Pernod Ricard, the world’s second largest wine and spirits group, has hit out at US hedge fund Elliott Management’s claims that the company is underperforming.
“Over the past three years, we have created more than €11 billion of value and our share price has increased by 37.7 percent, significantly outperforming the CAC40 index (+5.6 per cent) and the Eurostoxx Food & Beverage index (-13.4 percent). Our strategy is working and it is the right one, combining short-term profitability and sustainable, profitable and responsible growth under a consistent and long-term roadmap,” Pernod Ricard’s chief executive Alexandre Ricard said.
Pernod also confirmed its guidance for 2018-19 of 5 percent to 7 percent organic growth on profit from recurring operations and announced a new strategic plan which aims to accelerate growth while pursuing transformation. Explaining key elements of this, a spokesperson said “Over the last three years, there have been changes in the way the company works to adopt a fully consumer centric model. For example, we no longer work category by category but by moments of consumption, like a nightclub or bar moment. Changes have also been made to the top management and executive teams, with more international profiles and more women. The Group also has an active portfolio management to constantly adjust to consumer’s needs with recent inclusions of Monkey 47 gin or Del Malguey Mezcal. Meanwhile, strategic international brands such as Jameson Irish Whiskey or Martell cognac keep on posting very positive sales figures”.
The move comes after US hedge fund Elliott Management issued a statement saying it holds an economic interest in excess of 2.5 percent in the French company worth €1 billion but that the “company has lost market share across key segments within its portfolio and underperformed its peers on several metrics.”
Successive operational improvement plans have failed to generate operating leverage, leaving operating margins at a discount of 5 percentage points to its closest peer Diageo, Elliott added. Even though Absolut is one of world’s top 3 spirit brands, Elliot claimed “Pernod’s M&A track record has also been disappointing, with the €6 billion acquisition of Absolut in 2008 falling short of expectations. The result has been a material total shareholder return underperformance relative to its more comparable peers, with the company notably ranking last among its peer set over the last decade.”
To improve Pernod’s performance, the activist shareholder Elliott has recommended launching a more ambitious operational improvement plan to close the profitability gap with competitors and aligning corporate governance with best-in-class peers.
The US hedge fund manages two multi-strategy vehicles, which combined have around $35 billion of assets under management.