Spirits soar at Diageo North America! The subsidiary of distiller giant Diageo plc markets and sells its parent's collection of premium alcoholic drinks, including name brand spirits, Captain Morgan rum, Crown Royal Canadian whisky, Johnnie Walker Scotch whisky, Smirnoff vodka, José Cuervo tequila, and Tanqueray gin, as well as Sterling Vineyards wines, and beer under the Guinness and Red Stripe labels. Diageo North America owns production facilities in the US and Canada, as well as operates vineyards in California. North America is the parent company's largest market for premium drinks; it accounts for about one-third (the largest portion) of Diageo's net sales and roughly 40% of its operating profits.
Despite the economic downturn that impacted consumer purchases of luxury goods, year-over-year sales have remained relatively steady in the US and Canada. To further strengthen operating profits, Diageo North America is taking steps to cut costs and increase efficiencies by restructuring its supply chain.
In mid 2011 the company closed a bottling plant in California and its specialty product building in Maryland. Concurrently it signaled a new investment in its supply chain, much of which is earmarked for improving packaging plants in Illinois and Maryland. A year earlier, Diageo North America shuttered a Canadian plant that bottled Diageo's ready-to-drink Smirnoff beverages -- a line with a profitable, albeit decreasing market. Production was moved to less costly contract packer, Delta Beverages in Ontario.
Diageo has also responded to slumping demand and weak prices for wine by rationalizing Diageo Chateau & Estate Wines. Its US wine division managed to complete a $270 million sale and leaseback with Realty Income Corporation in 2010; approximately 2,000 acres of vineyard property and related winemaking facilities in Napa Valley, California, were disposed of. Diageo Chateau & Estate Wines, however, retains oversight of wine production.
▲ Show Less▼ Show Full Description