ricard’s teams have been hard at work in recent months to define an important new ambition for the Group. In line with Entreprendre’s mission to help you understand our activities and our strategic challenges, we offer you a full look at it inside. Finally, our sincere thanks go to everyone who took part in our readership survey. This exercise gave us a clear picture of your expectations so that we can work better to meet them, starting with this issue. Among other new features, we’ve introduced a new Forum for personalities of the contemporary world, added information on our commitments to Corporate Social and Environmental Responsibility, and expanded the section on the performance of the share price. We hope you enjoy reading this issue. The Editors ADVERTISMENT PUBLISHED OUTSIDE OF FRANCE 5 créate STRATEGY de Interview with General Management “Créateurs de convivialité”: Such is the new slogan adopted by Pernod Ricard in April 2010 to communicate the role the Group intends to play from now on in the Wine and Spirits industry. The wording to express this vision follows an intense period of study led internally in recent months. With it, Pernod Ricard proclaims its mind-set: that of a leader, a key change agent in the industry, and a driver of growth in the sector. 6 entreprendre No 55 • Spring-Summer 2010 urs To better understand the main implications of this vision, Entreprendre interviewed Pierre Pringuet, Chief Executive Officer, and his Managing Directors. Selected excerpts follow . Pierre Pringuet Chief Executive Officer Thierry Billot Managing Director, Brands Bruno Rain Managing Director, Human Resources and Corporate Social Responsibility Michel Bord Managing Director, Distribution Network Gilles Bogaert Managing Director, Finance entreprendre No 55 • Spring-Summer 2010 7 Six months ago Pernod Ricard launched a major company project, called “Agility”, which touches on all Group functions. What are the findings of this project? Pierre Pringuet > “Agility” has primarily served to reaffirm our key strength, which is our culture. We’ve found a new and clearer way to express this. There are three values at its core: a spirit of entrepreneurship, mutual trust and a strong sense of ethics. These values make eminent sense when expressed in a unique organisation, the Pernod Ricard “model”, founded on the principles of decentralisation and conviviality. Our culture can be summed up in one word: Passion. It is passion that unites us and guides our entrepreneurial drive. It’s with passion that we must face the future, using it to achieve the important goal of capturing leadership. Leadership is above all a mindset: the leader is the one who innovates, who changes the rules of the game. “Agility” finds expression through the combination of six keywords: focus, speed, passion, creativity, excellence and responsibility, which fit together like the pieces of a puzzle, and give the overall plan its coherence. New approaches will be implemented throughout the Group's businesses to translate these catchwords into action. Specifically, over 30 projects have been launched within the Group’s key functions and are now in their completion stages. Here, I’ve asked the members of our General Management team to expand on the meaning of these words. focus STRATEGY Thierry Billot > “Focus” means continuing to concentrate our efforts and resources on the industry’s best opportunities. This has led us to redefine the contours of our brand portfolio comprised of 18 priority brands divided into two groups: 14 priority spirits and champagne brands and 4 priority wine brands. Industry projections show that whisky and vodka will remain the major growth drivers of our business. We have thus sought to highlight two brands that are today considered “global icons”: ABSOLUT and Chivas Regal. Regrouping our vodkas under the same Brand Company will enable us fully to seize this opportunity. Accelerating the growth of our other key brands is also crucial. So in addition to our two iconic brands, we’ve reorganised our portfolio of key brands: • 7 Premium spirits brands: Jameson, Ballantine's, Havana Club, Kahlúa, Ricard, Malibu and Beefeater. • 5 Prestige spirits and champagne brands: Martell and Perrier-Jouët, The Glenlivet, GH Mumm and Royal Salute. • 4 Premium wine brands: Jacob’s Creek, Montana, Campo Viejo and Graffigna. These wines will now be managed by a single organisation in order fully to leverage the growth potential of wine, especially amongst a female target market. Lastly, key local brands have a major role to play in capturing the middle classes, which are expanding rapidly in emerging markets. There are also 18 such brands: 100 Pipers, Olmeca, Clan Campbell, Seagram’s Gin, Ramazzotti, Blenders Pride, Pastis 51, Wiser’s, Something Special, Royal Stag, ArArAt, RuaVieja, Montilla, Becherovka, Passport, Wyborowa, Suze and Imperial. Bruno Rain > As it relates to Human Resources, the concept of “focus” means focusing on what makes us strong: our employees. Our priority is to have the talent we need on board, and real leaders to lead them and help them to grow. Our aim is to bring about a genuine culture of leadership to stimulate individual performance. Such a culture should allow our employees to rise through the ranks and guide them in their careers. We will further this aim through the standardised rollout of specific Human Resources tools. 8 entreprendre No 55 • Spring-Summer 2010 passion speed Michel Bord* > In a context that has changed considerably in recent years – whether in respect of the size of the Group, our brand portfolio, or even the competitive environment – responsiveness and speed are essential strengths for outperforming our competitors. It is imperative that we be the first to anticipate market trends and meet our consumers’ expectations. We must be faster in taking decisions and implementing them, limiting the number of people involved, and thus preserving the responsiveness that has historically been the key to the success of Pernod Ricard and its decentralised business model. To achieve this, we will step up our efforts to share best practices within the Group. Sharing experiences enables us quickly to apply targeted solutions to specific problems. And through our 19,000 employees working in 70 subsidiaries worldwide, we have an inexhaustible store of knowledge and expertise. Speed in anticipating, taking decisions and executing them reflects first and foremost a spirit of boldness, enthusiasm and passion. Bruno Rain > At Pernod Ricard, we are all passionate Entrepreneurs. We live this passion through our brands and our business and transmit it to our customers and consumers. To cultivate this passion, we’ve introduced two main courses of action. First of all, we want to build what we call the Pernod Ricard University. More than a training centre, this will be a think-tank which will spread the Pernod Ricard spirit both inside and outside the organisation. In addition to being a “melting pot” for integrating new employees and transmitting the Group’s culture in a real and immediate way to all employees, it will serve as a place for dialogue and exchange, and for debating ideas concerning all of the Group’s areas of expertise. As the preferred platform for training, it will serve to accelerate the development of expertise within the Group. In addition, we want to go further in building the “Pernod Ricard” brand * After twenty years with Pernod Ricard, where he was a key architect of its international expansion, Michel Bord has decided leave the Group, effective 30 July 2010. and have defined three objectives to do so: raise the Group’s visibility beyond its historical markets, enhance its reputation by targeting themes that go beyond its financial performance, and increase its attractiveness to the financial community, institutions, NGOs, the media, our partners and new talent. We also want to go even further in strengthening our employees’ sense of belonging to our Group. Our “Pernod Ricard” trademark, which includes the new tagline “Créateurs de Convivialité” will thus evoke all the fundamental qualities we associate with the Group and its products: excellence, authenticity, origin, expertise and responsibility. entreprendre No 55 • Spring-Summer 2010 9 excellence creativity strategy Thierry Billot > Extending Pernod Ricard’s reach in the world is our daily obsession and we achieve it by exploring new segments of consumption and winning over new customers. Creativity and innovation drive this ambition. The environment has changed. The growth of the Internet means it is now the consumer who decides the kind of relationship he or she wants to create with a brand. Creativity is essential to establish this relational promise and meet consumers’ growing expectations. Expressing a brand’s inspiration and differentiation, such creativity is an essential component of promoting a Premium and Prestige portfolio. It is also a hallmark of the leadership culture and mindset. Curiosity and openness to the world feed creativity. This concerns all fields: not just Sales and Marketing, but Human Resources, Production, and Finance as well. Bruno Rain > To continue to nourish our creativity, we will rely on the diversity of our cultures, our origins and our sensibilities. This diversity is one of the Group’s great assets and it reflects the melting pot that characterises our contemporary society. We must continue to cultivate it and make it a competitive advantage. 10 entreprendre No 55 • Spring-Summer 2010 Gilles Bogaert > Excellence is the hallmark of leaders. It drives them to make their mark, to innovate, to be bold; in a word, to be a benchmark. It takes talent, but also hard work and organisation. No one can excel in everything. You have to target the key issues where you can make a difference. This means, firstly, to be able to work in a crossfunctional way and, secondly, to leverage our strengths by promoting the sharing of best practices (which requires speed as well as excellence), and making use of our experts. The goal of excellence concerns all functions in the business. It goes beyond the need to cut costs, making growth its primary aim. Striving for excellence means maximising the efficacy of points of contact with our stakeholders: consumers (including leveraging the tremendous opportunity of new digital technologies), customers (service quality, control of the shopping experience) and of course our shareholders, for whom value creation is our ultimate goal. Responsibility Pierre Pringuet > A company today is no longer judged solely on its business performance, but on its social commitment as well. At Pernod Ricard, we are convinced that acting responsibly is integral to our s t r a t e g y . This imperative of responsibility is encoded in the Group’s DNA from its founding, and it will continue to guide all of our future actions. Bruno Rain > Our social responsibility policy must be strong and consistent. It targets two priorities: t h e p ro m o t i o n o f responsible drinking and, within our operating framework, respect for the environment. Initiatives by our subsidiaries in these areas will now be measured by performance indicators. We are looking at projects that will involve the unified effort of all 19,000 employees of the Group. The idea is simple: make each of our employees an ambassador for our commitment to Social Responsibility, and better yet, a real actor in the cause. We are also strengthening our organisation in this area. It has thus been decided to establish an Advisory Committee that represents the Group’s functions and markets across the board, and to expand my responsibilities to those of Managing Director of Human Resources and Corporate Social Responsibility. If we were to sum up our vision for responsibility, it would be, “Around the world, we share responsibly and act sustainably.” Pierre Pringuet > Agility is thus more than a company project: it’s a new way of expressing and executing our role. Agility has from the beginning been a collaborative project involving a large number of Group executives. We are all intent on translating the selected proposals into immediate action: Implement our new priorities in terms of brands and geography. Make innovation and creativity a core feature of our business. Seek speed in taking decisions and excellence in their execution. Develop a culture of leadership and performance. Express our pride in working for Pernod Ricard, and make Pernod Ricard our number one brand. Reaffirm our commitment to social responsibility. “Our culture is the cement which ensures our success: we will leverage this asset by giving it new momentum as we head purposefully into the future.” entreprendre No 55 • Spring-Summer 2010 11 Shareholder Information share price chart business update Pernod Ricard share price measured against the CAC 40 from 30 June 2009 to 30 June 2010 (Close) 2009/10 Financial Year PERNOD RICARD CAC 40 e 63.98 Excerpts from the press release of 22 July 2010 Over the full financial year 2009/10, organic growth reached 2%*. 