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Michael writes on emerging markets, architecture and engineering. He has served as a correspondent in Tokyo, London and Johannesburg and has written for Reuters, the Financial Times, The Age and The Sydney Morning Herald.

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Two years too long? Pernod Ricard’s lengthy CEO succession is a long wait between drinks

Published 12 March 2013 07:21, Updated 13 March 2013 07:50

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Two years too long? Pernod Ricard’s lengthy CEO succession is a long wait between drinks

Pernod Ricard CEO Pierre Pringuet sees little need to beat about the bush when it comes to his company’s profitability. Photo: Josh Robenstone

Succession planning is a good thing, but sometimes you wonder if it’s overdone. Just ask Alexandre Ricard. Ricard was 40 last year when he was named chief executive-designate of Pernod Ricard, France’s biggest distiller. It was a great gig to land, but he won’t take the job for another two years.

It makes things awkward because way in advance of taking the job, people wonder what you’ll do differently when you’re in charge. It’s a question journalists like to ask. It can be more awkward when they ask and you’re sitting next to the current CEO – to whom you report and will do so for the next couple of years.

Of course, you don’t become CEO-designate of a company like Pernod Ricard if you’re not someone who can parry a journalist’s questions with ease.

“It’s probably a question for another couple of years’ time,” Ricard said without missing a beat. “But in the meantime, and I think the best way of saying it is that the current strategy of Pernod Ricard under Pierre’s leadership is delivering, clearly.”

Sitting right next to incumbent CEO Pierre Pringuet in a joint interview last week, Ricard then proceeded to go through the details of that strategy.

“I don’t see why this would change,” he said. “These have been the clear drivers of our value creation and our success, our collective success.”

Ok, so he’s a team player, and a smooth one at that, speaking American-accented English that he no doubt perfected while earning his MBA at the University of Pennsylvania’s Wharton business school.

But you do get a hint that the next man at the top, who will only ascend in June 2015 when Pringuet retires, will be more toned-down in style. If you ask his boss Pringuet how the company’s flagship wine Jacob’s Creek – traditionally seen as a middle-ground drop – can compete in the race to China’s fast-growing premium wine market with rival Penfolds’ wide suite of top-label wines, he gives a blunt response.

Pringuet, a former French civil servant, is disdainful of comparisons of his company with Penfolds owner Treasury Wine Estates.

“The answer is very simple,” he says. “Look at the P&L and look at the company which is profitable and I think you have the answer to your question.”

Hubris is a great tool, but can leave you open to attack. Pernod Ricard last month reported a 5.8 per cent increase in its half-year operating profit to €1.46 billion ($1.85 billion), while over the same period, TWE’s earnings before interest and tax fell 20 per cent from a year earlier to $73.4 million. Of course, over the past year, the French company’s 26 per cent share-price rise is nearly doubled by TWE’s 48 per cent gain.

At this point, Ricard steps into the conversation, dispensing diplomacy

“Just to add – one of the key strategic pillars to our strategy is premiumisation,” he says. “We have embarked on a premiumisation strategy a few years ago which is clearly delivering results – if you look at our P&L indeed. Both in terms of driving price by investing behind the brands, Jacob’s Creek being the key one, by driving trade-up into our reserves portfolio – Jacob’s Creek Reserves – by driving up as well into our higher marques such as St Hugo. And this is something that we’re doing across all markets.”

Pringuet sees less need to be diplomatic. He goes back to his point.

“And making profits.”

Ricard’s anointing last year happened a bit hurriedly. He had long been seen as the heir-apparent, but the company behind Absolut Vodka was plunged into crisis in August with the sudden death of chairman Patrick Ricard, Alexandre’s 67-year-old uncle. Patrick Ricard, the chief executive for 30 years until he handed over to Pringuet in 2008, mattered. He was the man who had built up the business started on the kitchen table of his father’s house, into a global giant. In 2006, Fortune magazine named him European businessman of the year. In 2007 he received France’s highest honour, the Legion of Honour.

Less than two weeks after his death on August 17 – reportedly from a heart attack – the company stated that Alexandre Ricard would step up from his role of managing director for distribution to that of chief operating officer and deputy CEO. The decision, Pringuet says, had already been made “a couple of years ago” and all that happened after Patrick Ricard’s death was that the announcement was brought forward from the November annual general meeting.

Ricard now has a couple of years to polish his style further before restoring family leadership to the company founded by his great uncle in 1932 (Pernod, with which it combined in 1975, was established in 1805).

But perhaps he won’t be so different to Pringuet after all, if family history is any guide. In 2002, the New York Times reported that after the company had bought Glasgow’s Chivas Regal, the UK’s Guardian newspaper stated: “The one challenge which Pernod is yet to overcome is to teach the British to enjoy a shot of Ricard (pastis) each evening”. Patrick Ricard’s response was suitably glib: “If one day we find a way to convince you, we will do so. You could always improve your taste.”

Maybe Alexandre Ricard is just biding his time – and his tongue. It would certainly make the next two years easier.

Disclosure: The writer holds TWE shares.

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