Whiskies Drive 5% U.S. Growth For Diageo, As Cîroc Slips On Pricing PressureJuly 31, 2014
Diageo continues to enjoy solid sales momentum in its core U.S. spirits and wine business, led by its American and Scotch whisk(e)y brands. In the 12 months through June, representing its full fiscal year, the drinks giant saw 5% organic sales growth across its U.S. spirits and wine portfolio, which offset a marked slowdown in emerging markets.
Reserve brands led the way for Diageo in the U.S. over the past year, rising double-digits. A key contributor to that result was Scotch whisky, led by nearly 50% growth for Johnnie Walker’s super- and ultra-premium whiskies—including new launches Platinum and Gold Reserve—and double-digit progress for Buchanan’s, which continues to thrive in the Hispanic consumer segment. Single malts Lagavulin, Talisker and Oban also drove growth at the reserve level, and, on the American whiskey side, Bulleit Bourbon delivered a nearly 70% advance. Among other brands on the rise in the U.S., Captain Morgan increased on a solid initial showing for its newly launched white rum, and Crown Royal and Don Julio also continued to make gains.
The vodka category, however, has become a challenging area, with both Smirnoff and Cîroc declining over the past year. Alluding to the “increasingly price-sensitive standard vodka segment,” Diageo said Smirnoff’s decrease in volume (-4% across North America) was the main reason the company’s overall volume slipped 1% in the U.S. Cîroc too has come under pricing pressure, and saw a U.S. net sales decline of 3% despite a strong performance for its Amaretto flavor.
Across its global business, Diageo’s net sales rose 0.4% to £10.3 billion ($17.4b), while operating profit before exceptional items grew 3% to £3.1 billion ($5.2b) and marketing spend declined 1% to £1.6 billion ($2.7b). Among its other global business units, company net sales were roughly flat in Western Europe, up 1% in Africa, Eastern Europe and Turkey, up 2% in Latin America and Caribbean and down 7% in Asia-Pacific, where, as expected, it wrote down its ShuiJingFang baijiu business by £264 million ($445m), owing to “the downturn in the baijiu category in China driven by the anti-extravagance measures by the Chinese government.”Subscribe to Shanken News Daily’s Email Newsletter, delivered to your inbox each morning.