Thursday, August 25, 2011

Diageo Rides Premium Progress To 3% U.S. Sales Growth For FY

(by Shanken News Daily) Despite continuing economic headwinds, Diageo rode improved operating margin driven by cost cuts and a marketing push behind its key brands to solid sales growth in the U.S. market in its fiscal full year, ended June 30. U.S. net spirits sales for the global drinks giant came in up 4% on an organic basis, led by a strong performance at the premium end by brands like Cîroc, Crown Royal Black, Buchanan’s and the silver and super-premium variants of Jose Cuervo.

Diageo’s U.S. spirits volume held steady over period, as Smirnoff, Johnnie Walker, Captain Morgan, Ketel One and Tanqueray were all either flat or down across the group’s North American region, resulting in a loss of share in vodka and rum. But those results were offset by torrid growth for Cîroc, which more than doubled in size, and Buchanan’s, which grew 37% by volume. Guinness’s 3% volume gain drove a 1% rise in Diageo’s North American beer volume overall, while its wine (-4%) and RTD (-3%) businesses struggled. (Diageo has moved to restructure its U.S. wine business of late, most recently selling Edna Valley Vineyard to E&J Gallo in June.) Total organic net sales growth for Diageo NA came in up 3% to £3.3 billion ($4.7b).

“While overall consumer confidence remains subdued we have seen some recovery and, importantly for our business, this recovery has been stronger in the premium, and especially the super-premium, segments,” said Ivan Menezes, president, Diageo North America. Menezes credited a 7% rise in marketing spend, mostly behind key brands like Cîroc, Ketel One, Smirnoff and the Cuervo silver variants with buttressing sales.

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