Diageo’s U.S. Sales Rise 6%, With Tequila, Whiskies Driving Gains

Dynamic growth in the Tequila and whisk(e)y categories drove strong sales gains for Diageo in its fiscal first half through December, as the company’s North America unit posted revenues up 6% on an organic basis to £2.5 billion ($3.3b), and operating profit up 5% to £1.1 billion ($1.4b). Diageo’s core U.S. spirits business also rose 6%, broadly in line with depletions.

In the U.S., the Don Julio and Casamigos Tequila brands have been propelling progress, combining for 35% growth in the first half. Crown Royal is also powering ahead, with net sales up 11% during the period due to ongoing growth for its Regal Apple offering as well as its limited-edition Peach extension. Diageo says it’s continuing to back Crown Royal with a robust marketing agenda after upweighting its spend last year. Overall, Diageo North America boosted its marketing by 6% in the first half to £404 million ($529m).

Among other whiskies, Buchanan’s saw net sales climb 9% and single malts like Oban and Lagavulin continued to rise, but Johnnie Walker declined by 3% after lapping last year’s successful White Walker launch. Still, more recent extensions “A Song of Ice” and “A Song of Fire” have performed well so far, the company added. In American whiskey, Bulleit slowed to 4% net sales growth in the first half, although Diageo says it has continued to gain market share.

The U.S. vodka category remains challenging for Diageo, with net sales down 5%, as Ketel One (-3%) and Cîroc (-9%) both declined. Smirnoff, however, showed “strong price/mix growth due to a reduction in promotional volume,” the company noted, and has benefited from the promising launch of its Zero Sugar Infusions extension, with net sales flat for the six-month period. Among other key brands, Captain Morgan rose 1%, Baileys jumped 7% with the help of its Red Velvet offshoot, and Guinness advanced by 4%.

Globally, Diageo posted net sales up 4% to £7.2 billion ($9.4b) and operating profit up 5% to £2.5 billion ($3.3b). For the full fiscal year, Diageo CEO Ivan Menezes said the company expects sales growth to fall at the lower end of its 4%-6% guidance, with global economic conditions and trade disputes potentially weighing on the business. “There is ongoing uncertainty in the global trade environment and we would not be immune from further policy changes,” Menezes said.—Daniel Marsteller

Tagged : Casamigos, Crown Royal, Diageo, Don Julio, Ketel One, Smirnoff

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