Diageo: vodka not on the rocks

31 July, 2014

Smirnoff is not a casualty of a global trend away from vodka, according to Ivan Menezes, CEO of Diageo.

Menezes told journalists at Diageo’s 2013/2014 financial results press conference in London today: “A lot has been written about the end of vodka in the last few months – it’s not true. Vodka in the US is growing at 4%. Vodka and whisky are still the two fastest growing segments."

Earlier this month DI reported that vodka is set to be usurped by whisky as the number one international spirit category by 2018 (forecast: Euromonitor International).

While Smirnoff, the category-leading brand, dropped 1% in volumes and 2% in net sales in the year ending June 30 2014.

But according to Menezes, the category, driven by Smirnoff, will continue to expand. He said: “In the emerging markets we’re seeing fantastic growth for vodka and it’s still so under-penetrated. In India, Brazil and South Africa the vodka revolution is just starting.  Vodka has a long way to run and Smirnoff has a long way to run as a global brand.”

Menezes attributed Smirnoff’s results to increased competiveness in the number one premium vodka market, the US, where it was 4% down in volumes. “In the US there’s been a lot of competitor entry – there have been over 200 brands enter the market in the last two years.

“We’ve been on a track of driving value in vodka, and so we’ve been taking price increases the last 3-4 years. A lot of the industry has not.”

The Diageo CEO added that Smirnoff’s return to growth was a “very important priority” for Larry Schwartz and his US team and said they would "not be taking price increases as rapidly” this year to “get the competitiveness of Smirnoff back”. 

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