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Chivas Brothers bullish over outlook after sales rise at Scotch whisky giant

THE chief executive of Chivas Brothers has declared the Scotch whisky giant has yet to see any impact on sales from the cost-of-living crisis, as it reaffirmed its ambition to ensure its operations in Scotland are carbon neutral by 2026.

Dumbarton-based Chivas, part of Paris-headquartered Pernod Ricard, reported a “significant increase” in demand for Scotch whisky around the world as it posted a 25 per cent rise in net sales for the year to June 30.

Speaking to The Herald, executive chairman Jean-Etienne Gourgues highlighted the “diversification of our portfolio in terms of brands and geographical footprint” as he said sales of the distiller’s four strategic international brands – Ballantine’s, Chivas Regal, The Glenlivet and Royal Salute – had all grown by over 20%.

“Our direction is very clear,” he said. “We showcased that our business has been very resilient over the last two years, able to weather a lot of uncertainties.

“We still have big ones ahead of us, but we are pretty confident with our diversification of geographies, with our portfolio play, and with our investment behind innovation and our sustainable future.”

The distiller highlighted a “very good mix” of growth in both mature and emerging markets. Sales in emerging markets rose by 34%, driven by strong performances in countries such as Brazil and India, where Chivas continued to benefit from the growing number of middle-class consumers and an “enduring trend of premiumisation”.

“There is an increasing trend of premiumisation with an increase of consumer purchasing power [in those markets]. Our brands benefit from strong consumer uplifting in those markets,” Mr Gourgues said.

Growth in mature markets was up by 16%, Chivas reported.

Looking ahead, Mr Gourgues said the performance “gives us a lot of confidence and strength to continue to invest in portfolio innovation” as well as in the future of its Scotch whisky making operations. “We are fast-tracking our roadmap for becoming carbon-neutral by 2026,” he added.

Asked if Chivas was seeing any effect on sales from surging inflation, Mr Gourgues replied: “So far no. Each market will have its own reality on that.”

He expects the first quarter to be “pretty solid” for Chivas, but conceded: “We may have impact in certain markets, in terms of the purchasing power for some of the consumers. A good element is that our portfolio is very skewed to premium and prestige brands, which are by nature very resilient to this type of environment than standard brands.

“We do hope that this focus on the [premium] part of the portfolio will provide us with resilience during the course of the year.”

Mr Gourgues said Chivas was feeling the effects of the rising cost of energy and freight around the world.

Asked if the company had passed the increased costs on to customers, he said it had put price rises through in some markets at the start of the current calendar year. It was also attempting to mitigate rising costs through operational efficiencies, he said.

As part of efforts to become carbon neutral by 2026, Chivas plans to roll-out mechanical vapour recompression fan technology at its Strathclyde Distillery in Glasgow, its largest whisky-making operation, which it hopes will save nearly 9,800 tonnes of carbon dioxide. This follows a trial at its Glentauchers Distillery in Speyside, which led to energy reductions of 90% on a single pot still.

Chivas intends to install MVR technology at Allt A’Bhainne distillery in Speyside in 2023, with plans to add two more MVRs at Glentauchers by October, making it the lowest-energy distillery in the company’s stable.

The investment comes on top of the £88m expansion of the company’s Aberlour and Miltonduff distilleries to increase output and improve their environmental sustainability.

The project will lift Chivas’s total production capacity by 14 million litres of alcohol per annum.

Mr Gourgues said the company’s bid to become carbon neutral by 2026 was “the most aggressive target in the industry” and ahead of wider net-zero ambitions set by the whisky sector and UK Government.

The results for Chivas contributed to a record-breaking performance by Pernod, which saw sales exceed the “symbolic milestone” of €10 billion, having risen by 17% to €10.7bn.

Profit from recurring operations came in at a record €3bn, up 25%.

Alexandre Ricard, chairman and chief executive, said: “Growth was driven by all regions, categories, price points and channels, with a comparable contribution from both mature and emerging markets.”

“Most importantly, our performance was sustainable thanks to the real progress we’ve made on delivering our strategic roadmap Good Times from a Good Place.”

He added: “While we are faced with a challenging and volatile environment, I am confident that our unique competitive advantages and the rapid deployment of our digital transformation will enable us to deliver our FY23 to FY25 medium-term financial framework.”

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