Monday 17 December 2018

Jameson owner stockpiles whiskey in Russia as tit-for-tat sanctions threatened

Fears Moscow may block future Irish imports

Pierre Pringuet, chief executive of Pernod Ricard
Pierre Pringuet, chief executive of Pernod Ricard

Nick Webb

Irish Distillers has ramped up shipments of its iconic Jameson brand to Russia ahead of possible retaliation by authorities against EU and Western sanctions.

Last week, Pierre Pringuet, chief executive of Pernod Ricard, which owns Irish distillers said: "We are importing as much as we can for our [Russian] inventories because an embargo or retaliatory action could happen any time.

The €24bn drinks firm is shipping extra supplies of Jameson Irish whiskey to Russia, as well as hiking shipments of Ballantine's scotch, Absolut vodka and wines in its brand portfolio in case Moscow blocks future imports in a tit-for-tat trade conflict prompted by aggression in Eastern Ukraine. Russia is one of Jameson's fastest growing markets. Sales of Jameson in Russia grew by 4pc last year, a performance only topped by the US and South Africa. Irish whiskey is one of the fastest growing segments of the global Pernod Ricard business.

Last Friday a ceasefire was agreed between Ukraine and separatists, although Europe is extending previous sanctions against Russia. A lasting truce would be the largest breakthrough yet in the conflict, which has soured Russia's relations with its former Cold War foes. Ukraine, the U.S. and Europe claim that Moscow is backing the rebels with cash, weapons and special forces. Russia denies any involvement.

Sanctions against key members of Russia's powerful inner circle led to a backlash where Russia banned imports of fruit, vegetable, meat, fish and dairy import from the United States, all EU member states, Canada, Australia, and Japan. Drink was not included in the initial embargo, although as tensions rise, the ban on imports may be extended to alcohol. Last month the Washington Post reported that one senior Putin adviser, Vladislav Surkov, had tweeted that he was "going out to buy Scotch whisky". "Russia is a serious worry," Mr Pringuet said. Pernod Ricard's move to increase shipments to Russia is aimed at defending its market position in the country where sales rose 5pc in the last year, despite the poisonous political tensions.

Boosting stockpiles of Jameson in Russia would help Pernod Ricard cope with the initial supply problems caused by a blacklisting of the brand and other western goods. Long term, it would badly dent Jameson's growth trajectory. Anna Malmhake, Chairman and CEO said: "The sustained progress of Jameson within the Pernod Ricard family of brands has been one of the group's most eminent success stories, growing from 466,000 cases when Irish Distillers joined Pernod Ricard in 1988, to approaching 5 million cases in 2014. Jameson is the No.1 selling Irish whiskey in the world, an Irish export story we should be truly proud of."

Irish Distillers wouldn't be the only Irish company to be hit by a Russian strike-back. Last month, Bord Bia boss Aidan Cotter indicated that a wide number of food producers faced losses of Russian business. "We're left with about €70m worth of exports that are affected by the latest sanctions that have been imposed by Russia. About €40m of those are in the dairy area, mostly milk powders, but also cheese, also €20m in seafood and €10m in beef," he said. However it emerged that some of these losses were unconnected to the Ukraine sanctions.

Russia is also an important market for Glanbia's sports nutrition division. Glanbia chief executive Siobhan Talbot has described the developments as "unhelpful" during a recent investor call. "It's an unhelpful development in a market that was starting to show some declines." Ireland is the 13th biggest European exporter of food and drink to Russia. These exports are worth about €232m, having grown six-fold from 2009 to 2013.

Sunday Indo Business

Business Newsletter

Read the leading stories from the world of Business.

Also in Business