Innovations Drive Diageo’s H1 Growth

Diageo ended H1 with US sales up 4.7% on an organic basis. The US portfolio is “much healthier” now, according to chief Ivan Menezes, with Johnnie Walker and Ketel One Botanicals particularly doing well.

Ketel One was up more than 20% in the first half, driven by Botanicals which is bringing new consumers to the brand. The plan for Botanicals is to go after wine occasions, white wine in particular, according to Ivan. “And we will continue to build that,” he said on this morning’s earnings call, adding, “We do see this trend more broadly around the world and we will be looking at rolling out Botanicals into more markets as we get into the second half.”

Diageo’s global Scotch sales were up 7% for the period. Johnnie Walker was the main growth driver for the category, up 9% in the US. The launch of White Walker, inspired by the HBO hit Game of Thrones, was another line extension that’s helped bring new consumers to the category.

“It is probably the best example of how we’ve launched at one time around the world with significant scale and impact and we got tremendous social media buzz with that launch and continue to get,” he said.

Innovations like Botanicals and White Walker are the kinds of innovations we can expect from Diageo in the future. “We’re trying to do I would say fewer and bigger innovations and making a fair amount of progress on that.” Moreover, Diageo plans to increase marketing spend in the US in the second half of the year as well, according to cfo Kathy Mikkels.

Other brands reported strong growth for the period including Bulleit, Don Julio, Crown Royal and Casamigos.

Though results were positive, Ivan said “we are not complacent…there are still areas we can continue to improve.”

For instance, Captain Morgan and Ciroc are underperforming. Moving forward, the company plans to “really get under” building brand quality and sustainable growth for Captain Morgan. “It will take time. The rum category is pretty sluggish,” said Ivan.

Ciroc is “more challenging,” he said. “It’s still coming off the flavor-dependent cycle, the big flavors which kind of take off and then fade. And our strategy is clear on Ciroc which is we want a more stable business.”

In the second half of the fiscal year, the company expects net sales growth to slow. “Our full year organic net sales is now expected to be towards the upper end of our mid-single digit guidance and improvement compared to last year,” Ivan said.

MOET HENNESSY PLANS TO KEEP TAKING PRICE

In 2018, Moet Hennessy sales were up 5% globally. Hennessy reported good growth in the US “against a backdrop of tight supply,” said LVMH chief Bernard Arnault on this week’s earnings call. Though a good harvest in 2018 should help with supply issues this year.

Cognac and Champagne harvests were “excellent” last year in quality and quantity, according to Bernard. “So very good potential for supply.”

Champagnes and wines were up for the year thanks to price increases. When asked about their pricing strategy moving forward, Bernard said they will continue to take price on its Champagnes and Cognac. “Since there’s a limit to our supplies, it’s just as well to be creating value, either through the mix or the price,” he said.

WSD BRIEFS:

YARDEN APPOINTS SKURNIK WINES AS EXCLUSIVE DISTRIBUTOR IN NY. Wine importer Yarden Inc. has inked an exclusive distribution agreement with Skurnik Wines in New York, effective immediately. Skurnik will distribute Golan Heights and Galil Mountain Wines throughout the state. “New York is a priority market for our wines, and we are thrilled to partner with Skurnik to support new growth opportunities as our exclusive distribution partner,” says US vp of sales Anne Markovich-Girard.

C. MONDAVI & FAMILY TO LAUNCH FLAT TOP HILLS. Flat Top Hills is the latest addition to the C. Mondavi & Family portfolio and is a new collection of premium wines designed to elevate everyday occasions, per a release. The Flat Top Hills lineup includes sauvignon blanc (srp $14), rose (srp $14), chardonnay (srp $14), red blend (srp $16) and cabernet sauvignon (srp $16). The wines will be available starting February 1 at select retailers in AZ, CO, FL, MA and NC with plans to expand into additional markets in the fall.

ACCOLADE WINES DEBUTS BAROSSA INK IN US. Accolade Wines North America is bringing Barossa Ink to the US market with a shiraz and cabernet sauvignon. The grapes are sourced from across the Barossa Valley in Australia and during the final stages of the winemaking process, concentrated petit verdot is added. The wines are priced at $16 a 750 ml and will be available throughout the US through Southern Glazer’s Wine & Spirits.

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Until tomorrow,
Your Editors

Emily Pennington – emily@winespiritsdaily.com
Sarah Barrett – sarah@winespiritsdaily.com

“We must make the best of those ills which cannot be avoided.” – Clarence Day

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