3,140.44 points 3,442.89 points sales After taking into consideration a negative foreign exchange effect of around 1% (which turned positive over HY2) and a negative Group structure effect of 3%, relating mainly to the disposal of the Wild Turkey and Tia Maria brands, 2009/10 sales reported a slight decline of 2%. For the full 2009/10 financial year, Pernod Ricard is targeting organic growth in profit from recurring operations of between 3%* and 4%* e (compared to about 3%* previously), while having increased advertising expenditure as planned. 43.9902 june 2009 JUly 2009 August 2009 september 2009 october november 2009 2009 december 2009 JANuary 2010 February 2010 MARch 2010 ApRIL 2010 may 2010 * on a like-for-like basis share price performance comparison Pernod Ricard’s share closed at €64 on 30 June 2010, for a yearon-year increase of 45% since 1 July 2009, significantly outpacing the CAC 40 (up 10%). One-year stock market performance At the start of July 2009 Pernod Ricard followed the falling market trend, and hit a low point with shares closing at €43 on 9 July 2009. The Group’s trading statement of 17 July 2009 reassured investors about the resilience of its sales and launched the share’s upward climb. The sale of Tia Maria, announced 27 July further boosted market confidence. Pernod Ricard’s share price continued to rise, reaching €60 on 7 December 2009. It hovered around this level until 17 February 2010, confirming its defensive status in an environment disrupted by concerns over Greek debt and the risk of an overheating Chinese economy. On 18 February, Pernod Ricard announced half-year results in line with forecasts, and then on 11 March, successfully issued a €1.2 billion convertible bond. The share again took off, to reach its peak for the fiscal year of €67.50 on 13 April 2010. Late April and the month of May were marked by renewed concerns about European sovereign debt, and the share corrected, in line with the markets, to hit its low for the year of €59 on 25 May 2010. In early June, rumours of an imminent revaluation of the Chinese Yuan and the announcement of strong annual results by Rémy Cointreau provided a boost to the sector and Pernod Ricard ended its financial year at €64. During the same period, the Group’s main competitors performed as follows: shareholding* diary 3.2% U.S. institutional investors 7.2% French institutional investors 9.1% Société Paul Ricard Individual and misc. shareholders Directors + Executives + Employees + Treasury Shares * At 31 December 2009 entreprendre No 55 • Spring-Summer 2010 +45% +22% Rémy Cointreau +70% Campari +42% Brown Forman +33% Fortune Brands +13% Diageo 2 September 2010 2010/11 First Quarter Sales 21 October 2010 9% Groupe Bruxelles Lambert U.K. institutional investors Pernod Ricard 2009/10 Annual Sales and Results 31.9% Other foreign institutional investors 12 june 2010 11% 14.3% 14.3% 2009/10 Combined General Meeting 10 November 2010 news Group In every field, Pernod Ricard makes continuous improvement a focus of its growth strategy. All functions throughout the company are involved in this approach, which is a constant source of innovation. Such innovation is regularly rewarded by expert panels which recognise the technological advances implemented by the Group to improve its processes and performance, and to reflect its commitment to social and environmental issues and its determination to create the best working environment for its employees. Below is a roundup of the latest news highlighting the Group’s commitment in these areas. 2 3 1 SEEKING PERFORMANCE ACROSS ALL FUNCTIONS The rollout of Oracle’s Business Intelligence solution (a tool enabling the operational management and business analysis of subsidiaries) in the Pernod Ricard Group was hailed in December 2009 by the 2009/2010 Oracle Innovation Awards which recognise companies that have found innovative ways to implement solutions by Oracle, the world's leading business software company. Beyond its technological aspects, this award recognises a major initiative undertaken at the Group level to share best practices and skills in order to reuse work done by some subsidiaries of the Group to benefit other entities, which cuts lead times for implementing programmes and thereby reduces costs. 2 In the field of Communications, Pernod Ricard was honoured in December 2009 by Stratégies magazine, receiving the Grand Prize in the “Corporate Publications” category for Entreprendre, its magazine for shareholders and employees. In February 2010, the Group received another publishing award for its 2008/2009Annual Report, this time winning the silver medal at the Top Com Awards. 2 3 In the legal field, the Group distinguished itself in March 2010, receiving awards for “Intellectual Property Team of the Year” at the European Counsel Awards and for “Intellectual Property Director of the Year” at the Trophées du Droit et de la Finance [Law and Finance Awards]. These awards demonstrate the effectiveness of Pernod Ricard’s Intellectual Property team in terms of organization and the actions it undertakes to protect and defend the Group’s trademarks and other intellectual property rights. 4 A COMMITMENT TO RESPONSIBILITY ON A GLOBAL SCALE 4 5 Pernod Ricard China’s ongoing efforts in Social and Environmental Responsibility, particularly through its pioneering outreach programme to prevent drink-driving, were recognised in January 2010 by the widely publicised award for “Outstanding Socially Responsible Business in China 2009” at the 5th annual Forum of Responsible Businesses. In Korea, in March 2010 Pernod Ricard launched the “Smart Driving Foundation” dedicated to the fight against drink-driving. This initiative is aligned with the responsible drinking policy which the Group is committed to promoting. The Foundation has been set up to organise campaigns to raise public awareness in alliance with other industry members, as well as with institutional partners such as the national police force and the road safety authority. 5 6 With its procurement project to buy “fair trade” and organic aromatic plants in India for the production of Amaro Ramazzotti, Pernod Ricard Italia is combining sustainable development and social responsibility. Small growers, ensured of a steady, long-term outlet, will also have the opportunity to promote their goods for export. In addition, access to micro-loans and rural development projects will support the creation of micro-businesses by these growers. 6 CONVIVIALITY: AN INTANGIBLE VALUE 8 7 7 In its first appearance on the list of “Best French Companies to Work For”, established yearly by the Great Place To Work® Institute, the Ricard company joined the Top 10 in 2010 (ranked 6th). Amongst answers to 58 questions put to all staff, 86% of employees said that “Ricard really is a great place to work”, and 94% said that they “are truly proud to work for Ricard”. These results recognise the company’s strong corporate culture and commitment to its founding values. 8 In publishing the ranking of the best employers in the Czech Republic in 2010, the firm Hewitt Associates placed Jan Becher (Pernod Ricard’s subsidiary there) amongst the ten best employers of the year in the category of small and medium-size companies.The level of employee commitment and motivation stands at nearly 70%, reflecting the strength of the Human Resources policies implemented by the company. entreprendre No 55 • Spring-Summer 2010 13 GUEST For the first time, Entreprendre offers a forum to an outside personality. Pascal Lamy, DirectorGeneral of the World Trade Organization since 2005 and former European Trade Commissioner, discusses the changing Latin American market, the trade agreements in place, the main challenges for the region and the role that international groups like Pernod Ricard can play. WHAT CHALLENGES LIE AHEAD FOR latin america? Interview with Pascal Lamy, Director-General of the WTO H ow would you describe t o d a y ’s m a r k e t i n L a t i n America, especially in Mexico, Argentina and Brazil? How has it changed in recent years? Pascal Lamy > Latin America wasn’t spared by the global economic crisis and every country was hurt by its impact: the region’s gross domestic product fell 3.5% in 2009. But it is on the road to recovery from the shock. Sound economic policies combined with macroeconomic reforms have enabled it to restart its economy. These efforts are unlikely to compromise the region’s goals of long-term growth. A return to growth is expected in 2010, although its rate will remain below the 5% seen there between 2004 and 2008. 14 entreprendre No 55 • Spring-Summer 2010 What is the degree of Latin America’s openness to trade? In what direction would the WTO like to see these markets evolve? Pascal Lamy > Over the past twenty years, the countries of Latin America have become increasingly integrated with the rest of the world economy. The region as a whole has rejected protectionism. However, the opening of South American markets has mainly happened through unilateral action or preferential trade agreements. Doha(1) negotiations offer a unique opportunity for Latin American countries to maximise their efforts to open trade. H ow do you view the role of South America, with its highly diverse countries and positions, in the Doha Round? Pascal Lamy > In general, the Latin American countries are very active in the WTO. They participate fully in the Doha Round and help to advance negotiations. They don’t hesitate to use the dispute settlement system(2). Brazil, like India and China, has become a major player in the WTO. Some countries in the region, like Chile, Peru and Mexico, have made trade a focus of their development strategy, with some success. M ore specifically, in Doha Round negotiations, the Mercosur(3) countries seem divided between their agricultural interests, which • Pascal Lamy is a graduate of HEC Paris International Business School, Institut d'Études Politiques (IEP) and École Nationale d'Administration (ENA). He began his career in the French civil service at the General Inspectorate of Finance and the Treasury Department. He then became an advisor to Finance Minister Jacques Delors, and subsequently to Prime Minister Pierre Mauroy. • In Brussels from 1985 to 1994, Mr Lamy was Chief of Staff for the President of the European Commission, Jacques Delors, and G7 Sherpa. • In November 1994, he joined the team in charge of rescuing the French bank, Credit Lyonnais, and later became the bank’s Managing Director until its privatisation in 1999. • F rom 1999 to 2004, Mr Lamy was the European Commissioner for Trade under Romano Prodi. • A fter his stint in Brussels, he spent a brief sabbatical period as head of the non-profit “Notre Europe”, a think tank working on European integration. He also served as an Associate Professor at the Institut d'Etudes Politiques in Paris and advisor to Poul Nyrup Rasmussen (President of the European Socialist Party). are p ro -trade , an d t h e ir industrial interests, which are anti-trade. How do you assess the gains and losses that these countries can expect from this round? Pascal Lamy > All these countries contribute significantly to the negotiations, both individually and as members of developing country coalitions. As a group, Mercosur countries have both pro-trade and protectionist interests in industry and agriculture. Individually, they have different sensitive sectors they want to protect, which complicates defining common ground for them within the WTO. However, all these countries will benefit greatly from an agreement that will support the economy and world trade overall. M e rc o s u r is sometimes perceived in Europe as a major threat to the future of EU agriculture. How would you respond to this claim? Pascal Lamy > This is a matter between two WTO trading blocs, so I have to remain neutral. But I have long said that I believe sound European strategy in this sector is to emphasise a value-added approach. From your point of view, would failure to conclude the Doha Round likely revive regional negotiations between Mercosur and other countries or groups of countries in the world, particularly the E.U.? For the WTO, as an institution that oversees the multilateral system of international trade, is this a risk, an opportunity or an inevitable development? Pascal Lamy > The Mercosur countries have always negotiated regional preferential agreements in Latin America (Chile and Bolivia in 1996) and in other regions of the world (India and the Southern African Customs Union in 2004). Other agreements are being negotiated, for example with Turkey and the Gulf Cooperation Council Customs Union. These agreements have been developed independently of WTO efforts. On the broader question of the proliferation of regional trade agreements, I could answer "yes" to almost all the points raised in your question. Yes, there is a risk: the very principle of non-discrimination and its corollary, entreprendre No 55 • Spring-Summer 2010 15 GUEST World trade should rise by almost 10% in 2010. the most-favoured-nation provision, could be thrown into doubt, at least for some WTO members. And yes, it’s an opportunity, which WTO members have also well understood and repeatedly seized. They did so first in 1996, by establishing the Committee on Regional Trade Agreements (i.e., preferential agreements), a body that oversees the work of the WTO in this area. Then again in 2001, at the launch of the Doha Round: the Members agreed to be involved in negotiations aimed at clarifying and improving the WTO’s disciplines and procedures as they apply to regional trade agreements. Most recently, in December 2006, Members adopted a new transparency mechanism for RTAs, which significantly improves the information provided to Members and the public in general on the agreements in force. 