webcast december 2012

VODKA
WEBCAST
DECEMBER 2012
Your presenters today
Simon Burch
Global Brand Director,
Smirnoff
Peter Fairbrother
Edward Pilkington
Global Category Director,
Vodka, Rum, & Gin
Global Brand Director,
Ketel One, CÎROC, Gins,
White Spirits Portfolio
We love vodka because it’s full of
possibility, and we lead the category
Dynamic
Versatile
Premiumising
VODKA
Profitable
Constantly
Growing
What is vodka?
`Vodka' is neutral spirits so distilled, or so
treated after distillation with charcoal or
other materials, as to be without distinctive
character, aroma, taste, or color.
US Federal Regulation
Vodka’s versatility is the foundation for
its historical success through innovation
1000-1860
1940s
1950s
1960s
1990s
2000s 2012
Some of the exciting new trends in vodka
NIGHTCLUB TREND GOING GLOBAL
EMERGENCE OF CRAFT
CATEGORY EXPANDING INTO NEW MARKETS
FLAVOUR AND FORMAT INNOVATION
Vodka is a large and consistently highgrowth category
600
Global Category Volume
(2001-11 Volume CAGR%)
500
Volume (9L cs in Ms)
Global Category Growth
Vodka
1.3%
400
4.7%
Vodka excl CIS
300
200
3.1%
Rum
100
Vodka
Vodka excl
CIS
2001
2006
Source: IWSR
Rum
Scotch
2011
Scotch
1.3%
Though already large, there is further
opportunity to develop the vodka category
Vodka Category Stage of Development
High
Low
312M
0.5M
78M
70M
8M
17.5M
6M
GTME
1M
3M
13M
1.6M
3M
Source: IWSR (2011)
Total Volume
Diageo Volume
13M
2M
The economics of vodka are very
attractive
Simple Production Process
Flexible Supply Chain
Attractive Margins
Consistent growth in vodka depends on
sustained brand-building investment
Vodka is critical to Diageo’s overall
performance
Diageo F12 Vodka Category Volume
Vodka (spirit)
34.1M 9L cases
Vodka (RTD)
3.6M 9L cases
Vodka Share of Diageo (F12)
12%
NSV
24%
NSV Growth
0%
20%
40%
60%
80%
100%
Diageo vodka core brand portfolio:
A strong business getting stronger
No. 1 Premium
vodka in the world
No. 2 Super Premium
vodka in the US
6%
F12 Organic NSV Growth
Source: Smirnoff – Impact Databank, Ketel One – IRI, Ciroc IWSR
9%
No. 2 Ultra Premium
vodka in the world
62%
We develop the category and drive its
growth with three simple strategic pillars
RECRUIT
GIVE BREADTH TO
THE CATEGORY
PREMIUMISE
Recruit: The most vibrant categories and
brands are always recruiting
RECRUIT
The Millenial Consumer
Huge numbers of new LPA
consumers in high growth markets
Category penetration low
Versatile & Accessible
Breadth: Keeps the category vibrant
by offering more choice
GIVE BREADTH TO
THE CATEGORY
Brands
Positioning
Occasions
Price
Consumers
Customers
Channels
Innovation
Premiumise: Elevate the category
PREMIUMISE
Status & Caché
Vodka trends often start
at the top end
Consumers value premium
experiences
Price / mix delivery
Category opportunity by geography
North America
Europe
Global Travel
Recruit multicultural consumers
Innovate to recruit
and broaden
Global recruitment
platform
Innovate to
broaden category
Build Super
Premium
Shop window for
our brands
Accelerate Super &
Ultra Premium
Build Ultra
Premium
Premiumise
Category opportunity by geography
Latin America
Asia Pacific
Africa
Keep recruiting
LPA Recruitment
Build the spirits
category
Build a full
category
Build Super
Premium
Extend channels
and occasions
Trade up through
price tiers
Define luxury in
vodka
Seed ultra
premium
Our brands play clear strategic roles
RECRUIT
GIVE BREADTH TO
THE CATEGORY
PREMIUMISE
Our brands operate in distinct price tiers
and outlet types
PREMIUM
SUPER PREMIUM
ULTRA PREMIUM
Our core vodka brands are supported by
a broader portfolio
RTD
LOCAL BRANDS (Selective)
Smirnoff RTD NSV growth
F12
F11
Total Diageo
(2)%
(1)%
Developed markets
(6)%
(3)%
Emerging markets
+9%
+4%
Smirnoff: A brand of history and heritage
We have returned Smirnoff to growth
Smirnoff Vodka Net Sales Growth
F12
F11
F10 -4%
6%
-1%
Drivers
Momentum going forward
Recruit a new generation of
consumers through:
Communications
Events
Drinks Programs
Innovation
A new global communications platform
