French spirits industry sees inflation giving 2022 bitter taste

© Reuters. FILE PHOTO: Oak barrels of Armagnac are seen in a cellar at the Chateau de Laubade in Sorbets, Southwestern France, August 24, 2012. Picture taken August 24, 2012. REUTERS/Bruno Martin/File Photo

PARIS (Reuters) - The French spirits industry faces a difficult year due to geopolitical constraints, soaring inflation and COVID-19 restrictions in China, after sales staged a partial recovery in 2021, industry group Federation Francaise des Spiritueux (FFS) said on Tuesday.

"The year 2022 is far more complex," FFS Chairman Jean-Pierre Cointreau told reporters. "We recovered from the COVID-19 crisis but we can see that sales are at down 4% (in value) in the 12 months to the end of May in supermarkets, and down 7% between January and May."

Spirits exports, France's second-largest sector after aerospace, had also recorded a fall in the past few months, he said. Last year, they accounted for nearly half of total spirits sales by value and were up 30% at 4.9 billion euros ($5.18 billion).

"In the United States we have seen a sharp drop in sales since April due to the rise in inflation (..) and in Asia it has clearly slowed down because of the sanitary measures," Cointreau said.

"It is clear that geopolitics will be one of the most important parameters in the coming year," he added, referring to the Ukraine war and tensions between China and Taiwan.

The United States accounts for 44% of total French spirits shipments in value and Asia 29%.

In France, where alcohol consumption has been in decline, sales volumes in retail shops have stagnated in 2021 despite higher sales for white spirits like vodka and gin.

Sales rose in hotels and restaurants in France which had been shut in 2020 because of COVID-19 but they were still well below pre-pandemic levels, FFS said.

Cointreau also stressed that lower availabilities and higher prices for gas, glass as well as grains, used for spirits like vodka, were raising costs and concerns in the industry.

It could also suffer from grain supply shortages due to the Ukraine war and weather problems, which are expected to hit this year's grain production, he said.

The FFS, which represents French producers and distributors of spirits beverages, encompasses 250 companies, including small businesses and international groups.

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