16 entreprendre No 55 • Spring-Summer 2010 What do you think of South America’s conduct in regards to trade since the beginning of the financial crisis of 2008? Has the WTO noted any protectionist tendencies? Pascal Lamy > The global financial crisis was unprecedented in the history of GATT and the WTO. The collapse of aggregate demand that followed in Europe and North America caused a global economic recession that resulted in a drop of more than 12% in the volume of goods traded in 2009. Developing countries, including in South America, were not spared, and remain particularly vulnerable to a further contraction in their exports. Trade in the countries of South and Central America declined in 2009: exports of goods fell by 24%, bringing a long period of export growth to a halt. According to our latest forecasts, world trade should rise by almost 10% in 2010. The countries of South America are well-positioned to profit from this recovery. The magnitude and speed of the global economic crisis could have triggered an acute protectionist backlash. This was not the case: despite some over-reactions, the global economy is about as open to trade today as it was before the crisis. Trade restrictions had no responsibility for the outbreak of the crisis and have played a minimal role in deepening the global recession. It is true that, as might be expected, some protectionist moves were seen in reaction to the impact of the crisis. However, no country sought to protect itself through massive trade restrictions or protectionism, nor were there (1) Doha Round: The Doha Round was established by the Fourth Inter-Ministerial Conference organised by the WTO in November 2001 in Doha, Qatar. The Doha declaration was the sequel to the Inter-ministerial Conference, which established a mandate for negotiations on various topics (including agriculture, services, non-agricultural products, the register of geographic denominations of wines and spirits, etc.). These negotiations have so far not been concluded. This round of negotiations is intended to allow developing countries, and in particular the least developed among them,to increase their participation in world trade in order to boost their economic development, including through improved access to markets, more equitable trade rules, and programmes of technical assistance and focused capacity building which include longterm financing availability. (Source: WTO) (2) Dispute Settlement Body: Composed of all WTO member governments, usually represented by ambassadors or officials of equivalent rank. It is currently chaired by H.E. Yonov Frederick Agah (Nigeria). The Appellate Body, established by the Dispute Settlement Body, is a permanent body composed of seven members broadly representative of the WTO membership. Its members are appointed for four-year terms. They must be individuals with recognised authority in law and international trade who are not affiliated with any government. (Source: WTO) (3) Mercosur: A Customs Union established in 1991 composed of permanent members including Brazil, Argentina, Paraguay, Uruguay and Venezuela (integration process underway for the latter). (Source: Mercosur) notable cases of trade retaliation. While some countries have tightened trade restrictions, it is encouraging to note that their governments are mindful of the beneficial role that loosened trade barriers can play in the current circumstances, by lowering consumer prices and production costs, stimulating aggregate demand and helping to reverse the contraction of world trade. What could be the role of a Group like Pernod Ricard in deepening commercial ties with Latin America and what benefits can be expected from it? Pascal Lamy > The WTO has proven its worth in the crisis. Its rules have allowed it to contain any protectionist moves, acting as an insurance policy against protectionism both for its members and for companies. The fact that the system held fast is proof of its value and of the need to reinforce it, particularly in the developing countries. The Doha Round will make for improvements in the international trade system. The private sector should support the conclusion of the Doha Round, which will lead to a greater opening of the international marketplace, framed by fairer rules, which will bring greater stability and greater certainty in trade affairs, from which companies will benefit. What are the main economic Pascal Lamy > The region is moving forward economically. But Latin American countries are still developing, and some must meet challenges relating to poverty, social inequality and infrastructure. The financial crisis has hurt Latin America. In part it has interrupted a cycle of growth begun in a number of countries which have seen portions of their population fall back into poverty. Foreign direct investment is thus very important for such countries. It stimulates their economies, creates jobs and growth, and thereby reduces poverty. Major foreign groups can also support these countries in preserving a rich and diverse environment. and social challenges ahead for Latin America and how can international groups contribute to addressing them? entreprendre No 55 • Spring-Summer 2010 17 FEATURE Latin America L atin America newla of Gro 18 entreprendre No 55 • Spring-Summer 2010 land rowth entreprendre No 55 • Spring-Summer 2010 19 FEATURE Latin America Latin America Takes Off Latine America Takes off Interview Philippe Dreano Chairman & CEO, Pernod Ricard Americas Latin America withstood the crisis better than in the past. Why is this so? Philippe Dréano > The countries of Latin America were hit by the crisis relatively late. They withstood it better overall and will recover from it sooner than Europe. In Brazil and Mexico, domestic consumption has remained strong overall, with per capita debt levels well below those of the United States. These two countries have the largest trade surpluses and have accumulated significant foreign exchange reserves. This helped to cushion the shock. Is Latin America a homogeneous or more heterogeneous market for spirits? Philippe Dréano > It’s more homogeneous than what I expected when I arrived in the region. In most countries, local products such as cachaça in Brazil and tequila in Mexico represent, in volume, the largest segment of the spirits market. At the same time we see, as with Asia, a strong demand for imported Premium international brands, which primarily benefits whisky and vodka. Both these categories are associated with the urban upper middle classes. However, in South America off-premise sales dominate on-premise, unlike in Asia, for example, where spirits are mainly consumed in restaurants, bars and nightclubs. I should point out, though, that in Brazil one can purchase a bottle in a shop for consumption in a restaurant, and not just at home. This remains an “off-sale” purchase, and our business strategy and brand promotion take this into account. (1) The Caribbean, Central and South America, Venezuela, Brazil, Argentina, Cuba, Chile, Peru, Uruguay, Ecuador, Bolivia, Paraguay and Colombia. 20 entreprendre No 55 • Spring-Summer 2010 ow is this market changH ing? Philippe Dréano > Local products, which generally have low added value per unit, are stable and in some cases in decline. With rising living standards linked to economic growth and the subsequent development of the middle classes, consumers aspire to gain access to global brands. And these brands are growing fast, especially given the relatively weak base they are starting from, compared to the global market. hat is behind the success W of whisky and vodka? Philippe Dréano > This success is primarily one of branding. It is the result of investments that we, and our competitors, are making to develop strong, iconic brands such as Chivas Regal, Ballantine’s and ABSOLUT. The choice of brand is more important to that of a product or category. Those in the “young adult” segment are as apt to drink whisky as vodka – it depends on the occasion. In Mexico, where brown spirits are considered manlier, men tend to drink whisky when they are together. But with their girlfriend or wife, they will just as readily drink vodka if she prefers it, which is usually the case. In Brazil, vodka is increasingly replacing cachaça. hat position does Pernod W Ricard currently hold in Latin America (1) and Mexico? Philippe Dréano > We are the worldwide volume leader, and are number two in the international brands segment. This is the culmination of the Group’s history. When we bought Seagram in 2001, we found local brands in the portfolio that are very strong in Brazil, such as Montilla rum, Natu Nobilis whisky and Orloff vodka. They represent a large share of the volumes sold in the country and of our profits. Similarly, with the acquisition of Allied Domecq in 2005 we acquired the Mexican brandies Presidente and Don Pedro, which are still very strong locally. What is your strategy now for these local brands? Philippe Dréano > Today they represent high sales volumes and profits, but their market is generally constant. We nonetheless count on them to provide us with the critical mass to maintain the very strong proprietary distribution networks supporting the growth of our Premium brands. We thus continue to invest in distributing and marketing these products, but our efforts give priority to our strategic brands, which offer tremendous potential for growth. hat are t h es e pr ior it y W brands and what is their potential? Philippe Dréano > Across the continent, in first place are ABSOLUT vodka and our whiskies Chivas Regal, Ballantine's and Jameson. In the past, the local affiliates we’d acquired were prioritising local brands instead of developing imported scotches which were still very much in the minority. We have corrected this. We are now supporting these international brands with substantial human, financial and marketing resources. We intend to build on the wealth of our range and the power of our distribution network to increase their market share. This gives us two key levers to drive growth: increasing our market share and naturally rising sales linked to higher living standards. hat does the addition of W ABSOLUT to the brand portfolio do for you in Latin America? Philippe Dréano > The benefits are twofold. First, ABSOLUT is gaining because it is now distributed across the continent through our broad-based network: this means it has significant room for growth. The brand also has a very strong, positive image among consumers. This really opens doors at any bar where we want to gain a foothold: it helps us to introduce our other brands, on excellent terms. With our Super Premium vodka Wyborowa Exquisite and local brands such as Orloff in Brazil, we now cover all segments of the category. I s there a place for spirits other than whisky and vodka? Philippe Dréano > The markets will continue to evolve in the direction of greater sophistication. We are thus already laying the groundwork for categories such as cognac, with Martell, as well as champagne and liqueurs, even if these relatively small market segments currently generate only small volumes. produced spirits such as Blender's Pride admix (whisky-based spirit). In exports, we have two excellent wines produced by different vineyards, Echart and especially Graffigna, which has the best potential internationally. Graffigna is today mainly sold in the U.S. and the U.K. and in a few other countries. Developing the brand abroad is now a priority for us, which was not the case under Allied Domecq. Is responsible drinking a big concern in South America? Philippe Dréano > These countries have recently acceded to the standards of developed countries, so their awareness is still emerging. We nevertheless intend to actively promote the Group’s corporate social responsibility policy throughout the region. In Mexico, we are far in advance: our efforts, in particular through the Domecq Foundation, set a real example. ■ atin America, particularly L Argentina, is a major wine producing region in which Pernod Ricard has a significant presence. What is your strategy in this area? Philippe Dréano > The Argentine market is effectively dominated by wine, with a spirits segment that is less developed