Pub closures see Guinness sales drop
Net sales of Guinness in Great Britain dropped 2% for the six months to 31 December 2010 on last year as more pubs closed and the shift from on-trade to off-trade volumes continued.
Guinness brewer Diageo said that although its Guinness Surger off-trade brand achieved distribution in a further 9,500 outlets, it was not enough to offset the "continued contraction of the on trade with, on average, 29 outlets closing each week".
Guinness marketing spend was down as the brand switched its sponsorship programme from the rugby premiership to the Six Nations and international rugby.
Smirnoff dip
Overall in Great Britain, Diageo saw net sales up 1% with volumes down 1% for the period — a performance it classified as "moderate net sales growth achieved as the economy continued its fragile recovery".
Net sales of Smirnoff dropped 16%, attributed to "stock building in fiscal 2010 ahead of the anticipated duty increase in the emergency budget in June and a loss of share in the on trade".
Margin was also eroded on Smirnoff as "price conscious consumers in the off trade bought more on promotion" rather than in the on-trade.
Net sales of Baileys grew 2% fuelled by its "Let's do this again" campaign. Net wine sales grew 18% due to a price increase on Blossom Hill and strong sales of its higher value wines.
Marketing spend increased 3% with investment in Smirnoff up 4%, focused on its "Nightlife Exchange Project" and its tie up with Coca-Cola.
Momentum
Globally, the drinks giant reported organic net sales growth of 4% with organic marketing spend up 10%. Organic operating profit grew 2%.
"Momentum is building in our business," said chief executive Paul Walsh. "Our top line performance was stronger and price/mix improved.
"We have increased marketing spend significantly, up 10%, but in a very focused way. 35% of the increase was behind strategic brands in US spirits to build the brand equity as we move away from promotional support and over 60% of the increase was on our brands in the faster growing emerging markets.
"Despite the economic weakness in much of Europe, our first half performance gives me increased confidence that we will improve on the organic operating profit growth we delivered in fiscal 2010."
