Diageo Sees Little Change in Consumer Behavior
Diageo said it saw “no significant change” in consumer behavior in the U.S. during the six months ended December 31, with premiumization trends continuing and a 2% market volume growth expected. Diageo’s growth continues to stem from its premium brands, such as Smirnoff, Captain Morgan, Johnnie Walker, Crown Royal and Sterling and Chalone wines, and reserve brands, while value brands are holding up the show. On-premise and off-premise both experienced some growth in the first half, although the on–premise (particularly casual dining) is slightly softer due to economic slowing in the U.S. Meanwhile, the company has a “very clear strength in the off-channel.”
As we mentioned, the spirits industry gained 2% in volume in the first half, with premium and premium plus brands growing at a faster rate. Ivan noted the trend to premiumization is continuing. While sales of value brands (retailing below $10) were declining, Diageo noted it has no significant presence in that part of the market despite the fact it has lost share in the value segment. The company said it outperformed the industry during the holiday and expects first half trends to continue in the second half.
The company remains confident that consumers will continue trading up despite an economic slowdown in the U.S. "Everyone is focused on subprime, monoline, $400bn write-offs ... to a lot of people it's a total irrelevance. They don't understand it, and they don't want to understand it," said Paul Walsh.
“While Diageo has outperformed the market by 12.2% year to date, we expect continued out-performance while market volatility persists,” said Melissa Earlam of UBS in a research note.
NORTH AMERICA. North America delivered sales growth of 6% and volume of 3%. The company’s leading brands, including Smirnoff, Johnnie Walker and Captain Morgan, all increased volumes by 5% or more in North America. Johnnie Walker again delivered double-digit net sales growth as did Smirnoff and Captain Morgan.
Diageo chalked up growth to price increases, mix benefits, favorable demographics, premiumization and innovation, which was offset by an increased spend behind the reserve brands group, including Don Julio. Diageo has also benefited from improved marketing, due in part to increased spending and a move to "boutique digital agencies".
In addition, growth in North America following the launch of Tanqueray Rangpur and a price increase on the core brand helped Tanqueray internationally. Crown Royal in North America performed strongly with improvement in price/mix, and growth in Buchanan’s was driven by continued strong performance in Latin American markets and by strong growth in North America where net sales grew 31%.
BACARDI, B-F AND REMY EXPAND DISTRIBUTION ALLIANCE
Bacardi U.S.A., Brown-Forman, and Remy Cointreau USA are expanding their distribution alliance to include California and Texas. This latest expansion comes on the heels of the three companies' alignment in New York with Empire Merchants, which began in May of 2007.
The expansion process will begin with RNDC in Texas this month. Discussions have already begun in California with Young's Market Company, and the Alliance anticipates expanding into additional markets in the coming months.
DIAGEO TO EXPAND KETEL ONE PRODUCTION
Diageo plans to expand Ketel One’s production “significantly” outside of North America, according to Drinks International. It may double production of the newly acquired vodka over the next few years, depending on growth in the premium spirits market which is expected to continue. Ketel One currently sells around 1.9 million cases per year, mainly in North America, and has a 14% share of the US premium vodka market.
A NAPA LEGEND PASSES AWAY
We regret to inform you that sparkling wine legend Jamie Davies of Schramsberg Vineyards passed away February 12 at the age of 73 after losing the battle against Parkinson’s disease. The Davies family has operated Schramsberg Vineyards and Cellars since 1965, and launched the family’s first red wine, a 2001 Bordeaux blend, four years ago.
Her husband, Jack Davies, died in 1998. She is survived by three sons, John, Bill and Hugh Davies, and their families. Her memorial service will be held at 1pm Sunday, Feb. 17, at Schramsberg Vineyards, Jack’s Grove. In lieu of flowers, the family suggests donations to the Jack L. Davies Agricultural Land Preservation Fund.
WSD BRIEFS:
CLONTARF IRISH WHISKEY is introducing a new packaging and marketing campaign, said parent company Castle Brands. Bearing “The New Irish” campaign, print advertising and POS material will start appearing immediately, with a new website under development.
AV BRANDS has expanded its Chilean portfolio with the addition of Viña Carmen, the company said this week.
PERNOD RICARD reportedly spent $1.3 million in 2007 to lobby on issues including trade with Cuba, according to a disclosure form posted online by the Senate's public records office.
BACARDI, meanwhile, spent $560,000 in 2007 to lobby on issues including trade with Cuba and trade name protections, among others. Recall that Bacardi has been in a trademark battle with rival Pernod Ricard over rights to Havana Club in the U.S.
Until Monday, Megan
“Fortune can, for her pleasure, fools advance, And toss them on the wheels of Chance.”
