PERNOD RICARD - 2018-2019 Universal registration document

4.

RISK MANAGEMENT Risk factors

Regulatory environment c.

Risk identification and description

Potential impacts on the Group

The Group’s businesses throughout the world are subject to a growing number of regulations. Regulatory decisions and changes in legal and regulatory systems could have adverse impacts on Pernod Ricard’s business, particularly in the areas of product recall, advertising and promotion, labelling and access to distribution. The regulatory environment governing the production and marketing of alcoholic beverages could undergo change worldwide. Similarly, advertising and promotion of alcoholic beverages are subject to increasingly stringent rules aimed at changing consumer behaviour and reducing alcohol consumption. In addition, in its capacity as a distributor of international beverage brands, the Group is subject, in the various countries in which it operates, to numerous regulatory requirements concerning production, product responsibility, distribution, marketing, advertising (such as the Evin Law in France), labelling and imports. More broadly, it is also subject to issues relating to competition and consolidation, commercial and pricing policies, pensions, labour law and environmental concerns.

Regulatory decisions and changes in legal and regulatory requirements in these areas could have a negative impact on Pernod Ricard’s business: product recalls : regulatory authorities in the countries in which — the Group trades could subject the Group to measures including product recalls, product seizures and other sanctions, any of which could have an adverse effect on its trading or harm its reputation, with negative consequences on its operating profit; advertising and promotions : regulatory authorities in the — countries in which the Group trades could impose restrictions on advertising for alcoholic beverages, for instance as regards television advertising or the sponsoring of sporting events. These limits could hinder or restrict the Group’s capacity to maintain or reinforce consumer behaviour in relation to its brands and their recognition on major markets and significantly affect the Group’s operating environment; labelling : changes to labelling requirements for alcoholic beverages — could diminish the appeal of these products in the eyes of consumers, thereby resulting in a fall in the sales of such beverages. Furthermore, such changes could have the consequence of increasing costs, thereby affecting the Group’s results; and access to distribution : regulatory authorities in the countries in — which the Group trades could seek to restrict consumers’ access to Group products, with actions such as the prohibition of alcohol in Bihar (India), which led to the termination of Pernod Ricard's operations in this state.

Risk control andmitigation Pernod Ricard actively participates in legislative and/or administrative thinking by presenting its positions and solutions to industry and other stakeholders, be they local decision-makers or lawmakers. Pernod Ricard does this through the professional bodies to which it belongs, or directly when the subject concerns the Group specifically. This causes the Group to express positions on topics that constitute risk factors, advocating alternatives to exclusively repressive solutions for treating alcohol abuse. Pernod Ricard believes that: governments, producers and other stakeholders need to work together to reduce the harmful use of alcohol, particularly illegal and/or — counterfeit alcohol. Counterfeits account for a significant proportion of alcoholic beverages consumed worldwide, particularly in low- and middle-income countries; the Wine & Spirits sector has a role to play in reducing the potential harm associated with alcohol consumption. Pernod Ricard wishes to — play an active part in this process; alcohol consumption patterns are heavily influenced by cultural and religious factors; — the effectiveness of initiatives aimed at reducing the harmful consumption of alcohol must be scientifically evaluated; and — we need to target at-risk consumers and behaviour, taking into account cultural differences. — These proposals are generally well grasped by Pernod Ricard’s interlocutors, and can prompt them to adopt rules on the trade, consumption and sale of alcohol that are both respectful of the need for efficiency as regard health-related issues and mindful of the economic constraints weighing on sector companies. These interlocutors are often sensitive to a factual demonstration of the ineffectiveness of radical repressive measures, which generally have little impact on at-risk consumer behaviour.

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2018-2019

PERNOD RICARD UNIVERSAL REGISTRATIONDOCUMENT