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Diageo Hails Pricing Improvement, U.S. Spirits Sales Up 6%

January 31, 2013

Diageo said recent price increases failed to slow volume growth in its U.S. spirits business over the six months through December, its fiscal first half, and led to a net sales gain of 6% during the period (including an 8% rise among its “strategic spirits brands”). Highlights included a 9% increase in Diageo’s North American vodka sales, with Smirnoff (helped by its recent Iced Cake and Kissed Caramel flavor launches), Ketel One and Cîroc all prospering. The whisk(e)y category provided double-digit growth for the drinks giant in the region, with Crown Royal up 12% (boosted by its new Maple Finished extension) and Bulleit Bourbon doubling net sales. Diageo’s volume across North America was up 1%.

“I’ve always thought of (North America) as our biggest developing market,” said Diageo CEO Paul Walsh. “It contributed over 30% of our organic net sales growth, driven by 6% growth in U.S. spirits, a rate which we believe outpaces industry growth by more than a percentage point. It’s a growth market. And demographic trends in North America will only improve its growth potential.”

Walsh added that a series of “major wine launches”—including the millennial-geared Butterfly Kiss, Rose’n’Blum and Stark Raving—led a return to growth in its North American wine business over the last six months. Diageo NA’s marketing spend was up 5% during the period.

Globally, Diageo’s organic net sales rose 5% to £6.04 billion ($9.6b) over its first half, while operating profit increased 9% to £2.03 billion ($3.2b). Volume was up 1%, as the strong performance of the U.S. and emerging markets offset weakness in Western Europe and Korea.

 

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