Diageo North American Whisky

Diageo
Investor Conference
North American Whisky
November 2013
North American whisky is HOT
• Classic cocktails
• Pop culture
• Ties to local/American pride
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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%
IRISH
2%
BRANDY/
PPC COGNAC
5%
GIN 3%
4%
IRISH
WHISKEY
6%
NAW
23%
SCOTCH
5%
SCOTCH
12%
NAW
53%
TEQUILA
7%
CORDIALS
9%
VODKA
30%
VODKA
27%
RUM
12%
Source: Nielsen xAOC, 52 wks ending Oct 12, 2013 *North American whiskey
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Diageo has a strong portfolio of brands well
positioned for growth
$ share of NA whiskey
Hood River
2%
Laird
2%
A/O
1%
Crown Royal #2 North American whiskey
Crown Royal Maple #1 Spirits Innovation1
Luxco
3%
Campari
3%
Diageo
23%
Constellation
5%
Heaven Hill
6%
Sazerac
12%
Bulleit Fastest Growing Bourbon2
Bulleit Rye #1 Leader in Rye whiskey
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
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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
47%
Super
premium
& higher
53%
Super
premium
& higher
89%
Value growth by price tier
Source: Nielsen xAOC, 52 wks ending Oct 12, 2013
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Flavour innovations are driving NAW growth
Flavours make up 11% of NAW sales…
… and drive 53% of value growth
Flavoured
11%
Unflavoured
47%
Flavoured
53%
Unflavoured
89%
Source: Nielsen xAOC, 52 wks ending Oct 12, 2013
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Bourbon and Rye are growing rapidly
Value growth – retail sales (USD)
51%
12%
Bourbon
Rye
Source: Nielsen xAOC, 52 wks ending Oct 12, 2013
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Diageo North American whiskey portfolio
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Crown Royal is strong and building momentum
6% CAGR
2% CAGR
F07 - 11
F11 - 13
Crown Royal net sales growth
Year ended 30 June
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Crown Royal’s consumer franchise is more
diverse than category competitors
Skews more Female and Multicultural than the NAW category
17%
30%
14%
14%
12%
26%
Female
African American
Crown Royal Franchise
Hispanic
NAW Category
Source: Milward Brown brand tracking survey Sept 2013
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We’re investing in powerful platforms
for greater growth
CONSUMER
ENGAGEMENT
INNOVATION
INTEGRATION
IN POPULAR
CULTURE
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“Reign On” campaign: Launched Jan 2013
PURPOSE
Inspire men to become
modern-day kings
BRAND GOAL
Become a contemporary
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.
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“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
22%
19%
14%
19%
24%
20%
15%
11%
Regular
consumption
"Brand that I love"
"Brand for
"Brand that is
someone like me" leading the way"
Source: Milward Brown brand tracking survey Sept 2013
This makes me proud
of Crown Royal.
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Print
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Outdoor
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Outdoor
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Outdoor
19
Digital
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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
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Innovation will continue to be a growth
engine
Strengthens ultra premium image: SRP $50; 2x Crown Royal Deluxe
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Crown Royal XO: Luxurious
indulgence
Creative
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Innovation: Celebrating our heritage
Special 75th anniversary blend honors King George VI inaugural visit to Canada
Luxury positioning: SRP $75; 3x Crown Royal Deluxe
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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
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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
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Built from the bottom up
• Tom Bulleit, inspirational entrepreneur
• Inclusive and culturally relevant
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Bulleit engagement model – Discovery
CHARM THE TRADE
TURN GATEKEEPERS
INTO EVANGELISTS
BUILD CONSUMER
AWARENESS
CONSUMERS
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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
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Print and outdoor
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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
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Bulleit is now the BEST SELLING RYE
10%
Jan 2012
22%
Jan 2013
33%
Present
Bulleit share of total Rye
Source: Nielsen xAOC, 52 wks ending Oct 12, 2013
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Bulleit is an award-winning whiskey
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Bulleit international expansion
Plans are in development to launch in more than a dozen markets
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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
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A finely crafted whisky:
“Hand Made the Hard Way”
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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
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George Dickel in the news
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George Dickel: A highly awarded whisky
SRP $ 750ml
$17.99
Gold Medal ’10
Silver Medal ‘11
$24.99
$24.99
Double Gold Medal ’07
Gold Medal ‘05, ‘10, ’11
Gold Medal ‘07, ‘10, ’11, ‘13
Gold Medal ‘13
Silver Medal ‘06, ‘08, ‘11
‘12: Very Good,
Strongly
Recommended: 97
points
Silver Medal &
Best Buy: 89
points ‘12
$44.99
Silver Medal ‘06, ‘11
Bronze Medal ‘08
13: Extraordinary, Ultimate
Recommendation, 93 points
’11, ‘13: Chairman’s Trophy
Winner: Extraordinary,
Ultimate Recommendation: 97
points
‘12: Chairman’s Trophy Winner:
Excellent, Highly Recommended: 91
‘12: Very Good, Strongly
Recommended: 89 points
‘10: Very Good, Strongly
Recommended: 89 points
Best Buy ’12
Gold Medal, 92 points in ’07, ’12,
’13
Gold Medal ‘02-’06, ‘12, ’13
Scored 90 points w/
Exceptional Rating ’06
Scored 91 points w/
Exceptional Rating ‘13
Scored 92 points w/ Exceptional
Rating ’06
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George Dickel “Buy the Barrel” programme
•
Special crafted offering for consumers
•
Provides retailers premium customised offer & display
•
Ultra premium pricing halo: SRP $50 - $70
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Upcoming innovation reinforces craft, heritage
and adoration from whisky enthusiasts
• Crafted in spirit of Prohibition Era
• A whiskey that’s “Mellow as Moonlight”
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INNOVATION FOR WHISKEY ENTHUSIASTS
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Flavoured innovations will continue to recruit
new consumers to North American whiskey
1 out of 5
flavoured whiskey
triers are
new to whiskey
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Expanding reserve – Blade & Bow concept
Aged and beautifully finished Kentucky bourbon entrenched
in our historic Stitzel Weller distillery site
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Expanding Reserve – Orphan Barrel Concept
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More exciting innovation to come
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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!
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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;
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which could harm the integrity or sales of Diageo’s brands;
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or at Diageo in particular, or the impact of a product recall or product liability claim on Diageo’s profitability or reputation;
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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
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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.
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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.
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