Liquor Companies Only Enjoyed the Whiskey Boom... Pernod Ricard and Diageo's Social Contributions Are 'Meager'

Pernod Ricard and Diageo Whiskey Boom Drives Performance Improvement
Net Profit of 33.6 Billion and 17.7 Billion with Donations Limited to 120 Million and 36 Million
Most Net Profit Remitted to Headquarters as Dividends

Recently, as whiskey has rapidly emerged as the dominant alcoholic beverage in the domestic liquor market, the performance of the two major whiskey companies, the French Pernod Ricard and the British Diageo, has also significantly improved. However, contrary to the saying "generosity comes from abundance," these foreign liquor companies have shown stinginess in social contribution activities such as donations, given the nature of their liquor import business and the lack of domestic research and development (R&D) or facility investments. Meanwhile, most of their net profits are remitted to their headquarters as dividends, raising concerns about serious capital outflows.

According to the Financial Supervisory Service's electronic disclosure system (DART) on the 12th, Pernod Ricard Korea, a company with a fiscal year ending in June, reported sales of 185.3 billion KRW for the 2023 fiscal year (July 2022 to June 2023), a 15.9% increase from 159.8 billion KRW the previous year. During the same period, net profit also rose by 14.6% to 33.6 billion KRW from 29.4 billion KRW the previous year.

During the same period, Diageo Korea recorded sales of 153.4 billion KRW and net profit of 17.7 billion KRW. This performance marks the first results since Diageo Korea's corporate split. In July last year, Diageo Korea spun off all businesses except for the "Windsor" whiskey business. The former Diageo Korea, which retained only the Windsor business division, changed its name to Windsor Global, while the newly established company was named Diageo Korea.

Before the split, Windsor's share was known to be about half, and the sales for the 2021 fiscal year, which included Windsor's performance, were 193.2 billion KRW. Considering that Windsor Global's sales for the 2022 fiscal year were around 76.7 billion KRW, it is estimated that Diageo Korea achieved performance growth compared to the previous fiscal year.

The improvement in the performance of the two companies is undoubtedly influenced by the growing popularity of whiskey in the domestic market. In recent years, whiskey demand has rapidly increased with the spread of various drinking methods, from high-priced single malt whiskey enjoyed neat to mid- to low-priced whiskey used in highballs. According to the Korea Customs Service, during the recent fiscal year, the import value of whiskey by the two companies in Korea was 276.21 million USD (approximately 370 billion KRW), a 23.9% increase from 222.87 million USD the previous year. During the same period, import volume also rose by 63.5% to 32,733 tons from 20,021 tons a year earlier.

Pernod Ricard Korea's 'Royal Salute 21 Year Richard Quinn Edition 2,' globally first launched this month in Korea

Amid the domestic whiskey craze, both companies are putting full effort into marketing, seizing the opportunity while the tide is favorable. Pernod Ricard Korea recently operated pop-up stores for brands such as "Ballantine's," "Jameson," and "Absolut," and chose Korea as the first country to launch the "Royal Salute" product in collaboration with famous fashion designer Richard Quinn, strongly driving the expansion of the domestic whiskey market.

In fact, Pernod Ricard Korea spent 86.6 billion KRW on selling and administrative expenses during this fiscal year, of which 54.6 billion KRW was spent on advertising and promotion. This amount is about one-third of sales and significantly exceeds the cost of goods sold (47.3 billion KRW). Meanwhile, employee salaries decreased from 11.5 billion KRW to 10.8 billion KRW, and even donations, which were around 120 million KRW, dropped slightly to 116 million KRW. Diageo Korea, whose representative products include "Johnnie Walker" and "Talisker," also spent 75.3 billion KRW on selling and administrative expenses, with 42.4 billion KRW allocated to advertising and promotion, but donations amounted to only about 36 million KRW.

Diageo Korea 'Johnnie Walker Blue Label'

Despite the significant improvement in performance, social contributions such as donations have declined, while a high dividend policy continues, with most of the fruits of improved performance paid to headquarters as dividends. Pernod Ricard Korea paid out nearly all of its net profit of 33.6 billion KRW as dividends to shareholders, except for about 4 million KRW carried forward as undistributed retained earnings. Pernod Ricard Asia, part of the Pernod Ricard Group, holds 100% of the shares of Pernod Ricard Korea. The dividend payout ratio reached 99.98%, with a face dividend rate of 403.6%, a 14.6% increase from a year earlier. Over the past three years, Pernod Ricard Korea has sent more than 82 billion KRW in dividends to its headquarters.

Diageo Korea also paid 16 billion KRW out of its 17.7 billion KRW net profit as dividends. The face dividend rate was 284.6%, and the dividend payout ratio was 90.1%. Diageo Atlantic B.V., part of the Diageo Group, holds 100% of Diageo Korea's shares, effectively sending all dividends to the headquarters. Previously, in the 2021 fiscal year (July 2020 to June 2021), Diageo Korea paid 22 billion KRW in dividends to its headquarters with a payout ratio of 230%. Last year, Windsor Global, which remained as the surviving company after the corporate split focusing only on the Windsor business division, paid 32.1 billion KRW in dividends.

This content was produced with the assistance of AI translation services.