Tequila Drives U.S. Growth For Diageo, But Emerging Markets Weigh Down ResultsAugust 4, 2020
Diageo benefited from the strong performance of its Tequila and North American whiskey portfolios in its fiscal year through June, with its core U.S. spirits business posting 2% organic sales growth. The resilient North American showing failed to offset difficult conditions across a number of other global markets, however, as the drinks giant’s full-year sales slipped 8% overall to £11.8 billion ($15.3b), and operating profit declined 14% to £3.5 billion ($4.6b).
“We have taken decisive action through the second half of fiscal 20, tightly managing our costs, reducing discretionary expenditure and reallocating resources across the group,” said Diageo CEO Ivan Menezes. “We are further enhancing our data analytics and technology tools to rapidly respond to local consumer and customer shifts triggered by the pandemic.”
Among the areas where Diageo has altered its approach to adapt to the new conditions is the Tequila category in North America, where the Don Julio and Casamigos brands were the star performers, up 26% and 68%, respectively. “While the brands were disproportionately impacted by the on-trade closures, an agile response drove strong demand in at-home occasions,” the company noted. Crown Royal (+8%) and Bulleit (+4%) also maintained solid gains, with Crown Royal boosted by its flavored offerings and Bulleit propelled by strong growth in the off-premise.
Diageo’s Scotch portfolio saw mixed results in North America, with single malts like Oban, Lagavulin, Talisker, and Mortlach performing well, while Johnnie Walker fell 13% owing to the on-premise shutdown and a tough comparison against the previous year’s strong launch of the White Walker extension. The company’s vodka lineup declined by 7% overall despite a solid rollout for Smirnoff Zero Sugar Infusions, as Ketel One suffered from on-trade closures. Diageo’s U.S. beer unit posted 8% growth, led by a 19% jump in RTDs like Smirnoff Ice and Smirnoff Seltzer.
While the U.S. sustained growth for the fiscal year, Diageo saw Covid lead to double-digit declines in a number of global regions. The company took a £1.3 billion ($1.7b) writedown across its India, Nigeria, Ethiopia, and Korea businesses owing to the difficult conditions.
|Diageo’s Key Brands in the U.S.
(millions of 9-liter case depletions)
|Crown Royal||Canadian Whisky||6.32||6.86||8.5%|
|Captain Morgan||Virgin Islands Rum||5.63||5.50||-2.5%|
|Ketel One||Imported Vodka||2.31||2.40||4.0%|
|Johnnie Walker||Scotch Whisky||1.91||1.85||-3.0%|
|Total Key Diageo Brands2||32.48||33.01||1.6%|
|1 includes flavors
2 addition of columns may not agree due to rounding
3 based on unrounded data
Source: IMPACT DATABANK © 2020