(Photos: Johnnie Walker, Casamigos)
On Tuesday, British spirits giant Diageo — the company behind Guinness, Smirnoff, Don Julio and over 200 other alcohol brands — reported its first yearly sales decline since the onset of COVID-19. The announcement comes on the heels of heated debate among investors, some of whom have speculated that the London-based firm may soon be targeted for a takeover.
Diageo reported a 1.4% sales dip to $20.3 billion, attributed in large part to lackluster performance in the Latin American market and unfavorable exchange rates. In its finer details, the report outlined a handful of brands that took the hit especially hard.
At the front of the pack was Casamigos Tequila, which reported a 22% sales decline in the U.S. due to "lower consumer demand." Just two years prior, the George Clooney-backed imprint was recognized as the best-selling celebrity liquor on Drizly; now, it's struggling to keep up with the competition. Another victim of the times was Johnnie Walker Scotch Whisky, which saw U.S. sales decline by 10%.
The tumble coincides neatly with macro trends. Higher-priced premium spirits, which benefitted from a surge in at-home spending at the beginning of the pandemic, have declined in popularity over the past few years. International firms like Diageo, Remy Cointreau and Pernod Ricard have all reflected the trajectory in their gradually declining stock prices.
Other details paint a more complex picture. After all, Diageo's ledger was filled with more than just dire forecasts; promising categories in the U.S. included spirits-based cocktails (+15%), Buchanan's Whiskey (+3%), Bulleit Bourbon (+12%) and Don Julio Tequila (+12%).
[caption id="attachment_60507" align="aligncenter" width="600"] (Photo: Jenny Kane/AP Images)[/caption]
Don Julio's double-digit sales bump proves that so-called "depremiumization" isn't taking hold of every expensive tequila in the industry. So why Casamigos? Amid a wave of celebrity-backed brands from the likes of Dwayne "The Rock" Johnson, Kendall Jenner, Matthew McConaughey and Kevin Hart, consumers may simply be getting overwhelmed by the options.
Facing pressure from investors, Diageo has triggered a rapid series of sell-offs. Over the past two months, the company dropped Guinness Nigeria, Safari Liqueur and Pampero Rum from its portfolio. As the firm continues to shed lesser-known brands from its catalog, it's possible that a pivot focusing exclusively on premium imprints could help lift sagging profits.
Some have sensed a lucrative opportunity. Russ Mould, investment director at AJ Bell, sparked rumors earlier this month when he suggested that the company was a prime candidate for a takeover bid.
“That bargain valuation, at least relative to Diageo’s history, could make it a takeover target for an opportunistic rival with deep pockets or a private equity firm loaded up with cash to do deals. A prospective bidder might take the view that current problems are fixable and that now is a good time to swoop on a portfolio of well-known brands,” Mould remarked in a public statement.
(Photo: Jenny Kane/AP Images)[/caption]
Don Julio's double-digit sales bump proves that so-called "depremiumization" isn't taking hold of every expensive tequila in the industry. So why Casamigos? Amid a wave of celebrity-backed brands from the likes of Dwayne "The Rock" Johnson, Kendall Jenner, Matthew McConaughey and Kevin Hart, consumers may simply be getting overwhelmed by the options.
Facing pressure from investors, Diageo has triggered a rapid series of sell-offs. Over the past two months, the company dropped Guinness Nigeria, Safari Liqueur and Pampero Rum from its portfolio. As the firm continues to shed lesser-known brands from its catalog, it's possible that a pivot focusing exclusively on premium imprints could help lift sagging profits.
Some have sensed a lucrative opportunity. Russ Mould, investment director at AJ Bell, sparked rumors earlier this month when he suggested that the company was a prime candidate for a takeover bid.