March 29, 2017 / 7:55 AM / in 4 months

Pernod to raise spirits prices in Britain, cites Brexit impact

A bottle of Ricard, aniseed-flavoured beverage, is pictured during a news conference to present the company's 2015-2016 half-year results in Paris, France, February 11, 2016.Jacky Naegelen

PARIS (Reuters) - Pernod Ricard is raising the prices of its spirits and wines in Britain to protect margins against a slide in the pound stemming from the country's vote to leave the European Union.

The owner of Absolut vodka, Martell cognac and Mumm champagne told its British trading partners this month and made the announcement as Prime Minister Theresa May filed Britain's formal Brexit divorce papers on Wednesday.

"Brexit is a reality, especially today. We have let our trading partners know we are raising prices. It is being negotiated," Christian Porta, who manages Pernod Ricard’s business in Europe, the Middle East, Africa and Latin America, said on an analysts call.

In slides released ahead of the presentation Pernod, the world's second-biggest spirits group behind Britain's Diageo, had said: "Brexit is leading to a strong pound depreciation, with inflation expected higher as a reaction. In that context, Pernod Ricard increased prices in March."

Imported brands account for 80 percent of Pernod's sales in Britain. Pernod derives 3 percent of group sales from Britain.

Porta declined to provide further details on the scope of the price increases, saying these were sensitive commercial information. Pernod is in negotiations with its British partners after alerting them to the increases and Porta said the company aims to have them in place April-May.

Inflation in Britain is rising quickly in response to the sharp fall in the value of the pound since the Brexit vote and a rise in global oil prices over the past year. Inflation jumped to 2.3 percent in February and the Bank of England predicts it will peak at 2.8 percent in the first half of next year, above its 2 percent target.

In October last year Anglo-Dutch company Unilever tried to raise the prices of its Marmite spread in Britain, prompting a stand-off with the country's largest supermarket, Tesco, which balked at the demand.

Pernod had previously reported that sales in Britain rose 7 percent in the first half of its 2016-17 fiscal year, with a 9 percent rise in international spirits sales and a 6 percent increase for wines more than offset a drop in champagne sales.

Editing by Sudip Kar-Gupta and David Goodman

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