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Diageo upbeat on Scotch despite decline
Johnnie Walker owner Diageo has blamed its double-digit sales drop in Scotch on a lack of demand for premium products in Latin America during fiscal 2024.
In Diageo’s results for the year ending 30 June 2024, Scotch sales declined by 10% with blended whisky Johnnie Walker reporting a 6% drop and single malts slipping by 14%.
Within Latin America and the Caribbean (LAC), organic full-year spirits sales dropped by 23%, led by Scotch, mainly Buchanan’s (down 28%), Johnnie Walker Black Label and Red Label. The decrease was also attributed to Don Julio Tequila, which plummeted by 37%.
In regards to the LAC region, Diageo CEO Debra Crew admitted that some of its inventory “was more premium that what the market really was”.
She told journalists during a briefing at the group’s London headquarters: “Latin America, it’s a big Scotch market. Even though it’s 10% of our [total] sales, it’s a much larger piece of our Scotch business. We’ve definitely seen that and felt the impact of that this year, within our numbers.”
Within Scotch, Johnnie Walker reported a 17% drop in LAC, Old Parr plunged by 25% and Black & White plummeted by 30%. White Horse saw a smaller drop at 11%.
“However, what we are seeing is Latin America still loves Scotch,” she stressed. “We are seeing some downtrading in standard-price Scotch versus premium Scotch, but that’s fine.”
She highlighted Johnnie Walker Red Label and Black & White as “really good standard Scotches” in the portfolio.
“Unfortunately, some of the inventory that got caught there was more premium than what the market really was. We’ve had to move through that,” she added.
Johnnie Walker outperforms in the US
Crew highlighted the US as a more positive market for the category: “Scotch has been a hit because, for price per litre, it’s one of the highest in the spirits category.”
Johnnie Walker reported a 10% decrease in the US as a result of demand normalising for the brand’s Blue Label bottling and ‘lower demand’ for Red Label. Despite the decline, the group said the brand ‘continues to outperform the Scotch category and held share of the spirits industry’, driven by Johnnie Walker Black Label.
Bottles of Scotch over US$100 “exploded during the pandemic” in the States, Crew adds, however she noted it was “more aspirational drinking now” and that consumers wouldn’t continue to drink in that price point.
“We think this will come back as the economy improves. Those bottles are definitely feeling the pinch, especially in a market like the US where you have American whiskey,” Crew said. “That’s also really flying, as well as Canadian whisky. There’s a lot of competition.”
She expressed optimism around Johnnie Walker: “We feel good about Johnnie Walker, in particular – we are gaining share. This is the magic of having the same brand that covers Red [Label] to Black to Blue. We are seeing certainly some switching around, but Black [Label] is still doing well in the US.”
Ewan Andrew, president of global supply and procurement and chief sustainability officer at Diageo, pointed to Johnnie Walker’s growth trajectory, with the brand now selling nine bottles every second around the world, up from seven bottles several years ago.
India-UK FTA
India is one of the world’s biggest whisky markets but the country’s tough import tariff laws have stopped Scotch from exploding in the market there.
In regards to the long-discussed free trade agreement (FTA) between the UK and India, Crew noted: “We’ve got a new government in. It is something that we’re already trying to engage. Half of the world’s whisky is consumed in India.”
The CEO of Diageo hopes to see the group’s Scotch portfolio continue to grow in India, which she described as a “bright spot”.
The group’s full-year organic net sales rose by 8% in India, with Scotch boosted by Black & White (up by 24%) and Johnnie Walker Blonde. The former was described as ‘one of the fastest-growing Scotch brands in the market’.
Johnnie Walker posted a 1% gain in India while single malt The Singleton rose by 12%.
Crew continued: “We continue to see premiumisation there. Certainly that’s such a big opportunity. We’re hoping the new government will help support us in that endeavour.”
Dan Mobley, global corporate relations director at Diageo, added that both governments “are firmly committed to the negotiation”.
“Now our understanding is that all the sticking points in that negotiation have nothing to do with Scotch or spirits,” Mobley explained.
“There is a landing zone – there are two sides to negotiate. We’re optimistic they’ll try to do so. Johnny Reynolds, the [UK] business secretary, recommitted to the deal in the House of Commons yesterday [29 July]. The politicians on the other side have not changed; they remain committed. Both sides are clearly negotiating in good faith.”
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