Diageo fights back: CEO Debra Crew, “We have 13 billion-dollar brands”

Following the mixed reception for Diageo’s interim results at the start of this month, chief executive Debra Crew has come out fighting with a presentation to America’s top investment houses and analysts. 

Her purpose was to stress that the beverage alcohol category is going through a cyclical, not structural, downturn and that Diageo is in poll position among its competitors to deliver long-term, sustainable growth that will boost shareholder returns.

Her prime argument was that Diageo is the market leader with a portfolio of iconic brands.

“We have 13 billion-dollar brands and are number one in international spirits and are one and a half times larger than our nearest international competitors”, she told the conference in Miami.

She said Diageo operates in more categories than any competitor and leads in the international whiskey, agave, vodka, gin and non-alcoholic sectors.

Premiumisation outpaces industry averages

The portfolio had achieved more premiumisation than the spirits industry as a whole with 60% of Diageo’s net sales in the last financial year being in the premium and above price brackets compared with an industry average of 35%.

She said that Diageo was confident about the three key factors that would benefit the company. 

First, an additional 600 million legal-age purchasers will enter the alcohol market in the next five years, with spending boosted by increased household consumption as the middle classes expand. 

Second, she predicted that premiumisation would continue despite the more challenging consumer environment.

Third, because of its versatility and innovation, she expected international spirits to continue taking market share from beer and wines, developing the trend of the past decade. 

Crew said that Diageo was “making meaningful progress”, leading and shaping consumer trends such as the cocktail culture and “unleashing the power” of Diageo’s portfolio by recruiting new consumers into key categories.

Positive market feedback from North America

Sally Grimes, the chief executive of Diageo’s pivotal North American division, told the analysts she was “encouraged” by recent results in the current volatile market.

As an example, she said the Tequila portfolio, headed by Don Julio, had gained 150 basis points of category share in the past year and 800 points in the most recent four years. Meanwhile, Crown Royal Blackberry had been the top innovation in the spirits market last year.

She believed that changes to the route to market mechanism are “the most important transformation of Diageo’s US spirits organisation in more than a decade, evolving how we work with our distributor partners and setting us up for growth.”

Finance director Nik Jhangiani said that Diageo was focussing on what it can “manage and control”, strengthening and increasing its agility to deliver top-line growth ahead of the market.

The changes being made, he said, would ensure that “Diageo is stronger, more agile, resilient and better positioned to recover”.

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