La stratégie de croissance suggérée par Pernod Ricard dans le marché mondial du vin et de l'alcool. (Document en anglais).

“A suggested growth strategy for Pernod Ricard in the wine & spirit global market”

Table of Contents

1.Introduction........................................................................................................…- 3 -

2.Company background...........................................................................................- 3 -

3. External analysis

a. Porter’s five forces...............................................................................................- 4 -

b. PESTEL analysis..………………………………………………………………….....- 6 -

4. Internal analysis

a. The value chain....................................................................................................- 8 -

b. SWOT analysis ………………………………………………………………...….…..- 9 -

5. Strategic orientation ………………………………………………………………....- 10 -

6. Conclusion ........................................................................................................- 12 -

7. Bibliography ......................................................................................................- 13 -

8.Appendices.........................................................................................................- 14 -

1. Introduction

The global market for wines and spirits is a highly competitive and diversified. Offer is abundant and the market requires a specific strategic approach. (www.adbrands.net, 2013)

The competition is becoming more intense, thanks to the acquisition of new techniques of production and the emergence of new markets, the Pernod Ricard Group continues to rank first at European level and the world's second largest market for wines and spirits. The group's success is reflected in large part, due to its decentralized organizational structure and strong internationalization policy. (pernod-ricard.com, 2013)

“Our ambition is clear: we want to become number 1 in the (wine and spirits) industry” (pernod-ricard.com, 2013) with this words Pierre Pringuet, the CEO of the company allows us to ask ourselves if the company is able to become the market leader in the future.. To do this, in a first part, we will study the external environment of the Pernod Ricard Group, and then in a second part, we will put forward the strategy developed by the group, before to finally discuss about a possible acquisition in order to become leader of the market .

2. Company Background

The French group Pernod Ricard was born from the merger in 1974 of two competing companies Pernod and Ricard specialized in aniseed. Founded in 1975 and floated (mis en bourse) the same year the reason of the merger between Pernod and Ricard was the conquest of foreign markets. (pernod-ricard.com, 2013)

The conquest began in 1975 with the start of its international growth. The new group built an international network between 1985 and 1993 (Italy, Ireland, Cuba, and the United States). Between 1997 and 1999, he completed a restructuring before starting from the 21st century a strategy of external growth characterized by large acquisitions: Allied Domecq in 2005, Wine and Spirit in 2008. The group also has 38% market share of Seagram. Recent acquisitions are intended to refocus activities, this was partially funded by the sale of soft drinks sector. (pernod-ricard.com, 2013)

Today it is a decentralized group, depends on a continuous exchange between the Brand Companies and the Market Companies, coordinated by the Holding Company that defines the major strategic guidelines. With a turnover of 8,215 million euros in 2012, employing about 19,000 people worldwide, and has a large portfolio of products (the famous one: Ricard pastis, Chivas Regal & Ballantine’s for whisky, and Jameson for whiskey, vodka Absolut, rhum Havana Club, Kahlùa & Malibu for liqueur) Pernod Ricard has managed to build a "world empire" to compete with the leader global, Diageo, born of the merger acquisition of Guinness and GrandMet. (pernod-ricard.com, 2013)

3. External Analysis

a. Porter’s (1985) Five Forces

The main purpose of a business is to achieve a sustainable competitive advantage in its sector and thus generate profit resisting the pressure forces acting on it.

The five forces model described by Porter (Figure 1) explain that there are 5 main forces which shape the competition, and who allow managers to identify the keys to competitiveness. (Hooley G. Piercy N. F, 2008). According to Porter (1980) this forces are :

The threat of new entrants to the market: Low

Threats of potential entrants depend on barriers to entry. We consider that the entry in the market of wines and spirits demand strong capacity of investment, production, storage and human resources.

Furthermore companies working in this market have a brand experience and a reputation (cost of the experiment).

Moreover because of this reputation they have acquired a distribution network and a relational dimension, whereas a new business can’t.

Furthermore these companies have a near worldwide strategic business location, an element that requires significant financial resources and because of this global presence, companies must achieve economies of scale to be profitable.

In addition, in order to compete with the Group's major investments in the sector in terms of marketing and marketing are huge. For example, capital expenditure amounted to € 227 million or 3.4% of consolidated sales, advertising and promotional costs nearly € 1.4 billion. (Pernod-Ricard, 2013)

So the sector is dominated by large companies such as Diageo and Bacardi, however some local or regional producers may emerge.

The bargaining power of suppliers: Low

Their bargaining power is critical because it is the farmers who provide the raw material for businesses

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