Business

Diageo Australia reveals its booming brands

Surging sales for Diageo Australia have led the drinks giant’s interim results for the six months to December 31, 2020.

The company reported global net sales of £6.9 billion, down 4.5%, an operating profit of £2.2 billion, a decline of 8.3%. There was a 1% increase in organic net sales, organic operating profit was down by 3.4%.

However, Diageo Australia organic volumes grew 25%, net sales grew 23% and reported net sale were up 26%, thanks to “strong off-trade momentum”. 

Scotch was up 17%, driven by Johnnie Walker; gin was up 48%, driven by Gordon’s and Tanqueray;  Bailey’s was up 29%; rum was up 20%, driven by Bundaberg and Captain Morgan; and vodka sales surged 23% due to Smirnoff. 

RTD sales globally grew 13% and now represent 4% of Diageo net sales. In Australia they grew 30% in the period, driven by Bundaberg, plus Smirnoff Spiked Seltzers and Gordon’s Pink Gin. 

Diageo Chief Executive Ivan Menezes said: “The growth of hard seltzers in the US in the last few years has been phenomenal. We are participating in the category through our Smirnoff portfolio, which continues to grow strongly, and we’ve recently launched Smirnoff Seltzers in Europe. 

“We have launched ready-to-drink cocktails across many of our brands, such as Crown Royal, Tanqueray and Ketel One. With the goal of bringing new drinkers into these trademarks, we have seen early signs of success. And we are looking forward to the upcoming launch of Guinness Nitro Cold Brew coffee in the US.”

Data drives growth globally

Diageo said it was using data to deliver relevant content in the right place at the right time. 

“This data-led targeted marketing maximizes our effectiveness and returns,” Menezes said. “Baileys is a great example of how we’re using this approach to win in the indulgent at-home occasion from baking to creative cocktails. We use data from search and social listening to identify and prioritise when to target treating occasions across the year. 

“We track global holidays, seasonal triggers and weekly rhythms and combine this with the deep understanding of real-time emerging trends such as baking banana bread during lockdown. We buy media to target indulgent moments and adjust our content to match those moments. Baileys’ online success was a key driver of the brand’s double-digit growth in the first half of fiscal ’21.”

The future of low and no-alcohol

Diageo said no and low occasions remain a key focus for its portfolio development and are broadening choices for consumers. 

Gordon's 0.0 alcohol-free

The company launched Gordon’s 0.0 in the UK just before Christmas, an alcohol-free version of its famed gin made using the same botanicals as the London Dry expression.

“Our recent launch of Gordon’s 0.0% has had a positive initial response, and Baileys Deliciously Light with 40% less calories launches in early February,” Menezes said. 

Low and no alcohol spirits is currently the fastest growing segment within the alcohol category in the UK, growing by 33% across the off-premise (Nielsen, w/e 5/9/20).

In Australia, beverage retailers Dan Murphy’s and BWS saw sales of non-alcoholic drinks more than double in the 2020 financial year alone, becoming one of their fastest growing categories.

Adam Fry, General Manager of Buying & Merchandising at Endeavour Group, attributed the rise in non-alcoholic beverage consumption to shifting consumer trends.

“This is a reflection of a broader trend where consumers are choosing to moderate, with particular interest from customers in metro areas,” he told Business Insider. “We expect this trend to continue.”

More acquisitions & premiumisation on the horizon

Over the course of the half year, Diageo announced two acquisitions: Chase Distillery and Aviation American Gin.  

“We have completed the acquisition of Aviation American Gin; and we announced the agreement to acquire Chase Distillery, subject to regulatory approval,” Menezes said. 

“We continue to invest in Distill Ventures, which allows us to partner with drinks industry entrepreneurs. This has led to exciting acquisitions, including Seedlip distilled nonalcoholic spirit and Belsazar vermouth. We look forward to future acquisitions coming from our portfolio of seed investments.”

Menezes noted that Diageo was consistently premiumizing its portfolio. 

“Over 50% of our net sales are now generated from premium-plus products, an increase of 8 percentage points since fiscal ’15,” Menezes said. “Our Reserve portfolio grew 15% in the first half of fiscal ’21.”

The company is using new launches to inspire consumers to trade up within its portfolio. 

“We are using innovation to create unparalleled experiences of rare and exceptional whiskeys. Our new Prima & Ultima collection of unrepeatable bottlings of single malts targets high net worth consumers,” Menezes said. 

“The launch of Casamigos Mezcal at a luxury price point has built on the strong momentum of our Casamigos portfolio.” 

New Diageo Australia survey reveals there’s been a 41% surge in patron confidence about visiting Australia’s pubs, clubs and bars.

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Categories: Business