Drink giant hails for China growth

Sparkling growth in Asia is driving spirits sales, especially in China, a highly profitable market for cognac and whisky. Brewers have also seen strong Chinese sales growth, but are hampered by the perennially low price of Chinese beer.

Paris-based Pernod reported this week that its underlying sales leaped 10% in the September quarter, Diageo last week posted a 5% rise and smaller Remy Cointreau saw an 11.3% increase for April-September.

Investors favour Pernod over Diageo due to its higher exposure to fast-growing Asian markets and the French group has set a target of a 6% rise in operating profits for the year to June next year, which analysts say could be increased.

Brewing stocks have won higher ratings as investors expected consumers to turn to cheaper-priced beer from pricier spirits in a slow economic recovery. But the profitable spirits markets is forcing a rethink. 

Pernod, which makes Absolut vodka, Chivas Regal whisky and Martell cognac, reported underlying sales growth of more than 30% in key emerging markets such as China, India, Vietnam and Indonesia, and 10% plus in Russia and the Ukraine.

Remy earns a third of its profit from the Chinese cognac market and Pernod 30% of its profit from Asia Pacific. Diageo gets just over 6% of group profit from the region.