Crown Royal ‘will not proliferate flavours’

Despite the success of Crown Royal Regal Apple, Diageo’s CEO Ivan Menezes has told investors the Canadian whisky brand’s growth will not be based on a “proliferation” of flavours.

Diageo will monitor the performance and Crown Royal Regal Apple and Crown Royal Vanilla

Speaking to investors following the publication of Diageo’s H1 2016/17 results, Menezes said any flavour extensions must “add to the core brand equity”.

Following its launch in 2014, Crown Royal Regal Apple – a blend of Crown Royal whiskies with Regal Gala apples – was said to be the “biggest driver” of increased shipments to the US in Diageo’s Q3 2014/15 fiscal period.

In October 2016, Diageo launched Crown Royal Vanilla – a Canadian whisky blend infused with Madagascar Bourbon Vanilla.

“[W]e’re not going to be proliferating flavours on Crown Royal,” Menezes told investors. “We do some limited-time offers to bring excitement into the category. We are really going to watch how Apple and Vanilla perform.

“The test for us is that flavour needs to bring new consumers to the franchise and it needs to add to the core brand equity, brand health.

“We really expanded the franchise [and] it helped the base brand because we have base Crown Royal growing low-single digits right now in Nielsen and NABCA. So we’re going to be very careful with whiskey flavours. And we’re also learning a lot as we introduce them into the Crown franchise.”

In H1 2016/17, Crown Royal’s total portfolio saw organic gains of 17%.

Menezes also referred to Donald Trump’s criticism of the North American Free Trade Agreement (NAFTA) – a zero-tariff pact between the US, Canada and Mexico agreed in 1994.

When asked what impact any change to NAFTA could have on Crown Royal, Menezes said: “It’s too early to speculate on where tax reform in the US is going to go, but we’re obviously close to the situation both as Diageo and the industry. And nothing’s really been decided, or there’s no firm policy legislations in place, so it will play itself out.

“But we are confident overall we’ll be able to manage through the Crown Royal situation effectively.”

Menezes added that if NAFTA was scrapped, WTO arrangements would mean zero tariffs on trading with Canada.

“I think it’s too early to speculate,” he said. “There isn’t a clarity at all as to where the Trump administration is going to go on both tax reform and the implications of a NAFTA renegotiation.

“But certainly, […] if you break up a free trade agreement and you revert to existing WTO rules, there’s not a major impact for us.”