than in other large countries like Mexico, Brazil and Venezuela. Wine represents the lion’s share of our sales there, although we also invest in our key brands, our bitters and locally entreprendre No 55 • Spring-Summer 2010 21 FEATURE Latin America Fertile Ground for Spirits Fertile Ground for Spirits crisis The financial could have brought South America’s economies to their knees, as happened during the previous shocks of 1980 and 1990. Yet the continent has already recovered, confirming its status as the second most dynamic economic region in the world after Asia(1). In March 2010, the World Bank again raised its economic growth forecast for the region by 0.5 percentage points, to 3% for the year. In Brazil, the rate easily exceeds 5%. Even Mexico – after being doubly impacted by the H1N1 virus and the U.S. recession – is turning around, with projected growth of more than 3% for 2010. With few exceptions, the economic crisis effectively struck stabilised, healthy economies. “Prudent management of budgets and debt, flexible exchange rates and trade surpluses in some cases”: such is glowing portrait of the economies of Brazil, Mexico, Chile, Peru, Colombia and Uruguay, drawn by World Bank President Robert Zoellick. Today it validates the confidence of investors in the future of this market of six hundred million people. An increasingly significant middle class • For the inhabitants of this region, a return to growth means the continued expansion of the middle classes, a true phenomenon of the last decade in countries that are practically all democracies now. According to a forecast study by the consulting firm PricewaterhouseCoopers, in Sao Paulo, more than four million people have monthly incomes above €1,800 (4,500 reais). The dynamism of this huge Brazilian metropolis will, within 15 years, make it one of the six richest cities in the world and home to more affluent consumers than Paris. Besides, this is a Latin-American middle class that aspires to consume, and doesn’t hesitate to splurge. When it comes to spirits, this translates to imported brands, synonymous with quality and status. Indeed, here as elsewhere, 1998-2008 saw a trend towards Premiumisation, with the Premium segment (e.g., ABSOLUT, Ballantine's Finest, Havana Club) growing at rate of nearly 3% per year. Growth even surpassed 5% per year in the categories of Super Premium (e.g., Chivas Regal, Wyborowa Exquisite) and Ultra Premium (e.g., Martell VSOP, Chivas 18-Year-Old)(2). (1) Source: World Bank (2) Source: Pernod Ricard Market View, based on IWSR Tequila, cachaça, pisco … the quest for recognition Tequila and its close cousin mescal are now protected by an “appellation of origin” designation recognised under international treaty. In July 2006, the city of Tequila, which lent its name to the most famous of Mexican drinks, and its agave-dotted landscapes covering over 35,000 hectares of the state of Jalisco were declared UNESCO “Human Heritage” sites. Tequila, the essential ingredient of the world-famous Margarita cocktail, is a direct descendant of “pulque”, the nectar which is a gift from the gods according to Aztec legend: under the heat of a lightning strike, an agave pina began one day to warm and ferment... Some 7,000 kilometres further south, on the Atlantic coast of Brazil, cachaça can’t lay claim to such noble origins. It began as fermented sugar cane juice, made clandestinely by slaves and scorned by their masters who preferred the wines of Portugal. Adopted by the least advantaged social classes as the country developed, cachaça has remained a “working class” spirit which is notably the base for the Caipirinha, the famous cocktail made with crushed lime. Cachaça’s name changes according to state, city or any of its thousands of small, artisanal producers: Here, it’s affectionately called pinga (droplet); there, it’s branquinha, pinguinha, birita, gas, oleo... or, more prosaically aguardiente 22 entreprendre No 55 • Spring-Summer 2010 (literally, “fire water”) , but it struggles to attract the middle classes. The Brazilian Institute of Cachaça (IBRAC)is hard at work to promote quality cachaça: after all, aren’t all things Brazilian in fashion right now? In a key example, IBRAC and a handful of quality cachaça producers are fighting to have the U.S. agree to import cachaça under its own appellation and no longer under the generic term “Brazilian rum”. Farther west, on the Pacific coast, the Peruvian government has decreed pisco its “National Drink” and an essential part of the “cultural heritage of Peru”. While production and consumption only concern Chile, it is Peru that is requesting the appellation, since the city of Pisco is located in Peru. This has led to a diplomatic tempest between the two countries, with each claiming pisco for its national drink. In 2005, the country filed an application with the World Intellectual Property Organization to have the appellation recognised. Like cognac, Peruvian Pisco is one of the few 40% ABV spirits in the world distilled from grape juice (and not grape must). Every first weekend of February the country celebrates Pisco, with public tastings in all cities. In Lima’s main square, a giant fountain of Pisco Sour freely distributes the cocktail made with lemon juice, cane sugar syrup, egg white and Angostura bitters. entreprendre No 55 • Spring-Summer 2010 23 Pernod Ricard in Latin America 24 entreprendre No 55 • Spring-Summer 2010 Mexico Ensenda Hermisillo Arandas Los Altos Los Reyes Mexico City headquarters production regions manufacturing sites Brazil Argentina Suape Resende São Paulo Cafayate San Juan Buenos Aires Mendoza entreprendre No 55 • Spring-Summer 2010 25 FEATURE Latin America Fertile Ground for Spirits and consumed outside of normal channels, according to estimates. That's four times the volume of wine consumption. The same spirits-to-wine ratio is found in Mexico, Latin America’s other major market. Here one can see the influence of climate, which is less conducive to drinking wine than a cold beer or a rum, whisky or brandy mixed with cola or fruit juice. The local cuisine, which can be very spicy, doesn’t encourage wine drinking either. Mexico is a case in point, where chillies (raw Cayenne peppers) accompany almost every dish. Argentina remains a land of wine, and by itself accounts for 50% of all consumption of this category in Latin America. Its Spanish influence has been bolstered by that of Italian and French immigrants. When the phylloxera crisis devastated French vineyards in the late 19th century, Argentina welcomed a record number of French immigrants: in 1889, over 70% of the French who boarded ships in Bordeaux were headed for Argentina. This helped make Mendoza the country’s leading wine region. ■ Population 566 million (2009 estimate) Population growth +1.1% Area 912,050 km2 (352,144 sq mi) GDP US$3,928.3 billion (2009) US$4,433.8 billion (2010 forecast) Per capita GDP US$6,941(2009) US$7,738.5 (2010 forecast) Private sector consumption -1.9% (2009) +3.2% (20 10 forecast) Growth rate -3.8% (2009) +1.8% (2010 forecast ) Source: World Bank In the trendy bars and clubs of Sao Paulo and Rio de Janeiro, the 18-25 set is increasingly trading the famous Caipirinha, made with cachaça and crushed lime, for a Caipivodka, made with vodka. In Mexico, vodka has become the favoured drink of the female population. In Caracas, whisky is king. In Chile, rum imports in 2008 set a global record by rising nearly 70% – at the expense of the local pisco(1). An accompaniment for meals • International brands still have enormous potential for growth in Latin America, given the dominance of beer and locally distilled spirits in the alcoholic beverage market. Despite its Spanish heritage, Latin America overall is more a land of spirits than of wine, though that hasn’t stopped Argentina and Chile from securing a top spot in the market for New World wines (along with the U.S., Australia, South Africa and New Zealand). Of course, in Mexico, the valleys of Guadeloupe and 26 entreprendre No 55 • Spring-Summer 2010 Calafia have produced wines renowned since the Conquistadors planted the first vineyards on the continent, but, during dinner time, when the French would open a bottle of wine, Venezuelans and Mexicans today accompany their meals with a whisky or a brandy mixed with water. In the evening, cocktails accompany moments of hospitality where drinks are shared between friends and family, both at home and in restaurants. In Brazil, where music is everywhere, including in the streets and on the beaches, 70% of spirits consumed in the country are enjoyed in the nation’s many bars and restaurants.(2) One might be quietly enjoying a Caipirinha at a table in a boteco (small pub) and in no time be swept away by music from a nearby table. A region dominated by spirits • Each year, two hundred million Brazilians consume some 1,300 million litres of cachaça, a 40% ABV spirit distilled from sugar cane juice, one-third of which is produced (1) Source: IWSR. (2) Source: Pernod Ricard Brasil. Note that in Brazil it is common for individuals to purchase alcoholic beverages to bring to bars or restaurants for consumption. In Brazil, 70% of spirits are consumed in bars and restaurants. ADVERTISMENT PUBLISHED OUTSIDE OF FRANCE FEATURE latin america Latin-American Dynamism 28 entreprendre No 55 • Spring-Summer 2010 LatinAmerican Dynamism Enthusiastic consumers of traditional local spirits, the people of Latin America currently aspire to more prestigious imported spirits. Over the 1998-2008 decade, the annual growth rate for sales of international vodka brands exceeded 7% overall, and 13% per year for ABSOLUT alone.(1) In Mexico, the region’s second largest market, Scotch whisky kept the pace, with annual growth averaging 11% over the decade. The economy’s return to growth this year will boost this momentum by enabling the continued expansion of the middle classes. According to World Bank forecasts issued in March 2010, the average per capita GDP in Latin America will jump to US$8,653 in 2011, a four-year rise of 31% and almost three times the global average (11% during the same period). With its powerful distribution network, reinforced by its lead position in the substantial local brands segment, Pernod Ricard is wellpositioned in Latin America to spearhead the gradual shift of consumers towards quality products. Pernod Ricard Americas offers the most comprehensive portfolio in the region of Premium international brands, including ABSOLUT and Wyborowa vodkas, Chivas, Ballantine’s and Jameson whiskies, Martell cognac, Havana Club and Malibu rums, Kahlúa and others. Not to mention Graffigna, a high-quality Malbec wine produced by Pernod Ricard Argentina which is an increasingly popular export. (1) Source for this article: Pernod Ricard Market View, based on IWSR. Data at 31 December 2008. entreprendre No 55 • Spring-Summer 2010 29 FEATURE Latin America Mexico Mexico No. 8 market worldwide Population 109.5 million (2009 estimate) Population growth +1% Area 1,967,183 km2 (759,530 sq mi) GDP US$842.6 billion Per capita GDP US$7,691 (2009) (2009) / US$873.6 billion / US$7,866 (2010 forecast) (2010 forecast) Private sector consumption -6.9% (2009) / +3.7% (2010 forecast) (2009) / +3.7% (2010 forecast) Growth rate -7.1% Source: World Bank Mexican market structure Total spirits > 24 million cases million cases (No. 8 worldwide) of which international brands > 14 including: 30 entreprendre No 55 • Spring-Summer 2010 vodka other 8% 7% 5% brandy (excluding Cognac) scotch whisky 12% rum 16% tequila 52% In Mexico , four years after the acquisition of Allied Domecq, Pernod Ricard still goes by the name of Casa Pedro Domecq. This subsidiary is a veritable institution in the Mexican market, which ranks 8th in the world in volume for international spirits, ahead of both Italy and Japan. The company leads this market in both volume and value, with 3.3 million 9-liter cases sold, 40% more than its nearest competitor. Amongst its brands, the company owns three major local brandies: Presidente, Don Pedro and Azteca de Oro. But Casa Pedro Domecq also carries the most complete range of Premium international brands available in Mexico, including Absolut and Wyborowa vodkas, Chivas Regal, Ballantine’s and Jameson whiskies, Martell cognac, Havana Club and Malibu rums, Kahlúa, and now, Sauza tequila, the category leader with more than one million cases. In 2009, Sauza’s owner turned over its distribution to the Pernod Ricard subsidiary in order to benefit from the now-recognised excellence of its network and sales force. Indeed, the takeover of Allied Domecq in 2005 resulted in a revitalised network, a much-strengthened sales force and redefined sales and marketing strategies, the results of which are now visible. Sales, marketing and merchandising teams now account for 80% of the non-production workforce, compared with 55% previously. These teams total 300 people, not including 250 others who are regularly employed through outside contractors for merchandising activitie “In 