That’s based on reported numbers. Diageo said its organic growth in North America – its largest market, representing 35% of total sales — saw sales rise just 5% on a 2% volume increase.
Selling 19 spirits brands to Sazerac Co. resulted in an estimated 40 basis points improvement in organic net sales growth.
Turning to brand performance, in U.S. Spirits, organic net sales increased 5%. Crown Royal net sales increased by 6% and the brand gained share, driven by strengthened marketing investment fueling growth of Crown Royal Regal Apple and by the Crown Royal Peach limited time offer.
Bulleit net sales were up 8% and it continued to gain share in US whiskey.
Scotch grew net sales by 7% and gained share with strong innovation performance recruiting new consumers into scotch.
Vodka net sales were flat, an improvement over the prior year, reflecting growth in Ketel One and Smirnoff and decline in Cîroc. Ketel One net sales grew by 10% and gained share in the category, driven by Ketel One Botanical with improvement in core Ketel One vodka performance. Smirnoff net sales grew by 2% due to stabilization of the base business and the launch of Smirnoff Zero Sugar Infusions.
Captain Morgan net sales declined 5%. In tequila, both Don Julio and Casamigos delivered strong double digit growth and gained share in the category.
Diageo Beer Co. USA net sales grew 10%, largely driven by growth in ready to drink as a result of successful prior year innovation launches. Beer net sales grew 2%, improving over prior year and gaining share.
Net sales in Canada increased 5% with broad based growth, including strong ready to drink performance.
North America operating margin declined 103bps, mainly driven by up-weighted marketing investment behind US Spirits, with some impact from market mix shift and higher commodity and logistics costs partially offset by overhead efficiencies.
Globally, Diageo reported net sales rose 5.8% on a 2% increase in volume. Organic growth was partly offset by acquisitions and disposals. Operating profit rose 9.5%. Net profit rose 5%, and the company expects its full-year dividend to be up 5%.
“Organic volume and net sales growth was broad based across regions and categories,” CEO Ivan Menezes, said, with new product innovation being a strong contributor. “We expanded organic operating margin ahead of our guidance and increased investment behind our brands ahead of organic net sales growth.
“Our focus on quality sustainable growth is backed by a culture of everyday efficiency that enables us to invest smartly in marketing and growth initiatives while expanding margins, he said, adding:
“These results reflect the steady progress we are making and as we look ahead we see attractive opportunities to deliver consistent growth and create shareholder value. In the medium term I expect Diageo to maintain organic net sales growth in the mid-single digit range and to grow organic operating profit ahead of net sales in the range of 5%-7%.”