.........Home | bio | Longer | What is Esquire's Cocktail of the Week? | contact: joseph.mailander@gmail.com ........... ... ...

Tuesday, April 1, 2008

Too much debt at Pernod Ricard?

Diageo was assembled as a super-giant in the 1990's; Pernod Ricard is assembling itself as such in the zeroes. The timing has left the company with more debt than Diageo, which markets niche products and superpremiums better. But what else does today's Pernod acquisition of Swedish Absolut mean for the spirits biz in the US?

The most intriguing element of the acquisition is that Pernod Ricard will have to divest itself of Stolichnaya in order to complete the purchase. The key to Absolut's success in the American market has been its relationship to Saatchi & Saatchi---the agency's historic Absolut campaign is nothing short of the reason Pernod Ricard is obliged to sell off Stolichnaya, which has never been able to gain peer status with Absolut in this country.

Stolichnaya's ad campaigns have fumbled many times, most recently by Pernod Ricard itself in last years ad campaign with Paris-based Marcel Republique. Pernod Ricard has only controled American advertising of Stolichnaya for the past two years, however.

The Absolut relationship with Saatchi may continue under Pernod Ricard; if so, good news for Pernod. But it is more likely that it will not, and if not, there will be more questions for the brand. Most ad agencies don't watch things like Moody's financial ratings, but at this level they do. Pernod's debt load may cause some concern with the new prospective clients.

No comments: