Pernod Ricard's Global Market Challenges: Geopolitical Risks and the Erosion of Premium Spirits Demand

In the volatile landscape of global luxury goods, Pernod Ricard-a titan in the spirits industry-faces a perfect storm of geopolitical risks that threaten its premium spirits demand. From the suspension of Cognac imports in China's duty-free channels to escalating U.S.-China trade tensions and regional conflicts in Southeast Asia and the Middle East, the company's 2023–2025 performance reveals a stark narrative of resilience and vulnerability. This analysis dissects how these risks are reshaping Pernod's regional markets and what investors should watch for in the coming years.

Asia-RoW: A Double-Edged Sword of Growth and Geopolitical Exposure

Asia-RoW remains Pernod's most critical market, contributing 41.3% of its 2023 revenue, according to The Spirits Business. However, this region is a battleground of contradictions. China, once a growth engine, has become a liability. In fiscal 2025, Chinese sales plummeted by 21%, driven by retaliatory tariffs on Cognac (imposed in response to EU electric vehicle duties) and the suspension of duty-free Cognac imports, as reported in that Spirits Business article. Martell, a flagship brand, saw a 20% decline in sales, while the broader Chinese market's weak yuan and subdued gifting culture compounded losses, the same report found.

Meanwhile, Southeast Asia's geopolitical chessboard is equally treacherous. The South China Sea disputes, involving overlapping territorial claims by Vietnam, the Philippines, and Malaysia, have disrupted trade routes and supply chains, according to an EGN analysis. While ASEAN's digital integration efforts (e.g., Malaysia's 2025 Digital Economy Framework Agreement) aim to stabilize the region, as noted in Pernod Ricard's statement, the U.S.-China rivalry has forced nations to hedge their bets, creating regulatory uncertainty. For Pernod, this means navigating shifting tariffs and consumer sentiment in markets like Indonesia and Vietnam, where premium spirits demand is sensitive to economic volatility, the EGN analysis also indicates.

In the Middle East, the picture is mixed. While conflicts between Israel and Iran have destabilized parts of the region, Pernod has found pockets of growth. Turkey, for instance, bucked the trend with robust sales of Ballantine's and Chivas Regal, driven by a resilient middle class, according to the company statement. However, broader instability-such as Hezbollah's weakening and Iran's nuclear tensions-threatens to erode consumer confidence in luxury goods, as observed in an MEI analysis.

Americas: Tariffs and Economic Moderation Undermine Momentum

The Americas, which accounted for 29.8% of Pernod's 2023 revenue, were highlighted in The Spirits Business report as facing headwinds. The U.S. saw sales decline by 6% in 2025 due to Trump-era tariff threats and subdued consumer confidence, per that report. The North American market, once a pillar of stability, now faces a "soft patch" as gifting demand wanes and pricing power erodes, a trend Pernod acknowledged in its company statement. Meanwhile, Latin America's dynamic growth in Mexico contrasts sharply with the U.S. slump, but even here, geopolitical risks loom. Currency fluctuations and political instability in Argentina and Brazil could disrupt Pernod's cost structures and pricing strategies, the Spirits Business piece warned.

Europe: A Bastion of Resilience Amid Global Turmoil

Europe's 29% revenue share was also noted in the Spirits Business coverage and has proven more resilient, with Spain and Germany benefiting from strategic pricing actions. However, the region is not immune to global shocks. The EU's trade-offs with China over electric vehicles have indirectly harmed Pernod's exports, as retaliatory tariffs on Cognac ripple through European markets, the same report observed. Additionally, the Russia-Ukraine war's energy crisis has kept inflation high, dampening discretionary spending on premium spirits, according to a JPMorgan analysis.

Strategic Responses and the Path Forward

Pernod's management has responded with a mix of cost-cutting and premiumization. The company announced a €1 billion cost-reduction plan by 2029, per the Spirits Business coverage, and is doubling down on high-margin brands like Chivas and Jameson. Yet, these measures may not offset the long-term damage from geopolitical headwinds. As CFO Jean-Baptiste de La Baume noted, "Global tariff threats could cost us €200 million annually, and recovery hinges on easing trade tensions," as reported by Reuters.

For investors, the key takeaway is clear: Pernod's 2026 outlook hinges on geopolitical normalization. While the company projects a "transition year" for sales recovery, noted in the Spirits Business coverage, persistent conflicts in the Middle East and U.S.-China trade wars could delay this timeline.

Conclusion

Pernod Ricard's story in 2023–2025 is one of strategic agility in the face of geopolitical chaos. Yet, the company's premium spirits demand remains tethered to global stability. As Southeast Asia's digital integration and the Middle East's political realignments unfold, investors must weigh Pernod's resilience against the unpredictable nature of geopolitical risk. For now, the road to recovery is paved with uncertainty-but not without hope.