2006 and 2007 we worked hard to stabilise the sales of our local brandies – and even to revive them, as with Azteca de Oro – despite the natural erosion of sales in the category,”, says François Bouyra, Chairman and CEO of Casa Pedro Domecq. "Although these inherited brands are less promising than our international brands, they are local products that still generate respectable margins and provide critical organisational mass. In fact, they allow us to fund our logistics organisation and build up our sales force, giving us an unrivalled platform from which to promote our portfolio of global brands.” Tequila The name “tequila” is said to be handed down from the Conquistadors who discovered agave growing on a small mountain whose shape resembled a woman’s bust and was called “Tetilla” (Spanish for “teat”). The arrival of the Spaniards in the 16th century also brought with it the distillation process and the production of agave wine, or mescal. Contrary to popular belief, tequila cannot be produced anywhere in Mexico. True tequila must be produced almost exclusively in the state of Jalisco, from the sap of the heart of the Blue Agave (Agave Azul), a cactus-like plant that grows only in about a 100 sq. km area of this region. The agave fields there now stretch as far as the eye can see. After a 12-year growing period, the Agave is stripped of its leaves, like an artichoke, leaving only the heart for the distillery. The heart is cut into pieces and steamed for several days to convert the starch into sugar. A successive process of extraction, fermentation and distillation ultimately results in tequila. There are two main types of tequilas: 100% agave tequila and blended tequila (minimum 51% Agave Azul), as well as four main categories, depending on age: • Tequila Blanco or claro (“white”): the most common, no-frills tequila, used in cocktails. • Tequila Joven or Oro (“young” or “gold” - especial): tequila that has undergone a double distillation process followed by a short period of aging in oak casks. • Tequila Reposado (“rested”): aged in oak casks for two to twelve months. • Tequila Añejo (“aged”): aged from one to four and even ten years in white oak casks. entreprendre No 55 • Spring-Summer 2010 31 FEATURE Latin America Mexico Priority to top-of-the-line • Promotional development funds are now directed mainly to Premium international products, particularly in the whisky and vodka categories which will increasingly drive Pernod Ricard’s growth in Mexico. As a result, Chivas Regal, which has been well-established for several decades, is now growing at an annual rate of 17%-20%. The marketing strategy aims to position the brand on a younger segment, taking care to preserve its top-of-the-line image in the Super Premium (€25 for 12-Year-Old) and Ultra Premium (€53 for 18-Year-Old) segments. Ballantine’s and Jameson cover the Premium segment (at around €12 to €15). In the cognac category, Martell has been in Mexico for over half a century and dominates with 66% of the market. Lastly, in the vodka category, the subsidiary now boasts a champion brand in Absolut. “The brand has an excellent reputation here,” , says Francois Bouyra. "It totally dominates the Premium segment, which for several years has grown at a double-digit pace which is twice that of the entire category. The investment that we’ve made in Absolut since adding it to our portfolio will increase this momentum.”. In recent years, international brands have grown at the expense of local brands. This growth was hampered by the crisis in 2008-2009 and the H1N1 epidemic which severely impacted Mexico, causing GDP to plunge 7% and the spirits market to tumble 9% to 10% in 2009. However, the medium-term trend remains favourable to big-name international brands and a recovery is expected in 2010. The last economic crisis saw the market for international brands fall from 13.9 million cases in 1998 to 10.4 million in 2003, before climbing back up to 14 million by 2008. The local brands have had to cope with a dual phenomenon: several large tax and duty increases on alcohol (a combined 50% increase over several years) and, for the past 10 to 15 years, growing competition from unlabelled products distilled and sold on the underground market for between $2.50 and $5.00 a bottle. Whisky or vodka? Younger generations love to be different from their parents. Fifty years ago, Mexicans drank brandy; their children preferred rum, which had its heyday in the 1970s/1980s. New generation, new cycle: 1990 - 2005 were the “tequila years”, with Mexico’s newly liberated women in particular enjoying this colourless spirit which was more discreet than its brown counterparts. Today tequila is on the decline in Mexico, with whisky (up 18% per year over three years for western-style whiskies) and vodka (up 5%-6% per year, and 14% for the Premium segment) now competing for the top spot. 32 entreprendre No 55 • Spring-Summer 2010 It’s a prize that can pay big rewards: the successive surges in brandy, rum and tequila sales show that it can rapidly amount to 10 million cases per year. With their international brands and “sophisticated” images, whisky and vodka are two categories that appeal to today’s young adults. Nearly 70% of vodka consumers are between 18 and 35 years of age. The addition of Absolut to Pernod Ricard’s portfolio and its powerful distribution network in Mexico has strengthened the hand of those who are betting on vodka’s success. Highly motivated sales forces • Today the subsidiary’s sales teams cover the entire country, enhancing relations with key account customers every day with their extra care and attention. Casa Pedro Domecq has become a benchmark for business practices: its training programmes host the employees of distributors, wholesalers and key players in the on-trade channel. Several awards have acknowledged its expertise, including the highly prized “Best Supplier of the Year” award from the Mexican national wholesalers’ association (ANDIVIL). Though the sales forces in the field are still largely male-dominated, the marketing teams at the Casa Pedro Domecq headquarters are predominantly female. "This reflects a conscious decision that we made a few years ago that has really paid off. It is aligned with trends amongst the younger generations which show that, following the liberation movement of the 1990s, Mexican females aged 18-25 are consuming alcohol on a par with their male counterparts.” In the crowded tequila market, Casa Pedro Domecq is executing a two-pronged strategy, independently of its distribution agreement with Sauza, the category leader. Currently, the Group’s international brand, Olmeca, with its Olmeca Tezon, ranks 4th by value amongst international tequila brands. It is number one in the Europe/Middle East/ Africa region. The launch of Olmeca Altos in late 2009 strengthened the brand in the 100% Agave Super Premium segment. Produced in the heart of the Los Altos Mountains in Mexico’s western state of Jalisco, this line extension is aimed primarily at the bartender-connoisseur market. Olmeca is now reserved for export, whilst two other tequila brands have been specifically created for the Mexican market: Agavia, an innovative and contemporary Premium product, and Real Hacienda, a more traditional tequila that is also 100% agave, but offered at a more accessible price to reach a broader customer base. ■ Lunch and Dinner Mexico is a warm-weather country and its cuisine is relatively spicy, two factors that do little to favour wine. The country consumes 100 times more beer than wine, despite several vineyards handed down from the Spaniards, including Chateau Domecq, a 2008 silver medal winner at the International Wine Competition in Brussels. For those who want a more sophisticated drink, a business lunch Thirty million Mexicans reside in the United States. Sometimes prone to nostalgia for their home country, they are all potential consumers of Casa Pedro Domecq products such as Presidente, the leading brand of imported brandy, Don Pedro and Azteca de Oro. Pernod Ricard’s U.S. and Mexican teams are working closely together to develop initiatives aimed at this population. or Sunday dinner will more readily be accompanied by a whisky or brandy mixed with water or soda, or even a tequila with grapefruit juice. In the evening, after dinner, Mexicans like to go out or have a drink with friends. Off-trade sales thus represent 65% of the market, versus 35% for on-trade. Two Tequila-Loving Territories Together, Mexico (8 million cases) and the U.S. (11.4 million cases), which has a large population of ethnic Mexicans, consume 85% of the 22.6 million cases of tequila produced annually (6.3% annual growth between 2003 and 2008). Germany lags far behind with 400,000 cases. Outside North America, tequila is still largely consumed in the form of Margarita cocktails. Over three- quarters of tequila sales still involve entry and mid-range products, as Premiumisation has yet really to take hold in this category. It nevertheless has many of the assets needed for an upmarket shift: a regulated raw material and manufacturing method, a limited geographical area, and a long historical tradition. entreprendre No 55 • Spring-Summer 2010 33 FEATURE Latin America Brazil Brazil Inside the latin american tiger Population 196.1 million (2009 estimate) Population growth +1.26% Area 8,511,965 km2 (3,857,597 sq mi) GDP US$1,567 billion Per capita GDP US$7,991 (2009) (2009) / US$1,804 billion / US$9,102 (2010 forecast) (2010 forecast) Private sector consumption +1.9% (2009) Growth rate +0.1% (2009) / +4% / +5% (2010 forecast) (2010 forecast) Source: World Bank Brazilian market structure Total spirits > 117 million cases million cases (No. 15 worldwide) 34 entreprendre No 55 • Spring-Summer 2010 6% bitters rum liqueur tequila gin 13% vodka 28% scotch whisky 47% 3% 2% 1% of which international brands > 5.7 including: In Brazil , the crisis is already a memory. By summer 2009, confidence was back in the business world. By November, employment had recovered to pre-crisis levels and consumer confidence indicators were once again on the upswing. While taxes on alcohol remain significant, the Real, which had fallen to 2.40 per U.S. dollar by end 2008, stood at 1.75 per US dollar a year later, making imported products once again more affordable. The land of the samba and Carnival once again offers many great reasons to party and celebrate with friends and family, and to enjoy a glass of ABSOLUT or Chivas Regal. “When the crisis began, the entire population took a hit psychologically,” explains Bryan Fry, CEO of Pernod Ricard Brasil. “But the country quickly bounced back. On a year on year basis, the spirits market was down in 2009 compared to 2008, but in December 2009 and January 2010, depletions of vodka and Scotch whisky again showed growth in the double digits. At Pernod Ricard Brasil, business is strong; our local brands have held up well, and the team have continued to work diligently on building a foundation for our strategic imported brands.” It’s the strength of Pernod Ricard´s local brands that has made the company a leader in terms of volume (23% market share, excluding cachaça). These brands— including some acquired in the 2001 buyout of Seagram—still account for 80% of its operating profit. “We have a balanced portfolio of high quality local brands that meet the aspirations and needs of various social class levels that seek out branded products,” Bryan emphasises. “Despite significant progress, there are economic disparities in the purchasing power of consumers throughout the country. In Brazil, a bottle of Orloff vodka at 18 reais (about €7.50), Natu Nobilis whisky at 28 reais (€11), Passport whisky at 32 reais (€13), or even Montilla rum at 12 reais (€5), represents, for a portion of the population, a quality product to which they aspire to.” Despite slow erosion in sales volume of 1% to 2% per year, particularly in the lowprice segments, cachaça still represents nearly 80% of the total Brazilian spirits market. With its São Francisco and Janeiro brands, Pernod Ricard Brasil is capturing the trend towards premiumisation in this category. Even brilliantly packaged, however, these local brands do not deliver the level of prestige a Chivas Regal, a Ballantine's or an ABSOLUT does—imported and sold at between 60 and 100 reais (€24 to €42)—in the Premium and Super Premium segments. Pernod Ricard Brasil's strategy is to build on the strong commercial footprint it already has in the country, and optimise it in order to capture premiumisation of consumption amongst consumers whose standard of living is on the rise. Already, the middle class (monthly household income of 500 to 1,000 US dollars) represents 50% of the population, adding to the 20% of upper middle class and upper class households. “Our Premiumisation strategy therefore applies to all brands,” Bryan explains. “The addition of ABSOLUT to the portfolio has presented us with a fantastic opportunity, and we have adjusted the selling price and implemented a new commercial strategy to ensure the brand benefits from increased marketing investment: Marketing a brand in the right place to the right consumer is critical." Premiumisation also concerns distribution. The arrival of ABSOLUT accelerated the need to pursue the formation of a network of exclusive distributors for Premium brands. “We will have over a hundred salespeople next year dedicated to these distributors, wholesalers, on trade customers and key accounts,” adds Bryan. 