Allied Domecq has admitted 'misjudged' price increases pushed down sales after 11 September.

The spirits multinational said it was slow to respond to difficult economic conditions even before the terrorist attacks on New York. It put up prices and promoted brands despite indications of an economic downturn.

Allied, which makes Courvoisier cognac, Ballantine’s scotch, Sauza tequila, Beefeater gin and Kahlua liqueur, said that it has overhauled its marketing and pricing strategies to win back market share for its core brands. The company has doubled its marketing budget and will invest around £400m (€647m) promoting its core brands, as well as new ready-to-drink brands Stolichnaya Citrona and Sauza Diablo.

Chief executive Philip Bowman said, ‘We have recognised that, even prior to September 11, we were slow to respond to more difficult economic indicators and, in particular, did not manage the tactical implementation of pricing and marketing promotions well.’

But despite a 2% drop in sales, Allied reported a 6% increase in half year profits. The group reported pre-tax profits for the six months to February 28 of £251m (€406m).

The company’s organic wine and spirit volumes dropped by three percent, although the industry leader Diageo and number three Pernod Ricard reported volume gains in organic wines and spirits.

Over the last 18 months Allied has bought Montana wine of New Zealand, Perrier Jouet champagne, the US rights to Stolichnaya vodka and Diageo’s Malibu rum. Allied said that once its acquisition of Malibu from Diageo receives regulatory approval, the rum will be a cornerstone of its spirits business.

Written by Josie McLaughlin, and agencies29 April 2002