Diageo Weighs In On U.S. Normalization, Outlook For Scotch Category
June 5, 2023Diageo offered an update last week on progress in its global Scotch whisky portfolio, with Crew also weighing in on the status of normalization post-pandemic in the U.S. spirits market, which is seeing growth rates now moderate after heightened gains during Covid.
“As we come off the supercycle we are seeing normalization across multiple markets, the U.S. being the most prominent. It’s getting back toward more mid single digits,” Crew said. “It’s being driven by this super-premium-plus part of the category. Luxury growth is moderating, although there is still growth there. Below premium there is a lot of price competition, and that’s really where you’re seeing this weaker consumer environment. But remember, most of our portfolio really is about the super-premium-plus area.”
Normalization is happening not only at the consumer level but throughout the supply chain as well. For Diageo, last year shipments were ahead of depletions, Crew said, “and a lot of that was restocking. Clearly that’s going to normalize.” On the other hand, some suppliers are now seeing actual consumption at the retail level outstrip wholesaler depletions. “Not across all retailers, but certainly some chains. Last year was a big inflation environment with a lot of price increases. Potentially retailers bought in against that, so therefore they’re lapping a big buy-in from last year,” Crew said.
While growth is moderating across the market, Diageo’s business overall is now 36% larger than pre-Covid. As she prepares to take the helm at the end of June, Crew sees the company as well positioned with an “advantaged footprint.” That very much includes the Scotch whisky category, where Johnnie Walker ranks as the top spirits brand by global retail value, according to Impact Databank, at more than $6.8 billion.
Scotch represents just over a quarter of Diageo’s total sales, with value growing at 9% on average over the last four years. In North America, the company’s value growth in the category has averaged about 5% over the same period. As in other spirits categories, the premium-plus level is driving gains, with upscale offerings like Johnnie Walker Blue and single malts like Lagavulin and Mortlach boosting value.
Overall, Diageo says its share of the Scotch whisky market in North America is closing in on 40% after steady increases the past few years. The company plans to continue investing to stoke growth behind the above brands as well as Buchanan’s and The Singleton, as well as further developing its visitor experiences across Scotland, led by the flagship Johnnie Walker Princes Street, to attract new consumers to the category.
| Diageo Key Brands in the U.S. (millions of 9-liter case depletions) |
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| Rank | Brand1 | Origin/Type | 2021 | 2022 | Percent Change2 |
|---|---|---|---|---|---|
| 1 | Smirnoff | Domestic Vodka | 8.9 | 8.8 | -1.7% |
| 2 | Crown Royal | Canadian Whisky | 7.5 | 7.2 | -4.1% |
| 3 | Captain Morgan | Virgin Islands Rum | 5.4 | 5.3 | -2.9% |
| 4 | Ketel One | Imported Vodka | 2.6 | 2.5 | -3.6% |
| 5 | Casamigos | Tequila | 1.8 | 2.4 | 34.5% |
| 6 | Don Julio | Tequila | 1.8 | 2.1 | 12.5% |
| 7 | Johnnie Walker | Scotch Whisky | 2.0 | 2.0 | -1.0% |
| Total Key Brands3 | 30.0 | 30.2 | 0.4% | ||
| 1 Includes flavors, excludes RTDs. 2 Based on unrounded data. 3 Addition of columns may not agree due to rounding. Source: IMPACT DATABANK © 2023 |
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Tagged : Crown Royal, Diageo, Johnnie Walker, Lagavulin