400,000 Venues for Celebration In Brazil, ties of family and friendship are very strong. This is evident in the festive moments shared in some 400,000 botecos, bars, restaurants and cafés throughout the country. Around 18,000 outlets are the core target of Pernod Ricard Brasil, as this represents the core premium spirit consumption outlets. As this figure might indicate, Brazilians consume around 60% of spirits outside the home. This is a major advantage for Pernod Ricard, where conviviality and celebration are encoded in the corporate DNA. Naturally, Montilla Rum is a partner of the Recife Carnival. Cachaça or Absolut? Vodka is the fashionable spirit in trendy bars and nightclubs in major Brazilian cities. It is the fastest growing spirits category (up 8.2% annually in 19982008), and the caipiroska (fruit based cocktail made with vodka) is increasingly replacing the caipirinha (same cocktail but made with cachaça), so beloved by Brazilians. Pernod Ricard is now in an excellent position to exploit this trend. Its Brazilian subsidiary already had Orloff, one of the market’s fastest growing local vodkas with over 750,000 cases sold each year. An ABSOLUT caipiroska is an even more premium version requested in bars by name, and it is the top card in the company´s vodka portfolio, and already leads the premium imported vodka category, posting 40% growth in 2009 compared to 2008. Since it joined the Group, ABSOLUT has become a priority brand for Pernod Ricard Brasil, as evidenced by the buzz surrounding the VIP party held in May 2009 at Sao Paulo’s Pinacoteca museum to launch the campaign “In an Absolut World”. Distribution an Asset, and a Challenge In Brazil, as in many of the Group’s other markets, distribution is a key factor for success. However, in a country covering 8.5 million square kilometres, it is sometimes easier said than done: it takes, for example, 10 to 16 days to ship a case of ABSOLUT by road from the Atlantic coast to Manaus in the centre of the Amazon. To address this issue, Pernod Ricard Brasil has a diversified processing base, with one plant located in the southeast, in Resende, between Rio de Janeiro and Sao Paulo, and another in the northeast, in Suape, 40 km south of Recife (see map p.24-25). Both have the capacity to mix and bottle the entire locally-produced portfolio (Montilla, Natu Nobilis, Orloff, Passport, Teachers, São Francisco). entreprendre No 55 • Spring-Summer 2010 35 FEATURE Latin America Argentina Argentina Land of wine Population 40.2 million (2009 estimate) Population growth +0.9% Area 2,700,000 km2 (1,068,296 sq mi) GDP US$250.1 billlion Per capita GDP US$6,217.3 (2009) (2009) / US$259.7 billion / 6,398.7 (2010 forecast) (2010 forecast) Private sector consumption -1.6% (2009) Growth rate +0.1% (2009) / +1.8% / +5% (2010 forecast) (2010 forecast) Source: World Bank Argentine market structure Total wine > 125 million cases Total spirits > 5.8 million cases 36 entreprendre No 55 • Spring-Summer 2010 5% scotch whisky vodka rum tequila gin other 10% 9% bitters 70% 3% 1% 1% 1% million cases (No. 23 worldwide) liqueur of which international brands > 2.6 including: argentina Surpassing even Chile, eis the great wine country of South America: it is the world’s fifth-largest producer (13.9 million hectolitres in 2009 as estimated by the International Organisation of Vine and Wine), its seventh-largest exporter, and ranks seventh in consumption, just behind Spain. More wine is enjoyed there than in all the rest of the continent’s countries combined. According to Sergio Marly, Managing Director of Pernod Ricard South Cone and Andes, “Today, as in other traditional wine-growing countries, consumption is declining in terms of volume (in favour of less-expensive beer), but not in value: the demand for quality wine is increasing.” Reds and sparkling whites are gaining ground at the expense of rosés and still whites. Pernod Ricard Argentina, with its local brands Colon, Graffigna and Mumm Espumante, is a major player in this market. To remain at the forefront, the company invests in quality and innovation. “We are developing and planting new varieties in order to offer innovative products that are suitable for late harvest and can be used to produce wines with a higher sugar content such as Malbec Tardio and Etchart Torrontés Tardio,” Sergio adds. But today’s top priority is the development of exports. At present, these account for just 20% of volumes produced and 40% in terms of value. In acquiring Allied Domecq in 2005, Pernod Ricard, which already owned Etchart (a highly sought-after label, particularly in Canada), found another great name in the portfolio: Graffigna. The Group is now working to develop Graffigna, which has the potential to become a true international brand. The U.S., where Graffigna has been imported since 2007, is already the wine’s number one market. Buoyed by its excellent value (around $10 per bottle, and $20 for Grand Reserve), Graffigna has big plans for the future. To achieve them, the brand can leverage the Group’s global distribution network to expand its reach in North America, Mexico, the U.K. and Scandinavia, and to capture new markets. Ubiquitous fernet • The dominance of wine, the preference for takeaways, a still- sparse middle class (just two million households) and recurring economic difficulties have so far hindered the spirits market, which totals about 5.8 million cases per year. What’s more, this market is influenced by a uniquely Argentine feature: fernet-type bitter spirits (liqueurs distilled from bitter plants such as gentian) have in 30 years captured more than 45% of the market with 2.6 million cases – and they’re still growing. In terms of market share, they rank far ahead of whiskies (23%) and liqueurs (18%), another popular category. “Fernet is a fashionable drink. Fernet and cola is the preferred cocktail of young adults, who drink it regardless of the setting - whether at a café, a restaurant or a nightclub,” Sergio elaborates. Also specific to Argentina, the market for imported spirits—other than fernet—is weak, with fewer than one million cases sold per year. The bulk of Pernod Ricard Argentina’s sales on this segment consists of Absolut vodka, Havana Club rum and 100 Pipers, Ballantine's and Chivas Regal scotch whiskies. The market for locally produced spirits, however, exceeds three million cases. In fact, nearly 75% of the whisky sold in Argentina is produced in-country. Pernod Ricard Argentina leads in this market of local products with four out of seven of the best-selling brands, including its Fernet Capri, Blenders Pride whisky, Cusenier liqueurs and Doble V Whisky, which together account for 750,000 cases. Objective: Quality How can the company ensure that a Graffigna Grand Reserve sent to the other side of the globe doesn’t deteriorate during the long weeks of travel? In 2009, Pernod Ricard Argentina broke new ground by making use of modern traceability technologies. Sensors placed in each shipment recorded changes in the ambient temperature on an hourly basis throughout the chain of transport for cases sent to Group subsidiaries in six test countries: the U.S., Finland, the U.K., the Netherlands, Brazil and Venezuela. Once analyses of any organoleptic inconsistencies are completed in 2010, new recommendations will be issued for future shipments. Malbec: The Pride of Argentina Imported from France in the nineteenth century, Malbec has become the flagship varietal for the wines of Argentina, representing 95% of its exports. Indeed, the country is home to 10,000 of the 18,000 hectares of Malbec vineyards planted worldwide, ahead of France (under 6,000 hectares), where it is today primarily associated with wines of Cahors. Malbec is an early-harvest grape that produces richly coloured, tannic wines suitable for aging. It is an ideal accompaniment to red meat, another great Argentine speciality. Graffigna: A Rich Heritage Founded in 1870 by an Italian immigrant, Don Santiago Graffigna, Bodega Santiago Graffigna is one of the oldest wineries in the country. Located at the foot of the Andes in the province of San Juan, it is surrounded by vineyards blessed by an exceptional climate, allowing it to produce expressive and intense wines. In June 2008, the New York Times selected the 2004 Graffigna Grand Reserve 100% Malbec as one of the 10 best Argentine wines to accompany meals. entreprendre No 55 • Spring-Summer 2010 37 FEATURE Latin America Corporate Social Responsibility 38 entreprendre No 55 • Spring-Summer 2010 Companies at the forefront: a proactive approach Promoting responsible drinking, efficiently managing energy and raw materials, training staff: these are all areas in which Pernod Ricard’s subsidiaries in Latin America are developing proactive strategies for responsible development that respect their host populations. Jaime Camil is one of Mexico’s most famous actors. He is now also the ambassador of the Group’s foundation in Mexico and spokesman for its commercials and ad campaigns against drink-driving. Along with the fight against misusing alcohol and the sale of alcohol to minors, combating drink-driving is one of three major campaigns conducted and financed by the Group's subsidiaries in Latin America, whether directly or through professional associations involved in this area. Brazil has vast natural wealth: all the more reason not to waste it. New methods of production, reducing the weight of bottles, ambitious programmes for water and energy savings: Pernod-Ricard’s teams, through their knowledge and know-how, innovate and lead the way in this vast country covering half of the continent, mirroring similar efforts in Mexico and Argentina. Without the enthusiasm and professionalism of its trained staff, Pernod Ricard Americas would not be experiencing the growth it currently enjoys. The Boards of Directors are already largely made up of local leaders, but the Group wants to go further, and is pursuing an active policy to identify, train and promote all who have talent. entreprendre No 55 • Spring-Summer 2010 39 FEATURE Latin America CSR/Social Social South America: a culture of sharing Interview Cédric Ramat Human Resources Director, Pernod Ricard Americas at the time, but the integration happened very quickly and without obstacles. Former employees of Seagram in Brazil or Allied Domecq in Mexico are now Pernod Ricard members, and proud of it. How is Pernod Ricard’s culture received in Latin America? Cédric Ramat > There are many commonalities between the Pernod Ricard culture and the Latin American lifestyle: a desire to share, the importance of friendship, family and the Group, a taste for celebration – in the best sense of the term. In each subsidiary, “happy hours” are opportunities to try our products and, more importantly, they provide an occasion for our people to share and learn more about each other outside of the daily work environment (for example, the “hora do pastis” [Pastis hour] in Brazil). The companies acquired during the Seagram and Allied Domecq buyouts were much larger than our Pernod Ricard subsidiaries 40 entreprendre No 55 • Spring-Summer 2010 re you able to find the talent A you need for the Group’s advancement? C.R. > The answer is a definite yes. There is a genuine entrepreneurial spirit here. These are all countries still in the making. Nothing is ever impossible; people are always ready to change things, to meet new challenges, to invent new solutions. Pernod Ricard Americas has 2,200 employees in the region, of which 98% are native born. Management committees are also predominantly local, with one-third being expatriates – mostly from France, along with some from Spain and Australia. oes mobility exist within the D region? C.R. > Mobility is not a natural phenomenon, as it is in many countries, unless it involves going to the United States. People still feel divided between a sort of distrust of that country and an attraction to the American dream. For us, however, mobility is a priority. We strongly believe in diversity and in cultivating a wealth of talent and experience. We thus expend a lot of energy to encourage and facilitate the mobility of our teams within the Group worldwide. We saw our first successes in this area in 2009 with more than a dozen international transfers in Latin America and we intend to strengthen these efforts. Among the many examples I could cite, the Sales and Marketing Director of Pernod Ricard Andes is Venezuelan, the Finance and Administration Director is Brazilian, the Sales Director of Venezuela is from Argentina, and the Managing Director of Colombia is also from Venezuela! This policy of mobility—which encourages open-mindedness, creativity and knowledge of other ways of working—is validated by the necessity of gaining international experience in order to manage a subsidiary or a finance or marketing division. What is your priority for Human Resources management? C.R. > Management [in the region] is influenced by a culture more conducive to oral communication than written procedures. This has many advantages: for example, because there is ample dialogue, managers personally know their teams very well; but it also has limitations. We are working to formalise processes at a basic level, which brings transparency and therefore fairness to decision-making, whilst preserving all the benefits of the current managerial culture. We have launched ambitious programmes in the subsidiaries to develop systems that allow us better to define the skills needed for all important functions in the region and better to identify and develop future talent. Mexico The pétanque court? It’s on the 4 th floor... When two co-workers at Casa Pedro Domecq want to relax after a long day’s work or take a break from a problem requiring further reflection, they do not need to go very far: an authentic pétanque court has been installed in the midst of the offices on the fourth and top floor of the building which houses the Group’s Mexican subsidiary. “Camaraderie is a major feature of the company’s culture,” says Liliana Leon, Human Resources Director for Casa Pedro Domecq.