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.
Earlier this year, just-drinks sat down with David Gates, the global category director of whisk(e)y at Diageo, to talk about Johnnie Walker, Formula One, Scotch and the other whisk(e)y sub-categories....
Our whisk(e)y specialist, Ian Buxton, has had his head turned this month by a glut of flavoured whiskies. Or, 'spirit drinks', if you're a European....
Grupo Damm's Estrella Damm beer brand is set to benefit from a marketing push in the UK....
Diageo has launched a three-tranche set of bonds that will net it US$2.5bn....
- Is Diageo on the Brink of a Brain Drain?
- SABMiller edges Diageo as beer trumps spirits
- Comment - Heineken's move for Pivovarna Lasko
- Will Keurig Kold come to Coca-Cola Co's Rescue?
- Focus - SABMiller's FY Sales Performance by Region
- Rémy Cointreau eyes recovery after Q4 bounceback
- Carlsberg exec joins Diageo as Africa chief steps
- Bacardi cuts jobs at Global Brands unit
- Diageo targets Millennials with DeLeon ads
- Belvedere unveils executive team