PERNOD RICARD - Universal Registration Document 2019-2020

4. RISK MANAGEMENT Risk factors

Counterfeiting/IP rights 3.

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, particularly in developing markets, and could pose serious threats to consumers, including endangering their health. In the context of the Covid-19 pandemic, illegal traders are actively seeking to take advantage of the measures put in place to combat the spread of the virus. The closure of on-trade premises and some official retail outlets, combined with legislation prohibiting the production, import, distribution and sale of alcoholic beverages in certain countries, has triggered a shift to online demand (a distribution channel increasingly used by counterfeiters), as well as a resurgence of black market activity. This is of particular concern in India and South Africa.

Fraudulent use of the Group’s brands damages the Group’s image and reputation and impacts its development prospects and results, as it 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 increases 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. For instance, the Group is currently in a dispute over the “Havana Club” brand (see Note 6.5 – Disputes in the notes to the consolidated financial statements).

RISK CONTROL AND MITIGATION The protection and defence of the Group’s intellectual property rights is based on a triangular 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. Second component: the Brand Companies are in charge of proceedings brought against any counterfeit goods and/or imitations that may be present in the markets. Third component: a Brand Security 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. In the context of Covid-19, the Brand Security team has stepped up its general monitoring of online sales platforms and social media. Many counterfeiting production facilities have also been dismantled with the help of local authorities, particularly in India and China. Lobbying has also been undertaken jointly with the Public Affairs teams and the Transnational Alliance to Combat Illicit Trade (TRACIT) to raise government awareness of the impact of measures taken on illicit trade during the lockdown. Lastly, the Brand Security team is also involved in the development of technical/technological measures to improve the protection of the Group’s 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. In addition, a platform identifying local legislation that could encourage illicit trade was set up in conjunction with industry stakeholders to identify high-risk regions and take the necessary action during the Covid-19 crisis. 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 2019-2020

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