“Along with our brand portfolio, it is one of the strengths that attract candidates to work here. Word of mouth is the best advertising and we have no difficulty recruiting talented individuals. We are looking for imaginative employees, who are able to innovate and are self-directed.” Brazil “Adopting” a point of sale Business intelligence is now the business of all employees of Pernod Ricard Brasil. The programme Adote um PDV (“Adopt a Point of Sale”) encourages all employees to visit a bar, nightclub, store or wholesaler every two weeks and interact with customers and staff. Whether they impart advice or collect information, they can then report their experiences directly via a dedicated intranet portal. Nearly one-third of the company’s 360 employees are already taking part in the programme. The best contributors will be invited to join the sales force on an upcoming business trip to Scotland. Argentina Pmanagement rofessional human resources In 2009, Pernod Ricard Argentina adopted an “integrated talent management programme” with an innovative, twofold objective: 1) to ensure that for each key position the company has the necessary managerial talent on hand; 2) to anticipate eventual changes. This programme involves several steps: 1) Identification of all “critical” positions in the subsidiary – i.e., especially those that impact value creation or that could endanger a key element of the company’s performance if left vacant or occupied by an insufficiently skilled manager. 2) Identification of all “key players” selected for their performance, managerial know-how, ability to motivate and lead teams, and their potential to grow into positions of high responsibility. This process involves regular assessments and interviews performed internally, as well as by outside consultants. 3) Establishment of development plans for individual skills: new objectives, training, coaching. 4) Succession planning: For each “critical position” identification of potential successors who can take over if necessary (departure or transfer). This programme will be expanded in 2010 to Uruguay and the Andean countries (Bolivia, Chile, Ecuador and Peru). Brazil Persons of influence The best projects also require good communication, because even a flawless programme has the potential to be misunderstood. In the first quarter of 2010, the Board of Directors of Pernod Ricard Brasil created a new tool to smooth the flow of information: ACT, which stands for “Advisory Committee Team”. The 13 members of this advisory committee, representing a cross-section of the company’s operations, will henceforth have advance access to information about certain Management Committee projects. The Management Committee will thus be able to take their initial reactions into account and make necessary adjustments. Also selected for their powers of persuasion, the members of the ACT team will be a great asset in promoting these projects. “They have their own channels of communication, and are natural leaders,” says Viviane Aguiar, Human Resources Director for Pernod Ricard Brasil. Mexico Educating customers As the number one spirits company in Mexico, Casa Pedro Domecq has developed genuine expertise in sales and merchandising training. It now shares this know-how through a training programme aimed at employees of a score of major customers, including distributors, wholesalers and large retailers. Courses cover three fields: products, sales negotiation and communications. entreprendre No 55 • Spring-Summer 2010 41 FEATURE Latin America CSR/Societal Societal Responsibility: a wealth of initiatives Pernod Ricard’s Latin American subsidiaries are engaged on the ground in programmes to promote responsible drinking which are tailored to local conditions and realities. Whether for communications campaigns, outside conferences, inhouse seminars, or displaying logos and icons on labels, the expertise of our marketing and communications teams is very often solicited for the five strategic directions adopted by the Group: promote moderate consumption, combat drinkdriving, spread the message of alcohol’s potential risks to young people, discourage alcohol use by pregnant women, and set an example. The leaders of many Group subsidiaries have been and remain at the forefront of their industry’s efforts in the area of social responsibility. In Mexico, the Domecq Foundation has since early 2006 concentrated its efforts on promoting responsible drinking, with three priorities: fighting drink-driving, the leading cause of death among 18-25 year olds, protecting minors and promoting moderate consumption. Alongside their own initiatives, subsidiaries in all countries continue actively to support prevention associations founded with the help of other stakeholders in the wine and spirits industry. 42 entreprendre No 55 • Spring-Summer 2010 Brazil Promoting Information programmes / From August to November 2009, Pernod Ricard Brasil held a series of informative talks in schools in the cities of Resende and Suape – where the Group operates industrial sites – with the help of assistants of Dr Arthur Guerra, psychiatrist and expert on alcohol and behaviour and president of the Brazilian NGO Centre for Information on Health and Alcohol (CISA). These conferences were addressed to parents, teachers and students. Special sessions were dedicated to employees of the Group’s sites in these cities and at the headquarters in Sao Paulo. Mexico Fight against “You Drink Or You Drive” (“O tomas o manejas”) / Jaime Camil, an actor and singer idolised by Mexican youth, is now also the Domecq Foundation’s ambassador in its fight against drink-driving. From the Foundation’s homepage (www.fundaciondomecq.org), to the new advertising campaign “O tomas o manejas” (“You Drink Or You Drive”), the actor voted “Sexiest Man of the Year” in 2007 by the Spanish version of People magazine (six million readers) is contributing his popularity to promote responsible drinking. This widely circulated campaign (TV, radio, cinema, bus shelters, and billboards) also reaches schools and universities through testimonials and the distribution of videos and leaflets. Thus the Foundation created by Pernod Ricard’s Mexican subsidiary is once again catching public attention, after an initial campaign from October 2006 to December 2007 which was broadcast more than 800 times on five television stations. In the current campaign, two commercials use analogy and humour to dramatise situations where irresponsibility causes risk to oneself as well as to others. In one, a man is seen making grilled sandwiches while taking a bath; in another, he stops in the middle of a busy street to tie his shoelace. Brazil Fight against drink-driving Safe transport for promotional events / In May 2009, taxis escorted all of Pernod Ricard Brasil’s guests at the launch party for the “In An Absolut World” campaign at the Pinacoteca Museum in Sao Paulo. On 2 August in Rio de Janeiro, the second annual “Ballantine’s Impression Party” featured 25 minibuses providing shuttle services throughout the night to ensure the safe transport of VIPs, actors and other guests. Mexico Chile Protecting minors “Selling alcohol to minors is a serious offence”: so recalls the Domecq Foundation’s “Zero Tolerance” campaign in Mexico. Launched in partnership with the foundation “Conviviencia Sin Violencia” (living together violence-free), the campaign aims to educate children’s parents and entourage against giving them access to alcoholic products. Aided by its famous ambassador, actor Jaime Camil, the Foundation communicates regularly with youth on the dangers of alcohol. Brazil Discouraging Since 2009, the “pregnant woman logo” has been displayed on all bottles distributed by Pernod Ricard Brasil. This initiative, launched in the Group’s European subsidiaries, was voluntarily adopted by the Brazilian company in May 2009, starting with Orloff vodka, and followed by all brands as the new labels bearing the icon became available. Venezuela Colombia Setting an example “Comprometidos con el equilibrio” (Ensuring Moderation) / Responsible drinking was the focus of a special seminar for all employees of Pernod Ricard Venezuela and Pernod Ricard Colombia held in September 2009 in Caracas. Participants in “Comprometidos con el equilibrio” were given the opportunity to test their knowledge of Pernod Ricard’s Responsible Drinking Code, voting electronically to express their views on the compliance (or lack thereof) of a variety of advertising projects. Chile Mexico Team support for non-profits / Pernod Ricard also contributes to promoting responsible drinking through active participation in professional non-profit associations. • In 2008, Laurent Pillet, Managing Director of Pernod Ricard Chile, and four colleagues co-founded APROCOR, a non-governmental organisation that brings together leading spirits producers and distributors who are committed to promoting responsible drinking. This association, of which Laurent Pillet is also the first President, now represents 97% of the industry’s sales. In less than 18 months, APROCOR has sponsored nearly a thousand initiatives, in particular targeting nightclubs located near campuses and beaches, as well as sensitive dates such as National Day in September and universities’ back-to-school week in March. When a group of young adults arrives at a nightclub, any member who agrees to stay sober throughout the evening is given certain benefits such as unlimited soft drinks and a gift voucher worth 10,000 pesos (U.S. $20) upon his or her departure... if all goes well, of course. According to Laurent Pillet "In record time, APROCOR has gained very high credibility with the public and the authorities. Enshrined in our charter is a prohibition on linking our company’s brands to consumer-oriented programmes. This disinterested stance vis-à-vis our work has made it possible for the media to cover it extensively, especially on television.” • C asa Pedro Domecq is also closely associated with FISAC (Social Research Foundation), which is chaired by Casa Pedro Domecq’s CEO, François Bouyra, and now represents 80% of the Mexican spirits industry. It is also involved with distributors, the national retailers’ association and the powerful restaurant association (13,000 restaurants), as well as communications companies and media groups. These combined efforts increase the impact of initiatives, campaigns and actions carried out in partnership with governmental bodies and supported by the wife of President Felipe Calderon, Margarita Zavala Gomez del Campo, who is also very committed to this cause. moderate consumption drink-driving alcohol use by pregnant women entreprendre No 54 • Spring-Summer 2009 43 FEATURE Latin America CSR/Environment Environment Saving water, energy and raw materials Cassio Cunha Director of Quality, Safety and Environment, Pernod Ricard Americas “Pernod Ricard has adopted an integrated approach to its QSE efforts in Latin America, simultaneously setting up programmes and processes to improve the performance of its industrial operations, better ensure the safety of its employees, and reduce its impact on the environment. This has meant implementing new production systems, partnering with suppliers, and involving management commitment.”, So explains Cassio Cunha, head of the region’s Quality, Safety and Environment department. The certification process for ISO 9001 (quality management), ISO 14001 (environmental management), OHSAS 18001 (health and safety of staff) and, by 2012, for ISO 22 000 (food safety), is aimed at ensuring that Pernod Ricard’s products are manufactured in conformity with international standards of quality, resource conservation (water, energy and raw materials), and the protection of health and safety of both employees and consumers. In Latin America, the Group has set new targets for reducing consumption between 2010 and 2012: • reduce water and energy consumption by 10%, • recycle at least 85% of the waste it generates. A number of programmes have already been launched to install precision consumption measurement and control systems, particularly for water from pump or catchment sources. This is an essential first step for undertaking projects to reduce its use. Capital investments have been directed to replacing or reinforcing pipe systems in order to minimise leaks. Training programmes have been launched to educate employees about properly controlling processes and the importance of preventing the waste of precious resources like water. Projects to economise raw materials include one to produce lighter weight bottles in Brazil, Mexico and Argentina. Between 2005 and 2010, some 2,100 tonnes of glass have been saved in Argentina, thanks to the re-engineering of a dozen different wine bottles. 