Chapter 4

Destock or Demand

The United States is Pernod Ricard's largest market and the biggest single swing factor in whether profit recovers. Its reported sales have fallen for three straight years, but the decline is mostly a distributor destock rather than a demand collapse: shipments have run below consumer sell-out throughout, and the US spirits market has stayed in slight growth. A milder demand normalisation sits underneath — enough to temper the cyclical read, not to overturn it.

The market that moves the numbers

The US is the group's single largest market, at roughly a fifth of net sales — about €2.1bn in FY2025, weighted at 19% and falling to 17% of the group by H1 FY2026 as it shrank faster than the rest [1] [2]. Because it carries that weight, the swing in US organic net sales has driven a large share of the group's move from its FY2023 peak.

That swing is stark. Reported US organic net sales went from roughly flat at the FY2023 peak to a run of falls that deepened, not healed, over three years: −9% in FY2024, −6% in FY2025, and −15% in the first half of FY2026 [3] [4] [5].

Source: FY2023 value at c.0% per the FY2023 Sales & Results deck [6]; FY2024 US shipments down 9% per the FY2024 call [7]; FY2025 −6% [8]; H1 FY2026 −15% [9].

A three-year worsening looks, at first read, like structural decay. How to price that trajectory depends on what those shipment numbers actually measure: spirits leaving Pernod Ricard's warehouses for its distributors, not spirits leaving the shelf for the consumer.

Shipments below the shelf

Three flows move in sequence: Pernod Ricard ships to its distributors (net sales); distributors deplete stock to retailers (depletions); retailers sell out to consumers (sell-out). When the pipeline is being drained, each flow up the chain is less negative than the one below it, because inventory is being run down at every level. That is exactly the pattern in the US.

FY2024 is the one year the company disclosed all three layers at once. Shipments fell 9%; Pernod Ricard's depletions fell 7%; its sell-out fell 4%; and the spirits market's own sell-out stayed in positive territory [10]. Management said as much directly: "the shipments will likely be below the sellout" as distributor inventory came down [11].

Source: FY2024 earnings call — US shipments −9%, Pernod Ricard depletions −7%, sell-out −4%, with the overall spirits market sell-out positive [12].

The gap between the bottom of the chain and the top is the destock. Consumers pulled ~4% less Pernod Ricard product off the shelf, yet the company shipped 9% less into the trade — the difference is inventory that distributors and retailers chose not to hold, against a backdrop of high US interest rates that make carrying stock expensive [13]. The same wedge shows up in every period the company has quantified it.

Sources: FY2023 deck [14]; FY2024 call [15]; Q1 FY2025 (first-quarter FY2025 print) [16]; FY2025 results release [17]; H1 FY2026 US −15% [18].

Down the shipment column the business looks in retreat; across in the sell-out column it looks like a warehouse being emptied while the shelf holds up. In the FY2025 release the company put the same point in its own words: "USA −6%, Spirits market (inc. RTD) in slight growth… Narrowing gap-to-market through sharp execution" [19]. Shipments below the shelf, with the company slowly closing the distance to a market that is still growing.

The consumer underneath

None of this proves the US consumer is unchanged. The evidence for a genuine, if milder, normalisation is real and worth stating plainly.

The category is soft, not booming. Pernod Ricard describes the US spirits market as in "slight growth," held back by "subdued consumer confidence and economic moderation" [20]. Its own structural data shows US alcohol penetration steady at about 53% of legal-drinking-age adults across a decade, but with the moderation concentrated in frequency — consumers drinking on fewer occasions rather than quitting [21]. A stable base with falling frequency is not a demand cliff, but it is a lower cruising speed for the category than the post-Covid boom.

And Pernod Ricard is not simply riding the market. Its own sell-out has been roughly flat-to-slightly-negative even as the market grew slightly — a gap-to-market it has been narrowing, but a gap all the same [22]. The pricing side of this reset, covered in Pricing Power, shows the same softening reaching the shelf: within-brand price/mix turned negative across the core US portfolio, and promotions increased. That is demand-side pressure, not just a pipeline effect — the consumer is trading occasions and responding to price, even if not disappearing.

Why the pipeline keeps draining

The awkward fact for a clean destock story is duration. A one-off inventory correction should be measured in quarters; this one has run three years and, in H1 FY2026, got worse rather than better. Three forces explain the extension.

First, distribution itself was disrupted. Over the past year Pernod Ricard "reset our route to market" in the US and made "targeted, capability-driven distributor adjustments," against an industry backdrop of distributor "expansion, consolidation and RNDC market changes" [23]. Reassigning brands across wholesalers drains and refills pipelines on its own, on top of the cyclical destock. Second, new US tariffs on spirits arrived as a fresh cost and a reason for the trade to manage inventory tightly. Third, high interest rates keep the carrying cost of stock elevated, so distributors hold less of it structurally.

The recovery timing has slipped with each telling. In August 2024 management expected a return to US growth in FY2025 and "a return to volume growth in most markets in the second half" [24]; instead FY2025 fell 6% and H1 FY2026 fell 15%. The FY2026 guidance again leans on a destock explanation — "distributor inventory adjustment in the US, continued soft consumer demand" — with the improvement pushed into the second half [25].

The mechanical implication cuts the other way, though. Shipments cannot stay below sell-out forever: once distributor inventories reach their new, lower steady state, shipments must converge back up to consumer demand. If US sell-out is roughly flat and shipments are down 15%, the catch-up when destocking ends is a tailwind of similar order — the volume mirror image of the operating-leverage argument in Cash and the Dividend, where a recovery in EBITDA is what pulls leverage back down.

Reading the split

On the weight of evidence, the US decline is cyclical-dominant: a multi-year pipeline destock, amplified by tariffs and a route-to-market reset, layered over a real but mild demand normalisation. Shipments falling three times faster than the consumer left the shelf is the signature of inventory, not of a broken market, and the still-growing category and narrowing gap-to-market support that read.

The strongest fact against it is duration and slippage. A destock that has run three years and keeps being pushed out starts to look like the trade's judgement that steady-state demand is structurally lower, and Pernod Ricard's own sell-out is only flat rather than growing — so the "catch-up" rebound depends on category sell-out holding up. What would change the read is straightforward to monitor: US category sell-out turning clearly and durably negative would move this from destock to demand; conversely, the shipment-to-sell-out gap closing as distributor inventories normalise would confirm the cyclical case and mark the point at which US net sales stop being a drag on group profit.