INCREASED MARKETING AND INNOVATION BOOSTS DIAGEO
Diageo’s annual profit increased 42%, driven by strong international sales of Johnnie Walker, and new product launches. International sales jumped 13% while volume was up 14%. European sales were flat, however, mainly due to the 8% decline in Guinness volume.
Overall, volume was up 5% for North America and net sales increased 7%. Smirnoff vodka, Captain Morgan and Jose Cuervo each delivered double digit growth in net sales, leading spirits to grow 8% while wine was up 7%. Johnny Walker gain 1.2% of share this year alone in the North American market.
In the U.S., sales rose 7% thanks to an increase in the legal drinking age population and the trend towards premium products. “Preference for premium brands has given us a great platform for growth” in the U.S., said Diageo CEO Paul Walsh.
Ivan Menezes, President of Global North America stated that Americans were continuously willing to spend on alcoholic beverages despite the economy. “We are not seeing any slowdown in the premium beverage alcohol space,” he said. “We feel pretty confident that the U.S. market will be pretty robust for premium spirits, wine and beer.”
“The trend of premiumization is also something we see as very sustained,” he continued.
Advertising also boosted sales in the U.S. where the company spent more on marketing and advertising, earning Diageo 41% of its overall profit.
Marketing focused more “on African-Americans and Mexican-Americans with ‘Barbershop’ and ‘Latin Kings of Comedy’ sponsorships,” along with a 15% increase in marketing spend for Crown Royal, said Paul. Tanqueray also grew 7% with help from the “Tony Sinclair” campaign.
“Our spend in spirits in the U.S. is where we’re really focused,” said Ivan. “In our spirits category we’ve got great momentum, we’ve got very effective marketing and we plan to spend very heavily behind it.”
Introducing new products and flavors also boosted sales in the U.S. “Innovation was another key growth driver, and has played an important role in driving net sales in North America this year,” said Paul. “Innovation has led 31 new products to be launched and 9 are in test markets.” The introductions of new Baileys’ flavors were responsible for 50% of the brand’s growth in the U.S. as well.
As far as pricing is concerned in the U.S., Ivan insisted it would stay pretty much the same. “For pricing in the U.S., we are looking at fiscal 2007 more or less in line with what we did in fiscal 2006. For fiscal 2007 we’re looking at roughly 40% of our business where we will take price increases.”
ANY PLANS WITH FOSTER’S? Diageo CFO Nick Rose stated that Diageo has no “imminent” plans for acquisitions, taking itself out of the possible running for Foster’s Group. In a telephone interview with Bloomberg, Nick replied, “I don’t think we are interested.”
Overall, volume was up 5% for North America and net sales increased 7%. Smirnoff vodka, Captain Morgan and Jose Cuervo each delivered double digit growth in net sales, leading spirits to grow 8% while wine was up 7%. Johnny Walker gain 1.2% of share this year alone in the North American market.
In the U.S., sales rose 7% thanks to an increase in the legal drinking age population and the trend towards premium products. “Preference for premium brands has given us a great platform for growth” in the U.S., said Diageo CEO Paul Walsh.
Ivan Menezes, President of Global North America stated that Americans were continuously willing to spend on alcoholic beverages despite the economy. “We are not seeing any slowdown in the premium beverage alcohol space,” he said. “We feel pretty confident that the U.S. market will be pretty robust for premium spirits, wine and beer.”
“The trend of premiumization is also something we see as very sustained,” he continued.
Advertising also boosted sales in the U.S. where the company spent more on marketing and advertising, earning Diageo 41% of its overall profit.
Marketing focused more “on African-Americans and Mexican-Americans with ‘Barbershop’ and ‘Latin Kings of Comedy’ sponsorships,” along with a 15% increase in marketing spend for Crown Royal, said Paul. Tanqueray also grew 7% with help from the “Tony Sinclair” campaign.
“Our spend in spirits in the U.S. is where we’re really focused,” said Ivan. “In our spirits category we’ve got great momentum, we’ve got very effective marketing and we plan to spend very heavily behind it.”
Introducing new products and flavors also boosted sales in the U.S. “Innovation was another key growth driver, and has played an important role in driving net sales in North America this year,” said Paul. “Innovation has led 31 new products to be launched and 9 are in test markets.” The introductions of new Baileys’ flavors were responsible for 50% of the brand’s growth in the U.S. as well.
As far as pricing is concerned in the U.S., Ivan insisted it would stay pretty much the same. “For pricing in the U.S., we are looking at fiscal 2007 more or less in line with what we did in fiscal 2006. For fiscal 2007 we’re looking at roughly 40% of our business where we will take price increases.”
ANY PLANS WITH FOSTER’S? Diageo CFO Nick Rose stated that Diageo has no “imminent” plans for acquisitions, taking itself out of the possible running for Foster’s Group. In a telephone interview with Bloomberg, Nick replied, “I don’t think we are interested.”
posted at 1:46 PM
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