Background: Pernod Ricard, a major player with a strong decentralized culture
Pernod Ricard, the world’s second-largest wine and spirits company, has always been distinguished by a deeply decentralized culture, in which each brand and subsidiary retains a high degree of autonomy. While this organizational structure fosters agility and responsiveness, it also presents a major challenge: how can the group fully leverage its scale to negotiate more favorable purchasing terms while preserving the autonomy of local entities?
“A comparison with its main competitor, Diageo—the industry leader and a highly centralized company—revealed a significant performance gap. Thanks to its centralized structure, Diageo is able to optimize its procurement and maximize economies of scale. Pernod Ricard, on the other hand, had to strike a balance between local agility and the group’s collective strength.”
It was in this context that Sarah Kerlan, who was hired as Chief Procurement Officer (CPO), was tasked with lead an ambitious transformation of the procurement function. Over the course of four years, she redesigned the procurement function to turn it into a strategic lever—both cost-effective and sustainable— with support from the Cubik teams (By.O Group).
Client need: to improve overall performance while preserving the group’s culture
Pernod Ricard had several key objectives:
- Optimize negotiations with suppliers by speaking with one voice, without sacrificing the autonomy of local brands.
- Clarify the division of responsibilities between headquarters and subsidiaries to avoid overlap and maximize efficiency.
- Reduce the carbon footprint, particularly for glass, which is the group’s largest source of CO₂ emissions under Scope 3.
- Extend best practices to indirect procurement (marketing, consulting, digital services, facility management, etc.), which is often overlooked but offers significant savings potential.
- Build long-term capacity by training teams in these new methods to ensure that the transformation continues beyond the initial project.
Achievements: A Four-Step Transformation
1. Setting the Rules of the Game: The Relationship Between the Central and Local Levels
From the very start of the project, it was necessary to clarify the roles and responsibilities between headquarters and the local entities. The idea was not to centralize excessively, but to create a centralized procurement function capable of negotiating more favorable terms for the entire group, while giving subsidiaries the freedom to adapt to their specific local circumstances.
This collaboration has been formalized through clear governance rules that define who does what and how decisions are made. The goal is to avoid conflicts, maximize synergies, and enable Pernod Ricard to speak with one voice when dealing with strategic suppliers.
2. Category Management: A Strategy Focused on Glass Bottles
Among the various procurement categories, one quickly emerged as a priority: glass. In fact, bottles are not only a major cost center but also the group’s largest source of Scope 3 carbon emissions.
In a tight market marked by capacity shortages, the team worked to:
- Identify the best suppliers based on their carbon footprint, location, and ability to meet the group’s needs.
- Negotiate economic and environmental terms with major global glass manufacturers, taking into account regional specificities (varying carbon intensity depending on the energy sources used, availability of recycled glass, etc.).
- Reduce the weight of bottles and optimize production processes to minimize the environmental impact.
This approach was then extended to other categories of direct purchases, with similar results.
3. Smart Spend: Continuing the Transformation Through Indirect Procurement Optimization
Indirect procurement—operating expenses, marketing, consulting, digital services, facility management, and more—represented a largely untapped source of savings. The team therefore restructured this function to:
- Map out expenses and identify opportunities for optimization.
- Renegotiate contracts with service providers, leveraging the group’s size to secure more favorable rates.
- Standardize processes to avoid redundancies and additional costs.
A prime example: the renegotiation of consulting fees, a major expense for Pernod Ricard, particularly due to its numerous reorganization and IT projects. The savings achieved were significant, while the quality of services remained unchanged.
4. Develop the skills needed to ensure the sustainability of the initiative
To ensure these changes took root over the long term, it was necessary to transform the culture and skills of the procurement function. Several initiatives were undertaken:
- Placing the procurement function under the direct responsibility of the CPO, making it a key driver of the group’s performance.
- The creation of a Procurement Academy dedicated to training managers and buyers. The goal: to give them the tools to maximize their impact, whether in terms of costs, sustainability, or support for business units.
- Support for operational departments—which are often decentralized—to help them integrate procurement into their overall strategy.
Results: Rapid, Measurable, and Lasting Impact
These efforts have borne fruit, yielding both economic and environmental benefits:
- A 28% reduction in weight per bottle through the use of recycled glass, achieved through a joint development effort with suppliers and support from the Marketing team to ensure successful adoption by consumers.
- A 50% reduction in carbon emissions per bottle, achieved by optimizing glass production processes and renegotiating contracts with glass manufacturers.
- 12 subsidiaries are participating in the indirect procurement optimization plan, demonstrating that the group’s size can be a major asset in negotiations.
- Procurement will make a major contribution to the 1 billion euro performance plan for the 2025–2029 period.
- An integrated and proactive procurement function, now recognized as a key partner to the business units.
- A broad-based improvement in skills through the Procurement Academy, which helps disseminate best practices and ensure that results are sustainable.
Beyond the numbers, this transformation has made it possible to reconcile two seemingly contradictory imperatives: preserving the agility of local brands while fully leveraging the strength of a global group.
Ultimately, this project illustrates how a strategic vision, close collaboration with business units, and an impact-driven approach can transform a support function into a true driver of performance for the company across its entire value chain.
Key Figures for This Transformation
