Diageo has warned a shift away from carbonated drinks has caused sales of Captain Morgan rum to shrink as health conscious Americans drink less rum and coke.
The drinks giant used its full year financial update to signal a 5% fall in net sales of Captain Morgan in America, its biggest market.
The world’s biggest spirits firm also said net sales of vodka were flat in the US, which was an improvement over the prior year, spurred by growth in Ketel One and Smirnoff.
However vodka sales were dragged down by a decline in sales of Ciroc, its premium brand made in a strategic alliance with partner Sean Combs, the rapper.
Diageo DGE, -2.88% chief executive Ivan Menezes said: “The rum category in the US has been sluggish for a long time. Carbonated soft drinks has something to do with this as people are drinking less of it.
“Rum has suffered as a result in part – rum and cola was a very popular strong drink. The energy from young Americans had moved into vodka, and now whisky and tequila is drawing a lot of that energy.
“We are changing the drinks profile to be less dependent on pure with cola and into other drinks and we are innovating on it. It will not turn overnight. I expect the trajectory to get better.”
READ THIS: Millennials’ shifting tastes are boosting sales of whiskey and tequila
Diageo, which also makes Johnnie Walker Scotch whisky and Guinness stout, says North America accounts for 35% of total sales and in the full year update said operating profit rose 3% to £52million on a 5% rise in net sales to £216million.
The firm’s shares, which trade on the FTSE 100 UKX, -0.17% , were down 2.97% as investors took profits compared to a 0.41% fall in the Dow Jones Industrial Average DJIA, -0.52% .
Group pre-tax profit rose to £4.2billion for the year to June 2019 from £3.7billion on sales of £19.2billion.
James Edwardes Jones, an analyst at broker RBC Europe wrote: “Diageo’s FY19 results are in line with company-compiled consensus expectations. It has also committed to an additional share buyback of up to £4.5billion over FY20-FY21. Diageo benefits from a remarkably robust US spirits market compared with other consumer staples categories and formidable barriers to entry in brown spirits.”
Add Comment