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 and Cîroc vodka, and Tanqueray gin, as well as Chateau and Estate wines and Guinness beer. Diageo North America owns production facilities in the US and Canada and operates vineyards in California. North America is the parent company's largest market for premium drinks; it accounts for about a third (the largest portion) of Diageo's net sales and roughly 45% of its operating profits.
Diageo's North American operating units include US Spirits & Wines, Diageo-Guinness USA, Diageo Chateau & Estate Wines, and Diageo Canada. The business divides its sales and marketing functions further based on regulatory environments in various US states. Canada uses a single alcoholic beverage regulation nationwide.
Diageo North America handles its parent's operations in the US and Canada. The US business is broken down by beverage type while the Canadian operations are grouped as one unit.
Diageo North America (DNA) reported €3.4 billion ($4.5 billion) in sales and an operating profit of nearly €1.5 billion ($1.9 billion) in fiscal 2014 (ended June). DNA boasts about a third of the North American market by sales and volume. Indeed, it is its parent company's growth engine.
Net sales and operating profit both decreased by single digits mainly due to to falling sales in the US, driven by continued decline in pouches as the category is deemphasized, and weak beer sales. Sales in Canada increased 1% year over year driven by growth in Cîroc vodka and scotch malts. The company blamed lackluster Guinness sales on weak performance of Guinness Black Lager and increased competition from craft beers.
In 2013 the company completed a $120 million investment in its bottling facility in Plainfield, Illinois. Diageo has invested more than $250 million in its North American manufacturing network since 2010. In 2014, it intends to invest about $115 million to a distillery and six barrel storage warehouses in Kentucky.
Diageo owns the number one spirit brand by value (Johnnie Walker) and the number one spirit brand by volume (Smirnoff). Its strategy includes leveraging those while also offering regional and more affordable brands in all its markets. Diageo North America uses its massive scale for cost advantages and relies on product and production innovation for improving its bottom line.
The company also works to use local expertise to maximize efficiency in its routes to market, especially in the US where it is bound by strict laws separating suppliers, distributors, and retailers.