Diageo Investor Conference - November 2013
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NAW is the second largest spirits category in the US and a key driver of growth NAW* is 23% of spirits value driving over 50% of growth Share of total spirits sales (USD) Share of spirits value growth vs. prior year OTHER 2% BRANDY/ IRISH PPC COGNAC IRISH 5% 2% GIN 3% WHISKEY 4% 6% NAW SCOTCH SCOTCH 5% 23% 12% TEQUILA 7% NAW 53% CORDIALS VODKA 9% VODKA 27% 30% RUM 12% Source: Nielsen xAOC, 52 wks ending Oct 12, 2013 *North American whiskey 4
Diageo has a strong portfolio of brands well positioned for growth Crown Royal #2 North American whiskey $ share of NA whiskey Laird A/O 1% Hood River 2% 2% Crown Royal Maple #1 Spirits Innovation1 Luxco 3% Campari 3% Constellation 5% Diageo 23% Heaven Hill 6% Bulleit Fastest Growing Bourbon2 Bulleit Rye #1 Leader in Rye whiskey Sazerac 12% Brown Forman 23% George Dickel #2 Tennessee whiskey Beam 21% George Dickel #3 Rye whiskey 7 Crown #1 Blended American whiskey Source: NABCA, 12 months ending September, 2013 Notes: (1) Nielsen xAOC, through September 2013, (2) mainstream brands, defined as > 30K cs / yr NABCA 5
Premiumisation is driving NAW growth Super premium+ brands are ~50% of category value but delivering ~90% of growth % of NAW value % of NAW growth Premium & lower 11% Premium & lower Super 47% premium & higher Super 53% premium & higher 89% Value growth by price tier Source: Nielsen xAOC, 52 wks ending Oct 12, 2013 6
Flavour innovations are driving NAW growth Flavours make up 11% of NAW sales… … and drive 53% of value growth Flavoured 11% Unflavoured Flavoured 47% 53% Unflavoured 89% Source: Nielsen xAOC, 52 wks ending Oct 12, 2013 7
Bourbon and Rye are growing rapidly Value growth – retail sales (USD) 51% 12% Bourbon Rye Source: Nielsen xAOC, 52 wks ending Oct 12, 2013 8
Crown Royal is strong and building momentum 6% CAGR 2% CAGR F07 - 11 F11 - 13 Crown Royal net sales growth Year ended 30 June 11
Crown Royal’s consumer franchise is more diverse than category competitors Skews more Female and Multicultural than the NAW category 30% 17% 14% 14% 12% 26% Female African American Hispanic Crown Royal Franchise NAW Category Source: Milward Brown brand tracking survey Sept 2013 12
We’re investing in powerful platforms for greater growth CONSUMER INNOVATION INTEGRATION ENGAGEMENT IN POPULAR CULTURE 13
“Reign On” campaign: Launched Jan 2013 PURPOSE BRAND GOAL Inspire men to become Become a contemporary modern-day kings symbol of status REIGN ON = WINNING We inspire all men. We enable each man. Crown Royal puts royalty on your side so you can win at the game of life. 14
“Reign On” platform is strengthening brand equity “Reign On” is more than a celebration of getting to the next level – it is about continuing to strive. Jul-Sept 2012 Jul-Sept 2013 24% 22% 19% 19% 20% 14% 15% 11% Regular "Brand that I love" "Brand for "Brand that is consumption someone like me" leading the way" Source: Milward Brown brand tracking survey Sept 2013 This makes me proud of Crown Royal. 15
Print 16
Outdoor 17
Outdoor 18
Outdoor 19
Digital 20
Recent innovations are attracting new consumers Recruiting younger LPA and multicultural consumers interested in higher proof bourbons +20% CAGR since launch SRP: $30 Recruiting women, multicultural and younger LPA consumers into the whiskey category SRP: $25 Black and Maple now make up ~15% of Crown Royal net sales 21
Innovation will continue to be a growth engine Strengthens ultra premium image: SRP $50; 2x Crown Royal Deluxe 22
Creative Crown Royal XO: Luxurious indulgence 23
Innovation: Celebrating our heritage Special 75th anniversary blend honors King George VI inaugural visit to Canada Luxury positioning: SRP $75; 3x Crown Royal Deluxe 24
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Bulleit is capturing the hearts and throats of America Increased net sales five-fold in the past 3 years 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year ended 30 June 26
Bulleit exists to champion the conquering of new frontiers A brand of substance Inspired by Tom Bulleit, who quit his successful law practice and risked everything to revive his great-great-grandfather’s bourbon recipe 27
Built from the bottom up • Tom Bulleit, inspirational entrepreneur • Inclusive and culturally relevant 28
Bulleit engagement model – Discovery CHARM THE TRADE TURN GATEKEEPERS BUILD CONSUMER INTO EVANGELISTS AWARENESS CONSUMERS 29
Consumers are discovering Bulleit on premise On premise is leading brand growth 102% 64% Off premise Off-premise On premise On-premise Depletions growth 2012-13 30
Print and outdoor 31
Recent innovations are accretive to Bulleit’s fast growing base business Bulleit 10 Bulleit Rye Bulleit Bourbon 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Year ended 30 June 32
