Diageo to Increase Investment in U.S. Beer
05 Agosto 2016 - 6:30PM
Dow Jones News
LONDON—Diageo PLC on Friday said it plans to ramp up investment
in beer in the U.S. and change the name of the business there,
signaling a shift in the world's largest spirits maker's approach
to American beer.
Diageo said it is changing the name of its beer business to
Diageo Beer Co. USA from Diageo-Guinness USA to signal its
"commitment to the broad category of premium beer." The company
will ramp up investments in Irish beers Smithwick and Harp, which
have struggled in the U.S., resulting in falling beer sales last
year.
Diageo's U.S. beer portfolio, which includes alcopop Smirnoff
Ice, logged a 3% drop in volumes in fiscal 2016. Beer net sales
fell 3% driven by a decline in Smithwick and Harp. Diageo reported
flat net sales for Guinness in the U.S., blaming "a crowded craft
beer segment."
Beer makes up about 20% of Diageo's global sales but its biggest
business is in Africa, where it sees the drink as a vehicle through
which to sell its spirits brands.
In the U.S., the company has historically plowed its money into
Guinness and Smirnoff ice, which make up the vast majority of the
Diageo-Guinness business. On Friday it said it has "a deep
innovation pipeline for beer and flavored malt beverages" including
creating a new alcoholic soda line and launching a Smirnoff spiked
seltzer.
The moves come as beer has been losing market share to liquor
and wine in the U.S. and beer companies such as AB InBev and
MillersCoors LLC have expanded into alcoholic soda in a bid to help
stem the decline. Diageo's global beer head Mark Sandys last year
noted that growth is expected to come from Africa and Asia, while
the U.S. and other mature markets will be flat.
"This change truly represents a culture and mindset shift for
Diageo's U.S. beer business," said Tom Day, president of the newly
named Diageo unit. Mr. Day said Diageo was responding to interest
from U.S. consumers in "experimenting with new styles and
brands."
Diageo's Chief Executive Ivan Menezes has been working to turn
around the company's performance in the U.S., its largest and most
profitable market, after a sustained period of slumping volumes.
Some of his efforts are starting to pay off with Diageo last week
reporting a 3% rise in organic sales in the U.S.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
August 05, 2016 12:15 ET (16:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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