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Whiskies, Tequila Drive Steady U.S. Progress For Diageo

December 11, 2019

Whiskies and Tequila continue to spur Diageo’s U.S. gains as it looks to seed growth in new occasions, consumer bases, and markets. Speaking to investors yesterday, Diageo North America president Deirdre Mahlan discussed both the company’s areas of strength—including enhanced innovation and analytics as well as its robust Tequila and whisk(e)y portfolios—and its near-term challenges, including bolstering growth in vodka and rum.

“American whiskey continues to take share,” Mahlan noted. “Bulleit, with value growth of 9% versus the prior year (in the company’s fiscal first quarter through September), is contributing to that.” Bulleit was up 10% in NABCA channels in the 10 months through October, building on its 1.3-million-case base. In June, Diageo opened a new $10 million, 12,000-square-foot visitor experience at Bulleit’s Shelbyville distillery.

Diageo’s Tequila brands are also churning forward, with Don Julio up 30% and Casamigos jumping 43% in the company’s first quarter, according to Mahlan. Both of Diageo’s major Tequila brands sell in the luxury segment, which now accounts for more than 22% of the 18.3-million-case Tequila category in the U.S., according to Impact Databank, and is outpacing the overall category in terms of growth. In NABCA channels Don Julio surged 30% year-to-date through October, while Casamigos leapt by 56%.

The Diageo Scotch portfolio is likewise outperforming the overall category. Johnnie Walker’s Game of Thrones tie-ins are an example of “consumer insight embedded in innovation,” Mahlan said, adding that they’re bringing new consumers into the Scotch category. The newest offerings in the Game of Thrones range—A Song of Ice and A Song of Fire (both $36 a 750-ml.)—are seeing “good uptake,” Mahlan noted, but aren’t expected to match the explosive debut of last year’s White Walker, which neared 80,000 cases after only about three months on the market.

Crown Royal advanced by a robust 13% in the U.S. in Diageo’s first quarter, and was up 11% in NABCA channels in the first 10 months of the year, advancing from a 2018 base of more than 6.3 million cases (including flavors). Specifically, Crown Royal Peach and Regal Apple have propelled growth for the Canadian whisky label this year.

The vodka and rum categories remain challenging areas, Mahlan acknowledged, outside of the recent turnaround for Ketel One, which has been rejuvenated by its Botanicals ($25 a 750-ml.) range. Diageo is aiming to boost Captain Morgan through a partnership with Major League Soccer, including TV ads and team-specific bottles. Captain Morgan was down 1.7% in NABCA markets through October amid a flat rum category. On the vodka side, Mahlan said the company is looking to recent launches like Smirnoff Zero Sugar Infusions ($12 a 750-ml.) and Cîroc White Grape ($34) to restore momentum. Looking ahead, she explained that one goal is to broaden the consumer base for Cîroc to new geographies and occasions outside its urban stronghold.—Shane English

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