Ahead of the release on Thursday of Diageo’s results for the first six months of fiscal-2017, here’s a look at the events that shaped the group’s second quarter, the three months to the end of December.
- The second quarter started with bad news for the group’s Johnnie Walker and Smirnoff brands: Research from Interbrand, released in early-October, showed the pair continuing their falls down a list of the world’s most valuable brands. The ‘Best Global Brands Report 2016‘, positioned Johnnie Walker at 95th – compared to 92nd in 2015 – and Smirnoff at 96th, from 94th.
- Also in October, the group announced its entry into the alcoholic CSD – or hard soda – segment in the US, teaming with Quaker City Mercantile to launch Lemon Shrub and Old Dutch in two cities. The new products both carry an abv of 5.8% and have been designed to capitalise on the growing hard soda trend in the US.
- Later in the month, an analyst warned that Diageo was the most exposed drinks company to an alcohol ban in Thailand. The death of King Bhumibol Adulyadej in early-October led to a call from the country’s authorities for the population to avoid “joyful events” for 30 days. The public consumption of alcohol was also banned indefinitely at the time.
- Another trend that Diageo hopes to benefit from went global in the second quarter, when non-alcoholic spirit brand Seedlip, in which Diageo bought a minority stake in 2016, announced the signing of distribution partnerships in Asia, Australia and New Zealand.
- November started with the threat of industrial action by members of the Unite trade union in the UK, as a row broke out over the company’s attempts to introduce changes to the pension plans for existing employees. The disagreement rumbled on throughout November, with Unite members voting at the end of the month in favour of a strike in protest at the proposals. However, the strike was postponed at the start of December after four days of talks between the two sides. Although members of the GMB union have accepted the new deal, Unite saw its proposed agreement with Diageo voted down by its members just before Christmas.
- A new global marketing campaign for Baileys was launched in mid-November. Centred around five TV ads that carry the tagline ‘Don’t mind if I Baileys’, the activation was launched to coincide with the run-up to the festive period.
- Despite moving its Captain Morgan facilities from Puerto Rico to the US Virgin Islands in 2008, the group announced in November its intention to shift the warehousing of the liquid used in the rum brand to the US. Diageo had made the initial move to benefit from a system of tax rebates granted to the USVI from the US, although the maturation decision was taken in order to enable greater supply chain efficiency as well as cost savings, the company said.
- The latest senior executive departure was confirmed at the end of November, when Charlotte Lambkin announced her decision to step down as corporate relations director. Lambkin, who was on Diageo’s board and reported in to CEO Ivan Menezes, had held the role for just under three years. Her resignation came in the same year as the departures of group strategy director Anna Manz and Africa & Asia president Nick Blazquez.
- A brace of legal issues in the US cropped up towards the end of the quarter. First up, the company reached an out-of-court settlement with Allied Lomar over the use of the Stitzel trademark, after Allied Lomar registered the term in 2004 and Diageo had filed trademark applications related to its Stitzel-Weller distillery in the country. Then, in mid-December, Diageo was the one filing the lawsuit, this time accusing Sazerac of committing “wilful acts of trademark infringement, unfair competition, trade dress infringement and dilution”. The row was based on the company’s claim that Sazerac’s Dr McGillicuddy’s brand carried packaging similarities to Diageo’s Bulleit Bourbon.
- In a presentation at the start of December, North America head Deirdre Mahlan provided insights into the expected effect of President Trump on the US spirits market, as well as the role of Millennial consumers and what plans Diageo has in the Bourbon category, moving forward.
Absolut, Smirnoff and their conflicting views on US Millennials – Click here for a just-drinks analysis
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