Diageo Increases Promotional Dollars in July

FILED AUGUST 1, 2009

Dear Client:

The times are certainly tough, particularly for higher end spirits brands (not to mention wine but that’s another story). Consumers are less willing to drink at bars and nightclubs, causing super-premium brands that were on fire just 2 years ago to take a step back. Case in point: the percentage of volumes on promotion for the total spirits market grew 150bps to 44.6% of volumes in July, reports UBS analyst Melissa Earlam based on Nielsen scan data from the off-premise.

Diageo reportedly led in promotional spend, up 380 bps year over year to 54.7% of volumes sold on promotion. The brands that received the most promotional boost include: JW Black, Ketel One, Ciroc and Crown Royal. Volumes for Diageo gained 1.1% and sales grew 1.4%.

Meanwhile, Pernod’s promotional activity declined year over year, noted Melissa, with volumes down -1.2% and sales declining -1.1%.

TOTAL OFF-PREMISE RESULTS. Volumes grew 1.3% year over year for spirits in the off-premise in the four weeks to July 25, slowing from the 12 week period (1.7%) and 52 weeks (2.1%), says Melissa. She noted that price/mix remained stable, but certain promotions have stepped up. Price/mix increased 0.4% in the four-week period, compared to 0.7% over the last 12 weeks and 0.8% over the last year.

Campari’s volumes grew 6.2% versus 6.8% over the 12 weeks and 12.8% in the 52 weeks. Remy volumes declined -14.1% and sales declined -8.2%, likely due to hurting champagne and cognac sales. Brown Forman volumes fell -1.7%, with sales declining -1.3%. Constellation volumes grew 2.8% and sales rose 6.5%.

Melissa says they continue to expect the U.S. spirits market growth to slow. In 2009 they estimate that volume will rise 1% and value will grow 1.6% overall.

FOSTER’S TAPS FORMER SEBASTIANI PRESIDENT

Foster’s Wine Estates has appointed Mike Holden to senior vp of sales in the U.S. Mike most recently served as president and coo for Don Sebastiani & Sons, and has also held leadership roles at Beam Wine Estates, Allied Domecq Wines USA and Diageo in Europe and the Americas. Managing director Stephen Brauer said in a statement that Mike’s “experience and relationships with distributors and retailers has earned him a reputation as one of our industry's most skilled and respected leaders.” Mike will work out of Foster's North American headquarters in the Napa Valley.

HIGH END RUM GAINING CONSUMER ATTENTION

There was an interesting piece on rum in Bloomberg today, which touches on the evolving image of the spirit. Like tequila and even gin, rum is getting a more refined rap with high-end brands mimicking “elite sipping spirits” such as “single malts, XO cognacs and aged bourbons.” White rum generally used in cocktails and fruity drinks like pina coladas outsells brandy, Scotch and American whiskies in the U.S., but as we’ve seen in recent years, “rum makers are beginning to promote their own top-grade products as drinks to be savored on their own, or cut with a dash of water.” Some of the brands mentioned in the article include: Gosling’s Black Seal Dark Rum; Havana Club; Ron Zacapa Centenario Solera Grand Reserve; Flor de Cana Grand Reserve; Depaz Blue Cane Rhum Agricole; Gosling's Gold Bermuda Rum; Bacardi 151; Bacardi's 8 Year Old; Clement Rhum Vieux; and Tres Vieux.

BLACKSTONE WINES: SOMETHING “YOU CAN COUNT ON”

Constellation is circulating a new print ad for Blackstone Wines, with the tagline reading: “Here’s to the things in life you can count on.” The ad was created by Amazon Advertising in San Francisco and suggests that Blackstone is a reliably good wine. To back up its theme, the campaign promises a money back guarantee. In all, the campaign’s budget is about $1 million, according to the New York Times, and Constellation is hoping it will appeal to budget conscience consumers. To read more, click here.

WSD BRIEFS:

JACK DANIEL’S MASTER DISTILLER DIES. We regret to report that Jimmy Bedford, the former master distiller for Jack Daniel’s, died at the age of 69 on Friday, August 7. The Associated Press reports that “his body was found outside a barn at his farm in Lynchburg, apparently the victim of a heart attack, company officials said.” Jimmy retired from the company in March 2008 after spending 20 years as master distiller.

BEEFEATER 24 IS EXPANDING IN THE U.S. after initially launching in New York and San Francisco. Next in line is Boston, Los Angeles and Philadelphia. Says Beefeater marketing director Juli Falkof: “The gin category continues to show strong momentum and offers excellent future growth opportunities, making this an ideal time for us to capitalize on the momentum we have built in New York and San Francisco for Beefeater 24 and expand our presence for this super-premium expression.”

BOISSET FAMILY ESTATES HAS PURCHASED RAYMOND VINEYARD & CELLAR from Kirin Holdings Company of Japan. This is Boisset’s first winery acquisition in the Napa Valley, said the company in a statement.

CONSTELLATION PLANNING MORE CHANGES IN AUSTRALIA/UK. Decanter is reporting that Constellation Brands is expected to soon announce further integration plans in Australia and the UK. One possibility is dividing Constellation’s premium and commercials brands into separate units. Another plan may entail acquiring one or more inexpensive wine brands from Australian Vintage.

DEL FRISCO’S RESTAURANT GROUP has signed a deal to carry Danny DeVito's Premium Limoncello via parent company Iconic Brands, effective August 24. DFRG includes 19 Sullivan's Steakhouses and 8 Del Frisco's Double Eagle Steakhouses throughout the US.


Until tomorrow, Megan

“Laughter gives us distance. It allows us to step back from an event, deal with it and then move on.”
Bob Newhart

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