Bulleit is now the BEST SELLING RYE 10% 22% 33% Jan 2012 Jan 2013 Present Bulleit share of total Rye Source: Nielsen xAOC, 52 wks ending Oct 12, 2013 33
Bulleit is an award-winning whiskey 34
Bulleit international expansion Plans are in development to launch in more than a dozen markets 35
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George Dickel is founded in a world where integrity is the true measure of success We believe that if it’s worth doing, it's worth doing right: • Small, dedicated staff • Chill charcoal filtered – smooth sippin’ whiskey • Everything made on-site – in “Cascade Hollow” “Don’t change a damn thing” – made the same way from George Dickel’s original recipe 37
A finely crafted whisky: “Hand Made the Hard Way” 38
George Dickel Rye expands appeal • Uniquely finished in the style that made George famous A unique rye whisky put through the George Dickel chilled, charcoal filtering process • Impressive success since November 2012 launch: • The #3 selling rye in America • Gold Medal – SF World Spirits Competition • 91 points – Beverage Testing Institute • 4 stars – Spirit Journal • SRP - $24.99 Source: combined open states shipments (DISCUS) and control states depletions (NABCA), P12M as of 6/30/13 39
George Dickel in the news 40
George Dickel: A highly awarded whisky SRP $ 750ml $17.99 $24.99 $24.99 $44.99 Double Gold Medal ’07 Gold Medal ‘07, ‘10, ’11, ‘13 Gold Medal ’10 Gold Medal ‘13 Gold Medal ‘05, ‘10, ’11 Silver Medal ‘06, ‘11 Silver Medal ‘11 Silver Medal ‘06, ‘08, ‘11 Bronze Medal ‘08 13: Extraordinary, Ultimate ’11, ‘13: Chairman’s Trophy Recommendation, 93 points ‘12: Very Good, Winner: Extraordinary, Strongly Ultimate Recommendation: 97 ‘12: Chairman’s Trophy Winner: Recommended: 97 points Excellent, Highly Recommended: 91 points ‘12: Very Good, Strongly ‘10: Very Good, Strongly Recommended: 89 points Recommended: 89 points Best Buy ’12 Gold Medal, 92 points in ’07, ’12, Silver Medal & ’13 Scored 91 points w/ Best Buy: 89 Gold Medal ‘02-’06, ‘12, ’13 Exceptional Rating ‘13 points ‘12 Scored 92 points w/ Exceptional Scored 90 points w/ Rating ’06 Exceptional Rating ’06 41
George Dickel “Buy the Barrel” programme • Special crafted offering for consumers • Provides retailers premium customised offer & display • Ultra premium pricing halo: SRP $50 - $70 42 42 42
Upcoming innovation reinforces craft, heritage and adoration from whisky enthusiasts • Crafted in spirit of Prohibition Era • A whiskey that’s “Mellow as Moonlight” 43
INNOVATION FOR WHISKEY ENTHUSIASTS 44
Flavoured innovations will continue to recruit new consumers to North American whiskey 1 out of 5 flavoured whiskey triers are new to whiskey 45
Expanding reserve – Blade & Bow concept Aged and beautifully finished Kentucky bourbon entrenched in our historic Stitzel Weller distillery site 46
Expanding Reserve – Orphan Barrel Concept 47
More exciting innovation to come 48
In summary, North American whiskey offers Diageo an exciting opportunity for growth • Strong and growing portfolio of brands • World class innovation capabilities • Well positioned to capitalize on trends in premiumisation, flavours and craft Diageo is positioned for success! 49
Cautionary statement concerning forward-looking statements This presentation contains ‘forward-looking’ statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. In particular, forward-looking statements include all statements that express forecasts, expectations, plans, outlook and projections with respect to future matters, including trends in results of operations, margins, growth rates, overall market trends, the impact of interest or exchange rates, the availability or cost of financing to Diageo, anticipated cost savings or synergies, the completion of Diageo's strategic transactions and restructuring programmes, anticipated tax rates, expected cash payments, outcomes of litigation, anticipated deficit reductions in relation to pension schemes, general economic conditions and all statements on the slide “outlook statements”. