Diageo Redirects U.S. Beer Business -- WSJ
August 06 2016 - 3:03AM
Dow Jones News
By Saabira Chaudhuri
LONDON -- Diageo PLC is dropping Guinness from the name of its
U.S. beer business as part of a plan to widen its investment in the
market.
The name will change to Diageo Beer Co. USA from Diageo-Guinness
USA to signal the company's "commitment to the broad category of
premium beer," the company said Friday.
Diageo, which is the world's largest spirits maker, plans to
ramp up investments in Irish beers Smithwick and Harp, which have
struggled in the U.S., resulting in falling beer sales last
year.
In the U.S., the company has historically plowed its money into
Guinness and "alcopop" Smirnoff ice, which make up the bulk of its
American business. On Friday, Diageo 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.
Diageo's U.S. beer portfolio, which includes Smirnoff Ice,
logged a 3% drop in volume in the fiscal year ended June 30. Net
sales of beer fell 3%, as Smithwick and Harp showed declines and
Guinness sales came in flat. The company blamed "a crowded craft
beer segment."
Beer makes up about 20% of Diageo's global sales but is its
biggest business in Africa, where it sees the drink as a means to
promote its spirits brands.
The moves in the U.S. come as beer has been losing ground to
liquor and wine and as beer companies such as AB InBev NV and
MillersCoors LLC have responded by expanding into alcoholic soda.
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 mind-set shift for
Diageo's U.S. beer business," said Tom Day, president of the newly
named Diageo unit. He said Diageo was responding to interest from
U.S. consumers in "experimenting with new styles and brands."
Diageo Chief Executive Ivan Menezes has been working to
re-energize 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 positive sales trends in the market.
Write to Saabira Chaudhuri at saabira.chaudhuri@wsj.com
(END) Dow Jones Newswires
August 06, 2016 02:48 ET (06:48 GMT)
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