ANNUAL REPORT 2011/2012 CONNECTED AT A GLANCE 02 PROFILE AND STRATEGY THE 5 PILLARS OF PERNOD RICARD Created by the link-up of the Ricard and Pernod companies in 1975, Pernod Ricard is today the world co-leader of Wines & Spirits. Organic growth and acquisitions have driven the international development of a Group that reaffirms its ambition: to become the undisputed number 1 of the industry. Already the leader of the Premium segment—the most dynamic in the industry—Pernod Ricard has opted for a model of sustainable growth. This is based on both a systematic strategy of brand upscaling, called ‘Premiumisation’, and Innovation, regarded as being an accelerator of value creation. The Group’s growth model is based on five pillars: A COMPREHENSIVE PORTFOLIO OF PREMIUM INTERNATIONAL BRANDS Since its beginning, and particularly over the last ten years of rapid acquisitions, Pernod Ricard has built a unique portfolio of Premium brands on an international scale. This portfolio covers all Wine & Spirits categories and is now illustrated by the ‘House of Brands’ concept. The ‘House’ classifies the Group’s priority brands into three segments: the ‘Top 14’, which consists of 14 strategic spirits and champagne brands; the wine segment, with its four Premium wine brands; and the 18 key local brands segment. The Top 14 includes: ✦ two ‘global icons’—ABSOLUT vodka and Chivas Regal Scotch whisky; ✦ seven Premium spirits brands—Ricard pastis, Ballantine’s Scotch whisky, Jameson Irish whiskey, Havana Club rum, Beefeater gin, and Malibu and Kahlúa liqueurs; ✦ five Prestige spirits and champagne brands—Martell cognac, The Glenlivet and Royal Salute Scotch whiskies, and G.H.MUMM and Perrier-Jouët champagnes. PREMIUMISATION AND INNOVATION: TWO KEY STRATEGIC FOCUSES FOR CREATING VALUE Pernod Ricard’s strategy is built on creating value through a systematic policy of brand upscaling, or ‘Premiumi- sation’. This ‘value strategy’ is part of a long-term vision based on strong and continuous investment in the Group’s brands. Pernod Ricard has one of the industry’s biggest marketing expenses, which represent 19% of its net sales. The Group invests heavily and continuously to bring about innovation, seen as a growth accelerator. Innovation is a priority in supporting the brands, but it also concerns every other area of the business: Sales, Human Resources, Production, Legal, Finance and Communications. By creating the conditions for profitable and sus- tainable growth, the Group intends to consolidate its position as leader of the Premium segment. PROFILE AND STRATEGY 03 A DECENTRALISED ORGANISATION AND A WHOLLY-OWNED DISTRIBUTION NETWORK Pernod Ricard’s organisation is unique in its industry. The Group has opted for decentralisation: the 75 Market Companies are all wholly-owned and managed as profit centres. This global network ensures decision-making that is closer to the markets, which enables the Group to respond more swiftly to the needs of customers and consumers in any country. This flexible and responsive structure has consistently shown its ability to boost individual motivation and team performance. Pernod Ricard, the leader in many Asian markets such as China and India, is best positioned to take full advantage of the growth of these markets—the most dynamic in the sector. EMPLOYEES UNITED BY A STRONG CORPORATE CULTURE In a decentralised organisation, it is the corporate culture that binds everyone together. At Pernod Ricard, this culture is grounded in three values: entrepreneurial spirit, mutual trust and a strong sense of ethics. These are continually encouraged by a policy of Human Resources management that promotes leadership skills, mobility and diversity. This corporate culture is seen as a real competitive asset, expressed in a convivial, straightforward and direct attitude. Almost 19,000 employees share it every day—in their relationships with one another, and in their rela- tions with consumers and stakeholders of the company. This Pernod Ricard spirit is conveyed by the tagline ‘Créateurs de Convivialité’. AN HISTORICAL COMMITMENT TO ETHICS, PEOPLE AND THE ENVIRONMENT There is no leadership without a deep sense of responsibility. Since it was founded, the Group has been strongly committed to Corporate Social Responsibility. It created the Paul Ricard Oceanographic Institute in 1966, and the Ireb (Institute for Scientific Research on Alcoholic Beverages) in 1971. The Group has defined four priorities in its CSR platform: 1. Promote responsible drinking of alcoholic beverages: this is the Group’s number 1 priority. 2. Respect the environment and commit to sustainable development, in line with the Group’s desire to protect the unique lands that gave birth to its brands. 3. Foster cultural sharing. 4. Encourage the entrepreneurial spirit. 