44 entreprendre No 55 • Spring-Summer 2010 Olmeca Plant in Arandas, Mexico New Process for Manufacturing and Waste Recovery It’s against the idyllic backdrop of the Los Altos de Jalisco mountains, east of Guadalajara, that Pernod Ricard produces its premium tequila, Olmeca. But the industrial site in Arandas now has something new to boast about – to wit, two major advances in sustainable development. Teams from Casa Pedro Domecq have developed an ingenious waste recovery unit, as well as a production process that slashes water and energy consumption. An Optimised Production Process • The heart of the agave plant, once harvested, must be soaked with water and then steamed to convert its starch into sugar. The agave hearts are then crushed and their juice collected to begin the process of fermentation and distillation. By optimising this process, Casa Pedro Domecq was able to reduce the amount of water needed for this first step of processing, obtaining a liquid with a 28% higher sugar content. Because it’s more concentrated, producing one litre of distilled alcohol from it requires 15% less energy. Waste Recovery • Less water injected during the manufacturing process also means less stillage, the liquid waste from distillation. But in Arandas, they’ve taken things a step further. A composting site now receives the agave dregs, which are mixed with the liquid stillage, or vinasse. According to official analyses, every four months the water-tight compost area, which measures 25,000 square metres, transforms nearly 1,300 tonnes of waste rich in carbon, nitrogen, calcium and phosphate, into a high quality, marketable fertilizer. Packaged onsite, this fertilizer has replaced 30% of the chemical fertilizers used in the nearby agave plantations. The green spaces of the town of Arandas are also fertilized in this way when possible, to the acclaim of the municipality and its inhabitants. Other factories in the region have already expressed interest in the process. “ With their imagination and know-how, our teams have managed to return to the earth what we take from it. And at the same time, we save money on chemical fertilizers and on the stillage processing plant that we did not have to build.” Ivan Saldana, QSE Manager for Casa Pedro Domecq Montilla Rum, Brazil Lighter Bottles Through a new design and collaboration with its supplier, Pernod Ricard Brasil was able to reduce the weight of its Montilla Rum bottle by 15%—from 600 grams previously, to 502 grams in 2009. This gain was achieved with very little change to the overall shape of the bottle. It reconciles both the technical requirements and market expectations for a product of this quality. Meanwhile, the shipping cases have been made more compact by eliminating the use of cardboard dividers. Benefits: 2,000 tonnes/year of less glass consumed 236 tonnes/year of cardboard saved 2,300 fewer tonnes of CO2 emitted each year “As the most iconic alcoholic beverage of the Northeast region and the sales champion of our portfolio, it was very important for Montilla rum to become the first Brand to actually make a difference in terms of responsibility towards environment issues”. Eric Sampers, Senior Brand Manager Traditional Brands Resende, Brazil Planting Trees Etchart Winery in Cafayate, Argentina Natural Treatment of Wastewater Faced with the need to reduce the environmental impact of its business, the Etchart winery, located in the “magical valley” of Cafayate in the far north of Argentina, has designed and built a natural wastewater treatment plant. After passing through a first stage of sedimentation of solids and pH neutralization, wastewater is directed to flow slowly over a gently sloping hill. This slope is divided into a multitude of cells in which grow grasses whose roots harbour thousands of micro-organisms. These tiny bacteria gradually break down and digest the organic matter present in the run-off water. At the bottom of the slope, the water purified by this process is reused to irrigate the vineyards. “We installed this system in 2009 and tested it with the first harvest. We can now say that it is a complete success.” Alejandro Iocco, QSE Manager, Pernod Ricard Argentina Pernod Ricard Brasil and its employees at the Resende plant have joined forces for a two-phase planting of 6,500 trees on four hectares of land near the Paraiba River. Launched on 21 September 2006—Brazil’s “Arbor Day”—in partnership with the NGOs “Educa Mata Atlântica Foundation” and “Aguas Limpas Paraty”, this initiative has already seen 300 trees planted per Resende employee. In Suape, a tree-planting program was also developed, along with an environmental outreach program involving not just the plant’s employees, but 1,100 children in seven nearby schools as well. Guided by the plant’s staff, students were educated about good practices in preserving the environment (primarily regarding water, energy and waste). “We aim to educate children and teenagers about the importance of preserving the environment. All our efforts are aligned with our QSE policy and contribute to make communities and consumers more concerned with a sustainable world.” Melissa Madi, our QSE and Development Manager entreprendre No 55 • Spring-Summer 2010 45 ”I’m Here” – An Absolut Collaboration opens globally On Friday March 19, 2010 at 12 GMT, Spike Jonze’s highly anticipated film, I’m Here, was globally released on www.imheremovie.com. This 30-minute robot love story premiered at the 2010 Sundance Film Festival, and thereafter screened at the Berlinale. Now it is made available to viewers all around the world, through a striking online cinema experience. I’m Here is a creative collaboration with ABSOLUT VODKA, acknowledging the brand’s position as a pioneering and culture-shaping brand. 46 Martell opens its first boutique in Hong Kong International Airport Maison Martell, a global leader in the XO category, is burnishing its image as a contemporary luxury cognac with the opening of its first dedicated boutique in Hong Kong International Airport. The occasion also marked the introduction of the brand’s new visual style. In this space in one of the world’s largest air transport crossroads in the world, travellers are beckoned to take part in a unique sensory experience in the Martell universe, to discover its unique heritage and prestige credentials, its eaux-de vie and, of course, its cognacs. The Maison’s new visual style, unveiled for the occasion, pays homage to the brand’s culture, heritage and unrivalled know-how. entreprendre No 55 • Spring-Summer 2010 Havana Club International S.A. awarded at Havana’s International Fair Havana’s 27th International Fair that was held in early November 2009, from 2nd to 7th is an important commercial event in the Latin American and Caribbean zone. It was attended by representatives from an impressive 54 nations. During the event, Havana Club International S.A. exhibited the entire portfolio, from white rums like Havana Club 3 year old to aged rums like Havana Club Especial and Havana Club 7 year old and of course Maximo Extra Añejo. The brand has also unveiled its new 7 year old bottle, which clearly positioned this rum in the “super premium” spirits category. Havana Club International S.A. has been distinguished by 2 rewards: - Quality reward with gold medal for Havana Club Añejo Especial rum, - Trophy of the best stand. Chivas Regal continues its collaboration with the Alfred Dunhill BAFTA* A Life in Pictures events Chivas Regal 25 continues its cooperation with the elite of the film world and the glamour of the red carpet supporting the Alfred Dunhill BAFTA Life in Pictures events. Chivas Regal 25 was involved in four events recently paying tribute to legendary Hollywood directors and actors Viggo Mortensen, James Cameron, Quentin Tarantino and Jean-Pierre Jeunet. Chivas Regal 25 supported all the events with a bespoke bar serving Chivalry cocktails. Each of the film world celebrities were also given a special bottle of Chivas Regal 25 as a gift. BAFTA Life in Pictures is just one example of a programme that includes activities around the Oscars, the Caesars and the Chivas Brothers partnership with the Cannes International Film Festival. * British Academy of Film and Television Arts New image for Montana In 2010, the Montana range is sporting a new label, showcasing the mountains that inspired its name. The aim is to highlight the link between the name ‘Montana’ and New Zealand's mountains, which contribute towards the character of these wines. It's now more than 30 years since Montana introduced the world to Marlborough Sauvignon Blanc. Montana was the first to plant Sauvignon Blanc in Marlborough and create a style of wine that has since changed the taste preference of consumers around the world. The new image for Montana, will encourage wine enthusiasts to take a fresh look at this pioneering brand's range of quality wines. The 2010 Jameson Empire Awards Ricard dressed for the holidays January 2010: Becherovka Lemond celebrates its millionth litre Campo Viejo Crianza at the Nobel Prize in Sweden Entreprendre The Pernod Ricard Magazine 12, place des États-Unis 75116 Paris, France Tel: +33 01 41 00 41 00 actionnaires@pernod-ricard.com It was a high-profile evening on Sunday 28th March as the film industry’s biggest and most respected stars turned out to celebrate the 2010 Jameson Empire Awards. The awards, which were hosted by comedian Dara O’ Briain and took in London were honoured with the presence of cinema’s leading names, including Gwyneth Paltrow, Ian McKellen, Jude Law, Patrick Stewart, Guy Ritchie, Simon Pegg, Ray Winstone, Jaime Winstone, Aaron Johnson and Mark Strong, amongst others. The awards ceremony is deemed by many in the industry as the most fun awards in the British movie calendar, making it the perfect match for Jameson. The 2009 holiday season was the perfect occasion to launch two new limited editions: A new “Ricard Collection” decked out in a multitude of golden droplets that highlight Ricard’s amber hue, and an exclusive Ricard bottle designed by Stéphane Calais, a leading light on the French contemporary art scene, who transformed the refreshing Ricard experience into a palette of dazzling colours in his modern and luminous style. Fifteen months after its launch on the Czech and Slovak markets, the millionth litre of Becherovka Lemond liqueur was produced. This milestone number confirms the success of the newest brand from Jan Becher. The original intention to distribute Becherovka Lemond only on the Czech and Slovak markets has also been reevaluated due to demand from abroad. Thus, the product will soon be introduced to markets in the former Yugoslavia and Hungary, and negotiations are underway to launch the product in Finland and Denmark as well. For it’s fourth consecutive year, Campo Viejo Crianza 2006 graced the final Nobel Prize gala, the “Nobel Night Cap”, in Sweden. This celebration, which follows the awarding of the prizes and the official dinner, welcomed a total of 1,200 guests including the award winners, students, politicians and key industrial and cultural figures from Sweden., The exclusive presence of Rioja wines at the Nobel Prize ceremony highlights their importance on the Swedish market. Indeed, Sweden is the fifth biggest importer of Rioja, with more than four million bottles sold in 2008 alone. Publishing Director: olivier Cavil Publishing Manager: Olivia Bourdy Consulting, Design & Production w w w. t e r re d e s i e n n e . c o m Photo Credits: Marc-André Desanges/Studios Photos Pernod Ricard, Gerardo Lazzaro, Marcelo Schmoeller, Luciana Prezia, Michele Mifano, Isabel Machado, Marcelo Bravo, Ilan Rabinchinsky, Pool Creative Agency, Forum Absolut, Getty images and Corbis. 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