Grumpy Rumpundit welcomes the news. The whole point of rum is to add the flavours after – if you really must, and to sip it straight if its any good.
Smirnoff Ice pours cold water over Diageo profits
Catherine Boyle
Times, London
Drinkers are cutting down on ready-mixed alcopops, in favour of conventional vodka and rum brands, against the backdrop of the global financial crisis,according to Diageo.
Sales of products such as Smirnoff Ice and Archers Aqua at the world’s biggest drinks company fell by 8 per cent globally and by 17 per cent in Europe in the year to June 30, as the economic downturn and changes in fashion took their toll. Andrew Fennell, chief marketing officer at Diageo, acknowledged: “In some places, consumers have moved away from it.”
But Paul Walsh, chief executive, said: “We have made a lot of money out of that category in the last few years.”He added that the company would be interested in buying the 66 per cent of Moët Hennessy, the French-owned champagne and cognac house, that the British group does not already own, if it was available at the right price. But Mr Walsh stated that the stake was not for sale at the moment.
Pre-tax profit at Diageo fell only slightly to £2 billion, even though volumes were down by 4 per cent. The company’s sales were boosted by £1.1 billion owing to exchange rate fluctuations as sterling lost value.
Related Links
* Diageo makes £2.7bn profit but defends job cuts
* Plan to save half of threatened Diageo jobs
At the same time, sales of Diageo vodka, particularly Smirnoff, the flagship brand, rose by 8 per cent around the world, while sales of its rum, including Captain Morgan, went up by 6 per cent.
Anthony Bucalo, analyst at Credit Suisse, commented: “The worst may be behind the spirits companies, and Diageo is best positioned for a rebound in sales trends.”
The Spanish and Irish markets have been particularly badly affected by the financial crisis. Andrew Morgan, head of Diageo Europe, said: “The recession has added to lifestyle changes where people are going out less and not staying out as late. There has been a consumption decline pretty much across the board.”
Sales of the company’s Scotch whiskies could also suffer if American consumers boycott Scottish goods in the wake of the release of the Lockerbie bomber Abdel Baset Ali al-Megrahi. Mr Walsh said: “We don’t really know what we are looking at yet. We will see if it gains traction.”
The company is also battling with the continued controversy over 700 proposed job losses at its Johnnie Walker plant in Kilmarnock. Unions and local politicians have protested against the plans and have submitted further proposals to the company, which may include public money being spent to keep Diageo at the plant.
Mr Walsh confirmed that he had received a letter yesterday and said that the company would look at the proposals in an “open-minded” way.
He added that he was “in favour of free markets” rather than subsidies but that he would consider the proposals.
“It’s never easy to make these kind of decisions, but we owe it to the other 4,000 employees to remain competitive. The future is in emerging markets where we have to compete with local products.”
The drinks company offered little hope of green shoots. Mr Walsh’s most optimistic prediction for recovery was a fundamental improvement in the first half of 2010.
Although the group has made a number of acquisitions of “super premium” brands such as Cîroc vodka — which is advertised by rapper Sean Combs, perhaps better known as Diddy, and before that Puff Daddy — in the United States, Mr Walsh said that Diageo would focus more on its value brands in the next year or so.