04 KEY FIGURES No.1 CO-LEADER IN WINES & SPIRITS WORLDWIDE, IN PREMIUM AND LEADER IN THE AsIAN MARKETS, PRESTIGE spIRITS THE MOST DYNAMIC OF THE SECTOR(1) WORLDWIDE 8,215 2,114 EURO MILLIONS EURO MILLIONS 18,777 NET SALES, EMPLOYEES IN PROFIT FROM RECURRING OPERATIONS, +8% 75 COUNTRIES +9% (ORGANIC GROWTH) (ORGANIC GROWTH) 19 BRANDS AMONGST THE WORLD’S TOP 100(2) 14 STRATEGIC PREMIUM AND PRESTIGE 4 PRIORITY SPIRITS & CHAMPAGNE BRANDS PREMIUM WINE BRANDS (1) Among international spirits groups. (2) Source: Impact published in February 2012. KEY DATES 05 2010 2011 Asia & Rest of the World becomes The Group signs a joint-venture the Group’s top region. agreement with Tequila Avión™ for Creation of Premium Wine Brands, the development and marketing of a Brand Company grouping together the ultra-Premium tequila brand, Avión. the Group’s priority wine brands. Acquisition of Vin&Sprit, owner of ABSOLUT, 2008 making Pernod Ricard the world co-leader in the industry. Purchase of 39.1% of Seagram’s Wine & Spirits businesses: integration of Chivas Regal Scotch whisky and Martell cognac. 2005 2001 Acquisition of Allied Domecq, in partnership with Fortune Brands. The Group doubles in size and becomes the world number 2 Pernod Ricard and the Cuban company in Wines and Spirits. Cuba Ron create Havana Club International, a 50/50 joint venture for the marketing and 1993 distribution of Havana Club rum. 1989 Acquisition of the Orlando Wyndham Group, Acquisition of Irish Distillers, an Australian producer of wines, the leading producer of including the Jacob’s Creek brand. Irish whiskey and 1988 owner of Jameson. Pernod Ricard is created by the link-up of two French 1975 anise-based spirits companies: Pernod, which was founded in 1805, and Ricard, founded by Paul Ricard in 1932. 18 KEY LOCAL BRANDS 06 LOCATIONS PERNOD RICARD LOCATIONS CHIVAS BROTHERS IRISH DISTILLERS 6 BRAND COMPANIES 4 REGIONS(1) 75 PERNOD RICARD AMERICAS MARKET COMPANIES 98 HAVANA CLUB INTERNATIONAL PRODUCTION SITES (1) Asia and Rest of the World, Americas, Europe (excluding France), and France. LOCATIONS 07 HEAD OFFICES – BRAND COMPANIES Havana, Cuba • Paris, France • Dublin, Ireland • London, United Kingdom • Stockholm, Sweden • Sydney, Australia HEAD OFFICES – PERNOD RICARD REGIONS New York, United States • Paris, Marseille, Créteil, France • Hong Kong, China 28 MAIN PRODUCTION SITES Walkerville, Canada • Fort Smith, United States • Los Reyes, Mexico • San Jose, Cuba • Suape, Resende, Brazil • Bella Vista, Argentina • Fox & Geese, Midleton, Ireland Paisley, Strathclyde, Kilmalid, The Glenlivet, Scotland • Åhus, Nobbelov, Sweden • Aalborg, Denmark • Poznan, Poland • Manzanares, Age, Spain • Yerevan, Armenia Lormont, Marseille, Reims, Rouillac, France • Behror, Nasik, India • Rowland Flat, Australia • Tamaki, New Zealand HOLDING THE ABSOLUT COMPANY PERNOD RICARD EUROPE PERNOD RICARD ASIA MARTELL MUMM PERRIER-JOUËT PREMIUM WINE BRANDS SOCIÉTÉ PERNOD SOCIÉTÉ RICARD Pernod Ricard Locations 08 GOVERNANCE BOARD OF DIRECTORS Pernod Ricard’s Board of Directors oversees the Group’s governance, respecting ethics and transparency rules. Combining personalities with complementary experience and skills, it ensures the respect of the long-term vision and strategy. It also guarantees that the Group’s management is carried out in the interest of the business and its shareholders. ORGANISATION AND METHOD OF OPERATION The Board of Directors is composed of 14 members, including 7 independent Directors. Pernod Ricard applies the independence criteria provided for in the AFEP-MEDEF corporate governance code for listed companies. THE ROLE DIVISION OF THE CHAIRMAN AND THE CHIEF EXECUTIVE OFFICER In order to adapt the Group’s governance and allow for natural succession within the Company’s executive management, the Board of Directors has separated the role of the Chairman from that of the Chief Executive Officer. The Chairman of the Board of Directors organises and directs the Board’s operations and reports these developments back to the Shareholders’ Meeting. He oversees the proper functioning of the Company’s managing bodies and ensures that the Directors are fully equipped to fulfil their roles. The Chief Executive Officer is granted full powers to act in the name of the Company in all circumstances. CHANGES IN THE COMPOSITION OF THE BOARD OF DIRECTORS DURING THE FINANCIAL YEAR At the Shareholders’ Meeting of 15 November 2011, Nicole Bouton was reappointed to the Board for a four-year term. In addition, on 25 April 2012 the Board of Directors co- opted Martina Gonzalez-Gallarza as Director, replacing Rafaël Gonzalez-Gallarza, who had resigned. THE BOARD OF DIRECTORS IN 2011/2012 During the financial year ended 30 June 2012, the Board of Directors met 10 times with an attendance rate of over 94%. The Board approved the annual and half-year financial statements and the terms of financial communications, reviewed the budget, prepared for the Combined Ordinary and Extraordinary Shareholders’ Meeting, and approved the draft resolutions. The current state of the business was discussed at each of these meetings, including operations, results and cash flow. As part of the Company’s debt management, the Board approved the continuation of the asset disposal programme, and during a scheduled review of the refinancing plan, it decided to launch two bond issues, one in October 2011 and the other in January 2012.