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including factors that are outside Diageo's control. These factors include, but are not limited to: changes in political or economic conditions in countries and markets in which Diageo operates, including changes in levels of consumer spending, failure of customer, supplier and financial counterparties or imposition of import, investment or currency restrictions; changes in consumer preferences and tastes, demographic trends or perceptions about health related issues, or contamination, counterfeiting or other circumstances which could harm the integrity or sales of Diageo’s brands; developments in any litigation or other similar proceedings (including with tax, customs and other regulatory authorities) directed at the drinks and spirits industry generally or at Diageo in particular, or the impact of a product recall or product liability claim on Diageo’s profitability or reputation; the effects of climate change and regulations and other measures to address climate change including any resulting impact on the cost and supply of water; changes in the cost or supply of raw materials, labour and/or energy; legal and regulatory developments, including changes in regulations regarding production, product liability, distribution, importation, labelling, packaging, consumption or advertising; changes in tax law, rates or requirements (including with respect to the impact of excise tax increases) or accounting standards; and changes in environmental laws, health regulations and the laws governing labour and pensions; the costs associated with monitoring and maintaining compliance with anti-corruption and other laws and regulations, and the costs associated with investigating alleged breaches of internal policies, laws or regulations, whether initiated internally or by external regulators, and any penalties or fines imposed as a result of any breaches; ability to maintain Diageo’s brand image and corporate reputation, and exposure to adverse publicity, whether or not justified, and any resulting impacts on Diageo’s reputation and the likelihood that consumers choose products offered by Diageo’s competitors; increased competitive product and pricing pressures and unanticipated actions by competitors that could impact Diageo’s market share, increase expenses and hinder growth potential; the effects of Diageo’s strategic focus on premium drinks, the effects of business combinations, partnerships, acquisitions or disposals, existing or future, and the ability to realise expected synergies and/or costs savings; Diageo’s ability to complete existing or future business combinations, restructuring programmes, acquisitions and disposals; contamination, counterfeiting or other events that could adversely affect the perception of Diageo’s brands; increased costs or shortages of talent; disruption to production facilities or business service centres, and systems change programmes, existing or future, and the ability to derive expected benefits from such programmes; changes in financial and equity markets, including significant interest rate and foreign currency exchange rate fluctuations and changes in the cost of capital, which may reduce or eliminate Diageo’s access to or increase the cost of financing or which may affect Diageo’s financial results and movements to the value of Diageo’s pension funds; renewal of supply, distribution, manufacturing or licence agreements (or related rights) and licenses on favourable terms when they expire; and technological developments that may affect the distribution of products or impede Diageo’s ability to protect its intellectual property rights. All oral and written forward-looking statements made on or after the date of this presentation and attributable to Diageo are expressly qualified in their entirety by the above factors and the ‘Risk factors’ contained in Diageo’s annual report for the year ended 30 June 2013. Any forward-looking statements made by or on behalf of Diageo speak only as of the date they are made. Diageo does not undertake to update forward-looking statements to reflect any changes in Diageo's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. The reader should, however, consult any additional disclosures that Diageo may make in any documents which it publishes and/or files with the US Securities and Exchange Commission. All readers, wherever located, should take note of these disclosures. This document includes names of Diageo's products, which constitute trademarks or trade names which Diageo owns, or which others own and license to Diageo for use. All rights reserved. © Diageo plc 2013. The information in this presentation does not constitute an offer to sell or an invitation to buy shares in Diageo plc or an invitation or inducement to engage in any other investment activities. This presentation includes information about Diageo’s target debt rating. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating organisation. Each rating should be evaluated independently of any other rating. Past performance cannot be relied upon as a guide to future performance. The contents of the company’s website (www.diageo.com) should not be considered to form a part of or be incorporated into this presentation 50
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