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Diageo Sees Mid-Single-Digit Growth Continuing Over The Next Two Years

September 20, 2017

In a trading update today ahead of its annual general meeting, Diageo forecast that its overall sales would continue to rise at mid-single-digit rates through June 2019, although it warned that growth might be slower in the latter part of this calendar year due to headwinds in China and India. In late July, Diageo posted sales up 4% to about $16 billion for the 12 months through this past June.

In the U.S., Diageo noted that it’s been “upweighting investment” behind a number of its core spirits brands in recent months, and is expecting those efforts to pay off in the coming quarters. In the year through June, Diageo North America grew its marketing spend by 4%. Among the brands getting increased attention are Smirnoff, Cîroc and Ketel One, all of which are fighting for share within the highly competitive U.S. vodka category.

The push has included new ads for Smirnoff featuring model Chrissy Teigen and targeted at millennial and multicultural audiences. Smirnoff (volume down 1%), Ketel One (-3%) and Cîroc (-13%) all faced challenges during the fiscal year, with Cîroc’s decline owing to a tough comparison against the previous year, in which the brand debuted its successful Apple flavor. Diageo CEO Ivan Menezes recently noted that he expects all three brands to fare better in the current fiscal year owing to the increased marketing investments. In calendar 2016, Cîroc spent $11.6 million on media ads in the U.S., ranking third among all vodkas, according to Kantar Media, while Ketel One ranked sixth at $3.4 million. Smirnoff wasn’t among the top 10.

In its update today, Diageo also noted that sales for its fiscal first half ending in December could be affected by the later timing of the Chinese New Year and new restrictions on spirits sales near national and state highways in India. The company added that its global Scotch business will also see increased investment looking ahead, along with its U.S. spirits unit.—Daniel Marsteller

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