US: Premium spirits market still growing - Diageo

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An economic slowdown has caused more US consumers to trade down on drinks, but figures show that the premium spirits category remains buoyant, Diageo executives have said.

Diageo North America president Ivan Menezes said today (6 November) there was no doubt that growth of higher priced drinks has slowed in the US, as a result of the country's economic downturn.

His comments came at the beginning of a Diageo investor conference in New York.

However, the group cited market research from a number of groups, including Nielsen, to show that growth in premium spirits has continued to outpace sales rises at the lower end. This, it said, was because consumers are increasingly seeking security at affordable prices.

"We are positioning our brands for consumers who choose to trade down," said Menezes, but, he added that the drinks giant would not "shift the pendulum too far to lower priced tiers".

A slowdown has been most marked in so-called super and ultra premium brands, said Menezes. Again, however, he said that some of Diageo's 'reserve' brands have continued to grow, adding that Ciroc vodka "is on fire right now".

He said that Diageo was pushing its ready-mixed cocktail portfolio, notably its Mojito and Margherita drinks, in order to follow a consumer shift away from bars and restaurants to drinking at home.

The group plans to launch two new varieties next spring, a Smirnoff Tuscan Lemonade and a Captain Morgan Long Island Iced Tea. It will also introduce a citrus and mango version of its ready-mixed Mojito.

Menezes said that Diageo would maintain a strong marketing spend, despite the downturn. "Research has shown that companies who increase advertising in a downturn not only increase sales in a downturn but also in the years that follow."

The group added that it had a "strong innovation plan" for its Jose Cuervo Tequila brand, which it said was "significantly under-developed" in the growing silver Tequila segment in the US. 

Summing up Diageo's position in North America, Menezes said: "We are better positioned for this economic slowdown than we have been for previous slowdowns."

Sectors: Spirits

Companies: Diageo, Smirnoff, Captain Morgan

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