-Juvenal
--------- Sell Day Calendar ----------
Today’s Sell Day: 10
Sell days this month: 21
Sell days this month last year: 20
This month ends on a: Fri.
This month last year ended on a: Wed.
YTD sell days Over/Under: 0
As we mentioned, the spirits industry gained 2% in volume in the first half, with premium and premium plus brands growing at a faster rate. Ivan noted the trend to premiumization is continuing. While sales of value brands (retailing below $10) were declining, Diageo noted it has no significant presence in that part of the market despite the fact it has lost share in the value segment. The company said it outperformed the industry during the holiday and expects first half trends to continue in the second half.
The company remains confident that consumers will continue trading up despite an economic slowdown in the U.S. "Everyone is focused on subprime, monoline, $400bn write-offs ... to a lot of people it's a total irrelevance. They don't understand it, and they don't want to understand it," said Paul Walsh.
“While Diageo has outperformed the market by 12.2% year to date, we expect continued out-performance while market volatility persists,” said Melissa Earlam of UBS in a research note.
NORTH AMERICA. North America delivered sales growth of 6% and volume of 3%. The company’s leading brands, including Smirnoff, Johnnie Walker and Captain Morgan, all increased volumes by 5% or more in North America. Johnnie Walker again delivered double-digit net sales growth as did Smirnoff and Captain Morgan.
Diageo chalked up growth to price increases, mix benefits, favorable demographics, premiumization and innovation, which was offset by an increased spend behind the reserve brands group, including Don Julio. Diageo has also benefited from improved marketing, due in part to increased spending and a move to "boutique digital agencies".
In addition, growth in North America following the launch of Tanqueray Rangpur and a price increase on the core brand helped Tanqueray internationally. Crown Royal in North America performed strongly with improvement in price/mix, and growth in Buchanan’s was driven by continued strong performance in Latin American markets and by strong growth in North America where net sales grew 31%.
BACARDI, B-F AND REMY EXPAND DISTRIBUTION ALLIANCE
Bacardi U.S.A., Brown-Forman, and Remy Cointreau USA are expanding their distribution alliance to include California and Texas. This latest expansion comes on the heels of the three companies' alignment in New York with Empire Merchants, which began in May of 2007.
The expansion process will begin with RNDC in Texas this month. Discussions have already begun in California with Young's Market Company, and the Alliance anticipates expanding into additional markets in the coming months.
DIAGEO TO EXPAND KETEL ONE PRODUCTION
Diageo plans to expand Ketel One’s production “significantly” outside of North America, according to Drinks International. It may double production of the newly acquired vodka over the next few years, depending on growth in the premium spirits market which is expected to continue. Ketel One currently sells around 1.9 million cases per year, mainly in North America, and has a 14% share of the US premium vodka market.
A NAPA LEGEND PASSES AWAY
We regret to inform you that sparkling wine legend Jamie Davies of Schramsberg Vineyards passed away February 12 at the age of 73 after losing the battle against Parkinson’s disease. The Davies family has operated Schramsberg Vineyards and Cellars since 1965, and launched the family’s first red wine, a 2001 Bordeaux blend, four years ago.
Her husband, Jack Davies, died in 1998. She is survived by three sons, John, Bill and Hugh Davies, and their families. Her memorial service will be held at 1pm Sunday, Feb. 17, at Schramsberg Vineyards, Jack’s Grove. In lieu of flowers, the family suggests donations to the Jack L. Davies Agricultural Land Preservation Fund.
WSD BRIEFS:
CLONTARF IRISH WHISKEY is introducing a new packaging and marketing campaign, said parent company Castle Brands. Bearing “The New Irish” campaign, print advertising and POS material will start appearing immediately, with a new website under development.
AV BRANDS has expanded its Chilean portfolio with the addition of Viña Carmen, the company said this week.
PERNOD RICARD reportedly spent $1.3 million in 2007 to lobby on issues including trade with Cuba, according to a disclosure form posted online by the Senate's public records office.
BACARDI, meanwhile, spent $560,000 in 2007 to lobby on issues including trade with Cuba and trade name protections, among others. Recall that Bacardi has been in a trademark battle with rival Pernod Ricard over rights to Havana Club in the U.S.
Until Monday, Megan
“Fortune can, for her pleasure, fools advance, And toss them on the wheels of Chance.”
-Juvenal
--------- Sell Day Calendar ----------
Today’s Sell Day: 10
Sell days this month: 21
Sell days this month last year: 20
This month ends on a: Fri.
This month last year ended on a: Wed.
YTD sell days Over/Under: 0
posted at 2:09 PM
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