By Scott Wright
THE chief executive of Scotch whisky giant Chivas Brothers has revealed all staff at its parent group in China are now working at home as everyday life continues to be disrupted by the spread of coronavirus, while expressing fear that new import tariffs on single malt in the US will be damaging to small distillers.
Chivas owner Pernod Ricard highlighted “additional pressure related to the COVID-19 outbreak” as it slashed its profit forecast on February 13, noting that trading conditions were “particularly uncertain from a geographical standpoint”.
With the coronavirus having since spread rapidly in China, and to other parts of the world, Pernod has ordered its staff in the country to work at home. But so far it is sticking to the forecast announced two weeks ago, when it said it expects profit growth from recurring operations to be in the region of two per cent to 4%, down from 5% to 7%.
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Jean-Christophe Coutures, chief executive of Chivas Brothers, said there is “no change to the guidance” but noted that the company was “monitoring the situation weekly”.
He said: “If in the coming months things were to evolve, if it was to become a pandemic, if Europe was to become impacted then we would have to review that, but for the time being we stick to what we [said].”
Rival Diageo said this week that its operating profit would be hit by to £200m as bars and restaurants have closed and public gatherings have been cancelled in China and across Asia.
Asked whether Pernod has closed any sites in China, Mr Coutures said: “Currently in China, people cannot go to the office, so they have to work from home. This is the current situation.
“Our main priority as a business is the health and safety of our staff and partners. We do everything we can to encourage those people by looking at work from home solutions, and healthcare benefits, and to make sure we keep staff and their families as safe as possible.”
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Mr Coutures said it is too early to gauge the effect from the spreading coronavirus in Europe, but expressed fears that sales in airport duty free stores will be affected. He said: “Clearly, airports are big areas of possible contamination.”
But he added: “If you look back in time at the last 20 years, there is only one time Scotch whisky was in decline, and that was after the financial crisis in 2009. The year after, the Scotch whisky category grew very strongly. If you look at the overall dynamic, yes there are bumps, but fortunately we belong to a category which is extremely resilient.”
Pernod reported strong growth for its Scotch whisky brands in the first half of its current year. It highlighted strong growth prospects in the US, where market leader The Glenlivet is up 8% in the year to date, despite the 25% import tariff introduced by the Trump administration in October.
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Noting that protectionism is “value destroying for everybody”, Mr Coutures said the tariff is “not good news” and fears it will have a bigger impact on small distillers than big players such as Pernod, which can turn to other markets.
“To them, this is really bad news because it could put all their business model at risk," he said. "I think we need to do everything we can to protect small distillers, because those are the ones who would suffer most.”
Pernod has responded to the tariffs by raising its prices in the US to cover the higher duty.
Meanwhile, Chivas has revealed its ambition to make one of its 14 Scots distilleries carbon neutral within two years. It is currently selecting a distillery to serve as a pilot, before rolling out the initiative. It aims to be carbon neutral by 2030.
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