PERNOD-RICARD - URD 2021-22 EN

4. Risk management Risk factors

3. Counterfeiting/IP Rights

RISK IDENTIFICATION AND DESCRIPTION

POTENTIAL IMPACTS ON THE GROUP

The Group’s brands are one of the key aspects of its competitiveness. However, they face various threats: unauthorised reproduction, imitation, use of signs likely to create confusion in the mind of the public, refilling of bottles with counterfeit liquids. These issues remain crucial in various markets, and could pose serious threats to consumers, including endangering their health. In addition, the increasing sophistication of techniques for unauthorised reproduction of the Group’s products can lead to difficulties in authenticating them. The Covid-19 pandemic has benefited illicit trade players. The latter made significant profits in the face of a legitimate market weakened by lockdown measures, the closure of on-trade premises, and sometimes even national measures prohibiting the production, import, distribution and sale of alcoholic beverages. Today, despite the recovery in activity, companies in the sector remain vulnerable due to profound disruptions in their supply chain (shortage of raw materials, extended delivery times for goods, stock-out situations), creating further openings for the black market. Lastly, the pandemic greatly accelerated the growth of e-commerce, both legal and illegal, due to the postponement of demand during lockdowns; it also sped up the globalisation of counterfeiting activities, enabling a sharp increase in the illicit online B2B trade and thus giving counterfeiters access to quality fraudulent items (finished products, fake caps, fake labels, etc.) wherever they were.

Fraudulent use of the Group’s brands damages its image and reputation and impacts its development prospects and results, and could cause consumers to shun the Group’s products if their reliability is not guaranteed (in the case of refills) or if third parties deliberately create confusion with the Group’s brands (brand imitation). It also increased operating costs. While avenues for legal recourse are generally satisfactory, it may be difficult in some countries to obtain swift and dissuasive sanctions against counterfeiters.

RISK CONTROL AND MITIGATION

The protection and defence of the Group’s intellectual property rights is based on a specific organisation established to maximise desired efficiency while minimising costs. First component: at the end of 2014, the Group set up a centralised team (the “Group Intellectual Property Hub”) dedicated notably to protecting the brands. This team ensures the protection of rights and defends them against any attempt by third parties to file similar rights in order to avoid confusion among consumers and the undermining or dilution of the Group’s brands. From 1 July 2022, this team will also manage intellectual property disputes (and in particular legal actions launched against counterfeits and/or imitations that may be present on the markets) instead of the Brand Companies that were previously responsible for them. This change should further strengthen the effectiveness of the fight against unauthorised use of the Group’s rights and make it possible to optimise protection strategies. Second component: a Global Trade Intelligence team leads the fight against illicit trade in the Group’s products globally by coordinating all action taken against counterfeiting and other forms of trafficking. This action takes the form of investigations on the ground or online, and legal action combined with initiatives to raise awareness among local authorities. The Global Trade Intelligence team also supports the marketing and operations teams at the Group’s Head Office and affiliates in the development of technical/technological measures to improve the protection and authentication of our products. Examples of such measures include a scheme based on the principle of the smart bottle, introduced in strategic markets such as China, which enables consumers to check the authenticity of the Group’s products using a QR code integrated into the packaging. The defence of intellectual property rights also involves operational staff, who are called on to identify imitations (products/brands) in the field and to pass on all necessary information to the aforementioned teams for action.

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Pernod Ricard Universal Registration Document 2021-2022