US: Diageo shifting vodka focus to high-end
Diageo will turn its attention more to Smirnoff and above in the US
Diageo has cut its focus on its lower priced vodka brands in the US, as it ramps up attention for the premium-and-above vodkas in its portfolio.
Speaking on Wednesday (16 November) at a round-table session with journalists in New York, Ivan Menezes, Diageo's president of North America, confirmed that the company will reduce its attention on the likes of Popov and Gordon's vodkas.
Both brands, which are priced at around $7 and $8 respectively for 75cl - or between $15 and $18 for 1.75cl - have been steadily losing volume market share in the US since early 2010, according to Sanford Bernstein analysts.
“Our premium-and-above vodkas – Smirnoff, Ketel One, Ciroc – are growing share,” Menezes said. “We're growing faster than the category. But, in total vodka, we're slightly behind the category. We're scaling back the focus – and losing volume – with low-end vodkas like Popov and Gordon's. We're just not supporting them – they're low-value and low-margin. So, we're quite happy to give up share here.”
Menezes highlighted the healthy margins Diageo gets from its more premium vodka offerings. “With Smirnoff,” he said, “we make 70% gross margins globally. So, there, and above, is where we will put the focus.” Smirnoff also accounts for almost a quarter of Diageo's spirits volumes in the US.
When asked if Diageo would withdraw the value vodka brands, Menezes said: “They'll find their natural level. We're going to keep them but not promote them.”
Alongside the likes of Smirnoff and Ciroc, Diageo has, meanwhile, launched mid-range vodkas. Rokk and Ursus, both launched last year, target the $9 to $15 per 75cl price bracket.
For Diageo's first fiscal quarter, to the end of September, group net sales rose by 5% in North America on an organic basis, which excludes currency swings. Its volume sales for the region fell by 2% on the same period of last year.
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