Recruiting through great nightlife events
Recruiting new consumers and inspiring
existing consumers with great drinks
Innovative new offerings recruit and
give breadth to the category
Opportunities for Smirnoff
Stunning recruitment programs
Continue strong innovation
Expanding geographical footprint
Ketel One: Driving growth as the
bartender’s choice
Ketel One Net Sales Growth
F12
F11
F10
9%
1%
5%
Drivers
Momentum going forward
Drive growth through:
Bartenders
Experiences
Craft Credentials
Communications
Be the choice of bartenders around the
world
Deliver great in bar experiences
and events
Add breadth to the category, reinforcing
craft credentials
Our communications reinforce our
brand credentials
Opportunities for Ketel One Vodka
Most loved vodka amongst bartenders
Expansion outside of USA
Expanding to new consumer groups in USA
Cîroc has consistently posted high
growth rates
CÎROC Net Sales Growth
F12
62%
F11
F10
126%
46%
F09
F08
145%
83%
Drivers
Momentum going forward
Drive category premiumisation through:
USA
ROW
Celebrity Alliance
Commercial Partnership
Communications
Nightclubs
Influencers
Celebration Events
Participation Platforms
Outstanding PR
In the US, our partnership with Sean
Combs is highly successful
Cîroc is set up to win in nightclubs all
over the world
We put Cîroc at the heart of celebration
events, reinforced by great PR
vd
Opportunities for Cîroc
Continue momentum in USA
Winning in the best nightclubs around the world
Vibrant luxury brand
Our category growth strategy is clear,
and is working
RECRUIT
GIVE BREADTH TO
THE CATEGORY
PREMIUMISE
Summary
Category leader with three strong core brands
Opportunity to grow in developed and high growth markets
Category is premiumising
We invest in brilliant programs and leverage our global footprint
We are committed to innovation
Diageo Vodka:
A Strong Business Getting Stronger
For further information on Diageo, please visit the Investors section
of: Diageo.com
The Investor Relations team can be contacted on:
UK +44 (0)20 8978 4267
or by email at: [email protected]
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, expected investments, 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:
 global and regional economic downturns;
 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;
 legal and regulatory developments, including changes in regulations regarding production, product liability, distribution, importation, labeling, 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;
 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;
 developments in the Colombian litigation, Korean customs dispute, thalidomide litigation or any similar proceedings;
 changes in consumer preferences and tastes, demographic trends or perception about health related issues, or contamination, counterfeiting or other
circumstances which could harm the integrity or sales of Diageo‟s brands;
 changes in the cost or supply of raw materials, labour, energy and/or water;
 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;
 levels of marketing, promotional and innovation expenditure by Diageo and its competitors;
 renewal of supply, distribution, manufacturing or licence agreements (or related rights) and licenses on favourable terms when they expire;
 termination of or failure to renegotiate existing distribution or licence manufacturing rights on agency brands;
 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;
 technological developments that may affect the distribution of products or impede Diageo‟s ability to protect its intellectual property rights; and
 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 pensions funds.
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 the annual report on Form 20F as filed with the US Securities and Exchange Commission (SEC) on 5
September 2012. 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 SEC. 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 2012.
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.