Spirits soar at Diageo North America! The subsidiary of distiller giant
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 Chalone 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 North American's three main operating units include US Spirits and Wines (which made up nearly 80% of its sales in fiscal 2015, ended June), Diageo-Guinness USA, and Diageo Canada. By product, about 80% of its total sales came from spirits, with the remainder was split between beer, wine, and ready to drink beverages.
Diageo North America handles its parent's operations in the US and Canada. The company has seven wineries and wine bottling operations in California, as well as nearly a dozen bottling, distilling, blending, and maturation sites in locations including Plainfield, Illinois; Amherstburg, Ontario; Valleyfield, Quebec; Relay, Maryland; Gimli, Manitoba; Tullahoma, Tennessee; and Louisville, Kentucky.
Sales and Marketing
DNA spent £542 million ($851.88 million) on marketing during FY2015, compared to £540 million ($920 million) in FY2014. Its advertising in FY2015 focused mainly on the Ciroc, Crown Royal, Smirnoff, and Captain Morgan brands, though it did increase spending on the Don Julio and Bulliet brands.
Note: Growth rates may differ after conversion to US dollars. This analysis uses financials from the parent company's annual report.
Diageo North America's revenue inched up less than 1% to £3.46 billion ($5.44 billion) during fiscal 2015 (ended June 30, 2015) mostly thanks to favorable currency exchange rates rather than positive sales growth. US Spirits and Wines (its largest line by far) saw its sales fall 2% as Smirnoff sales dropped 4% while Captain Morgan brand sales dove by double digits. Whiskey sales climbed 13%, however, with success from its Crown Royal (especially Crown Royal Regal Apple) and Bulleit whiskey drinks driving much of the sales. Tequila sales grew 10% driven by the Don Julio brand. Sales in Canada also grew by 3% thanks to the success of Johnnie Walker, vodka, and Smirnoff ready to drink sales.
Operating profits for Diego North America slipped less than 1% to £1.42 billion ($2.23 billion) for the year as the company spent slightly more on marketing and incurred special, non-recurring charges.
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.
Diageo has invested more than $250 million in its North American manufacturing network since 2010. In 2014, pledged to invest about $115 million to a distillery and six barrel storage warehouses in Kentucky. In 2013 the company completed a $120 million investment in its bottling facility in Plainfield, Illinois.