BUSINESS

Pernod Ricard strives for business recovery despite labor resistance

By Shin Ji-hye
  • Published : Jan 31, 2019 - 15:39
  • Updated : Jan 31, 2019 - 19:18

Struggling for a breakthrough in the unfavorable whiskey industry in South Korea, Pernod Ricard Korea has been pushing to downsize and restructure, including plans for the sale of a local brand and an early retirement program.

The local unit of the French beverage company Pernod Ricard currently runs two corporate bodies here: Pernod Ricard Korea that sells imported brands such as Ballantine’s, Absolut and Royal Salute; and Pernod Ricard Korea Imperial that sells local whiskey brand Imperial. 



Amid weakening whiskey sales in Korea, the firm recently announced plans to sell off its Imperial brand to local company Drinks International and to carry out major restructuring.

It plans to reduce its number of employees by more than half from the current 211 permanent employees to under 100 employees through an early retirement program. It has set aside 50 billion won ($45 million) to pay each employee up to 69 months of their wages.

Although the labor union is resisting such plans, the company has said it is an “inevitable decision” for the survival of the company’s operations and competitiveness, vowing continued efforts to support affected employees.

Whiskey sales here have been declining. The market has slowed over the past few years due to several factors including the implementation of the anti-corruption law in 2016, limiting the maximum workweek to 52 hours and changing consumer trends that increasingly favor beverages with lower alcohol content. 

Shipments of whiskey in Korea have declined from 2.8 million boxes (18 bottles) in 2008 to 1.4 million boxes in 2018. Sales of Imperial have also dropped from 119 billion won in 2015 to 82 billion won in 2018. 

However, the firm’s restructuring faces strong resistance from the union, which has reportedly urged employees to delay participation in the early retirement program.

Industry watchers say the union’s stance is understandable to some extent, but it seems to have gone a little too far. 

“I don’t think the early retirement program from Pernod Ricard is small because its employees are among the highest paid in the local beverage industry. It seems the union is manipulating public opinion through the media to seek more compensation,” said an anonymous official from the local beverage industry.

It is not the first time that a union has appealed to the public when a foreign company implements restructuring in the face of business difficulties. Global retailers, such as Walmart, Carrefour and Tesco, all grappled with labor unions when they faced such difficulties.

“If a union’s move becomes too excessive whenever foreign companies try to downsize, it will give a negative impression to foreign companies eyeing the local market,” said Chung Yong-min, CEO of Strategy Salad.

According to a KOTRA survey last year, one of foreign companies’ concerns about making investments in Korea was labor-management relations, beyond the business environment and government regulations.
 
By Shin Ji-hye (shinjh@heraldcorp.com)







 



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