PERNOD-RICARD - URD 2020-21

____ 4. RISK MANAGEMENT RISK FACTORS

2. Anti-alcohol environment and regulations (1)

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 advertising and promotions, labelling and access to distribution. In almost all countries in the world, the production, import/export and sale and distribution of alcohol are subject to special regulations. These are constantly changing. Likewise, the presentation or labelling, advertising and promotion of alcoholic products are subject to increasingly strict regulations, the aim of which is often to better inform consumers about the risks of inappropriate alcohol use and sometimes even reduce their alcohol consumption. The religious, cultural and media context of each country leads to wide variation in the regulation of alcoholic beverages. In general, there is a movement towards greater constraints on this type of product, its promotion or its distribution.

Regulatory decisions and changes in legal and regulatory requirements in these areas could have a negative impact on Pernod Ricard’s business: advertising and promotions : regulatory authorities in the countries in which the Group trades could impose restrictions on advertising for alcoholic beverages ( e.g. television advertising or sponsorship of sports events). One effect of these limitations would be to prevent or restrict the Group’s ability to retain or recruit consumers for its brands in a challenging competitive environment. Restrictions on advertising freedom could also constrain the Group’s ability to launch new innovations. They thus have a significant impact on the Group’s business; labelling : changes to labelling requirements for alcoholic beverages could diminish the appeal of these products for consumers, who might switch to other less tightly regulated products, resulting in a decline in sales. Furthermore, such changes could have the consequence of increasing costs, thereby affecting the Group’s results; and access to distribution : government authorities in countries in which the Group operates may seek to restrict consumer access to the Group’s products. For example, the prohibition of alcohol in Bihar (India) led to the cessation of Pernod Ricard’s activities in that State. Likewise, restrictions on channels, hours or points of sale are occurring regularly in many countries. These restrictions tend to shift consumption to illegal or parallel distribution channels, which compete with the Group’s lawful business.

RISK CONTROL ANDMITIGATION Pernod Ricard actively participates in public debates relating to the adoption of laws and regulations that affect the Group. The Company’s teams promote the Group’s positions and solutions to local decision-makers and legislators. Pernod Ricard does this through professional bodies to which it belongs, or directly when the subject specifically concerns the Group. Pernod Ricard is also committed to ensuring that the products distributed are promoted responsibly and in line with the ethical marketing or commercial standards agreed within the International Alliance for Responsible Drinking (IARD). Internal controls are in place to ensure compliance with the Pernod Ricard Commercial Communication Code, which includes all the rules to which marketing communications are subject. In line with its CSR ambitions, Pernod Ricard also wants to be part of the players who are proactively changing legislation and practices, by promoting alternatives to exclusively repressive solutions to treat alcohol abuse and which have not proven their effectiveness. Currently, more than 150 initiatives to prevent the dangers of abusive or inappropriate consumption are developed by the Group worldwide, alone or with partners. From 2021, a pictogram “prohibited to minors”, as well as a pictogram on the risk of excessive alcohol consumption while driving, will be affixed to all bottles produced by the Group’s brands, three years ahead of the initial schedule (insofar as the regulations in the country where they are sold allow it).

Note that this risk is also covered in Section 3.2.2 of the Non-Financial Information Statement. (1)

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PERNOD RICARD UNIVERSAL REGISTRATION DOCUMENT 2020-2021