Pernod shrugs off Hollande tax regime Pierre Pringuet, like many French business leaders, is vexed about higher taxes imposed by President François Hollande's Socialist government. But the chief executive of Pernod Ricard is measured in his criticism, perhaps reflecting his previous life as adviser to a former Socialist minister before he joined the drinks group 25 years ago. "The additional tax burden for us is significant but not devastating," he says in an interview with the FT. France accounts for 9 per cent of sales, which totalled €8.2bn in the group's year to the end of June 2012. "Despite everything said [about France] by the outside world, there is a clear direction in many, many countries that they want to raise more tax," says Mr Pringuet. Credit Suisse analysts have cut their 2013 earnings per share expectations for Pernod by 1.9 per cent because of the higher taxes. But Mr Pringuet says that far more important to the company's fortunes is the economic outlook in Europe, which accounts for 25 per cent of Pernod's sales. Like-for-like sales in the three months to the end of September fell by 1 per cent in Europe and by 8 per cent in France compared with the same quarter last year. The current fiscal year will remain "difficult" in the eurozone for the owner of brands including Absolut vodka, Martell cognac, Beefeater gin and Chivas Regal scotch. "That's inevitable," he says sitting at a glass-topped table in his office, which is lined with bottles of the company's wares, overlooking a prime Paris garden square. In the eurozone, he expects "stagnation" for at least the next 12-18 months but then a gradual recovery. "Certainly not a disaster scenario," he says. Fortunately, 75 per cent of our business is done outside and that external world we consider to be still very dynamic. Of the economy in China, which grew at 7.4 per cent in the third quarter, he says: "We would all dream of having this sort of slowdown." Pernod's previous rates were unsustainable, he says, because they ran down cognac inventories. Its Chinese growth rate has also slowed because the domestic culture of "gifting" to people in power has effectively been on hold during the transition to a new leadership. Pernod Ricard claims Martell is the Chinese market leader in cognac. The jewel in its crown is the top of the range L'Or, which sells for €2,600 per gold-decorated crystal bottle. "I think it would be sensible to assume that the Chinese New Year [on 10 February] might still be impacted," says Mr Pringuet. The pick-up will certainly come. But not yet. In the US - which is a "critical" market for Absolut - the company has launched a series of initiatives to push more sales at higher prices. These include the launch of Absolut Elyx, a premium vodka, and Absolut Tune, a blend of Sauvignon blanc and Absolut. The unusual-looking bottle is not on his shelf because "the few samples we had were drunk by the directors on the board. They loved it. Pernod Ricard, which has grown rapidly through three big acquisitions since 2000, has ambitions to overtake the UK's Diageo as the world's largest spirits group - with the US the key battleground. But Mr Pringuet has effectively ruled out a big acquisition in the rest of his tenure, emphasising instead the role of innovation in boosting sales. He says there are 300 new product initiatives in the current fiscal year. He is to step down when he turns 65 on 30 January 2015 after a boardroom shake-up this summer precipitated by the sudden death of 67-year-old Patrick Ricard, chairman and son of the group's founder. Mr Ricard's 73-year-old sister, Danièle, became chairman and Alexandre Ricard, his 40-year-old nephew, will replace Mr Pringuet. "It was a clear view that it was very important for the company that the Ricard family stay involved - and visibly involved," says Mr Pringuet, the only non-family chief executive in the company's history. The family owns 14 per cent of the shares. Some analysts wonder whether the breakdown last week of Diageo's exclusive talks to take over José Cuervo could prove too great an acquisition temptation, given the absence of a big tequila brand in Pernod's portfolio. "Irrespective of what is available in the market, we want to retain our investment-grade rating, which is a clear change from the past," insists Mr Pringuet, who has spent his four years in the job patiently pruning the company's net debt. It has fallen from junk status and six times earnings before interest, tax, depreciation and amortisation, following the 2008 Absolut acquisition, to an investment-grade 3.8 times as of June 30 this year. An investment-grade rating means limiting itself to acquisitions of less than €600m a year, reckons Giulio Lombardi, analyst at Fitch Ratings. Trevor Stirling, analyst at Bernstein Research, who values Cuervo at $3bn, thinks there is a way for Pernod to get its foot in the door: "Pernod might be able to acquire it by initially taking an equity stake, with an option to acquire at a future date." "We could make bolt-on acquisitions any time - and strategic acquisitions in a few years," says Mr Pringuet. If we could close the next strategic acquisition before January 31 2015, that would be my birthday gift. "But this is just a joke," he adds hastily.