PERNOD RICARD - 2018-2019 Universal registration document

4.

RISK MANAGEMENT Risk factors

Risks relating to business activities I. Pressure on Prices 1.

Risk identification and description

Potential impacts on the Group

Consolidation and alliances between retailers both at local and international levels are putting a strain on Pernod Ricard’s margins and reducing its ability to increase prices. The competitive environment can on occasion also lead Pernod Ricard to organise more aggressive or more frequent promotions. In addition, e-commerce is putting pressure on traditional retailers. The Group also faces heightened competition from both major international players on its strategic brands and local groups or producers on its local brands, driven by the growing success of craft products, as is the case with vodka in the United States. The fierce competition in mature markets and the increasingly competitive nature of emerging markets could require the Group to boost its advertising and promotional expenditure, or even to reduce or freeze its prices in order to protect its market share, thereby weighing on its results.

Potential impacts include: the increased negotiation power of its customers leading to — margin erosion and/or loss of market share; pressure on Pernod Ricard to align prices across markets within a — region; temporary delisting and/or loss of promotional support; — cheaper prices driving lower value brand image. —

Risk control andmitigation To mitigate risk, Pernod Ricard is committed to maintaining A&P investment at approximately 16% of sales to reinforce brand equity and, in turn, the ability to increase prices. Further, Pernod Ricard launched a global Revenue Growth project in 2017, including rolling-out a sophisticated promotional effectiveness tool and dedicated pricing management resources at market and HQ levels.

Geopolitical andmacroeconomic instability 2.

Risk identification and description

Potential impacts on the Group

Pernod Ricard faces the rise of protectionism, the increase of geopolitical tensions and terrorism, to which can be added the risk of the resurgence of a larger global macroeconomic crisis. These risks are not limited to emerging markets: the recent past has shown political and economic disruption in many markets. Brexit is a perfect example, with Pernod Ricard having in particular significant production assets in the United Kingdom and Scotch whisky representing around a quarter of its global net sales. The trade war between the United States and Europe, on the one hand, and China on the other is another good illustration.

Consequences may include a significant decrease in sales or margins linked to the Group's inability to sell and/or consume foreign products, an increase in custom tariffs or even destruction of assets.

Risk control andmitigation The Group’s best protection is the diversification of its business both by geography and category. The Group is present today in 73 markets and has leading brands in all major spirit categories. Pernod Ricard is continuing to actively develop new channels (e.g. e-commerce and hometainment) and new consumer occasions, such as the low/no alcohol trend and opportunities linked to female consumption. Accordingly, the Group regularly reassesses its routes-to-market and local partners. In addition, Pernod Ricard has implemented crisis management plans in all affiliates. Finally, in certain cases, the Group may increase its prices in order to mitigate the impact on margins. Similarly, under certain circumstances, production and logistics infrastructures can be adapted.

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2018-2019

PERNOD RICARD UNIVERSAL REGISTRATIONDOCUMENT