Diageo ‘innovating’ on Captain Morgan as sales slump

26th July, 2019 by Nicola Carruthers

Johnnie Walker owner Diageo is planning to improve sales of Captain Morgan by “innovating” its drinks profile after the rum brand declined during the firm’s 2019 fiscal year.

Organic net sales of Captain Morgan fell by 2% in Diageo’s fiscal 2019

In the group’s year ending 30 June 2019, the only category to decline was rum, which dropped 2% due to Captain Morgan’s decline in the US. Organic net sales of the rum brand fell by 2%.

Speaking at a briefing for the fiscal 2019 results yesterday (25 July), Diageo CEO Ivan Menezes said that the rum category in the US “has been very sluggish for a long time”.

He said: “The energy with the young Americans has moved first into vodka, and whisky and Tequila is drawing a lot of that energy right now. Rum has suffered as a result.”

He also said that rum and coke “was a very popular strong drink” but now “people are drinking less of it”.

On Captain Morgan, Menezes said the firm has plans for its marketing and is “changing the drinks profile to be less dependent on cola and into other drinks”.

“We’re innovating on it so we’ll see,” he said. “This will not turn overnight but just like we’ve worked on brands like Baileys and Smirnoff, we’ve got good insights, good plans and I expect the trajectory to get better.”

On the subject of vodka, which recorded a 2% organic net sales growth during the period, Menezes said that Smirnoff “is in good shape” in the US and the category is “still growing” in the market. “We’ve done better than last year so it’s improving,” he added.

Diageo’s chief financial officer, Kathryn Mikells, said Smirnoff has “stabilised” and Ketel One is “growing strongly”. On Cîroc, which dropped 8% during fiscal 2019, she said: “Cîroc is the one that we still have a lot of work to do.”

Gin and Tequila were the star performers of the period, with both categories posting double-digit gains of 22% and 29%, respectively. Don Julio and Casamigos, the latter of which Diageo acquired in 2017, helped to boost Tequila’s growth.

Menezes said: “There’s extraordinary momentum in the high end of Tequila. The category is thriving, really vibrant, and is recruiting new consumers across all demographics.

“One of the things that’s very hard to predict is the pace at which categories grow and develop so we do scenarios. In a category like Tequila, you have agave plants that need to be put in the ground and it takes seven years before they’re ready to come out and then be distilled. So we do do projections, [and] we see the growth rates continue.”

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