Dive Brief:
- British news site Sky News reports that global spirits company Diageo, which owns Guinness and Smirnoff, is looking to sell off many of its American brands, including Myers's Rum, Popov vodka, Romana sambucca and Goldschlager, as the beverage giant shifts its focus onto premium global brands such as Johnnie Walker, Ciroc, Tanqueray and Baileys Irish cream.
- Insiders told Sky News the U.S. brands, which Diageo would like to sell as a complete package, could command an overall $500 million to $1 billion price tag. Centerview Partners, an investment bank specializing in consumer-goods deals, is handling the sale.
- The sale process is expected to last several months. The company has seen flat sales in recent years, but said it saw a 6.1% increase in operating profit for half-year results in January, according to Sky News.
Dive Insight:
The potential sale is another bold move by Diageo in the premium sector lately, hoping to boost watered down sales recently. Last year, the company agreed to purchase Casamigos, the fastest-growing super-premium tequila brand in the U.S., for $1 billion.
The strategic shift to top shelf alcohol comes as spirits consumption, especially among millennials, continues to grow, as Food Dive has reported. A survey last year found that that age group drinks more than their Generation X and baby boomer counterparts. In addition, their interest in vintage cocktails like the old fashioned has spurred retail sales of alcohol like whiskey, tequila, bourbon and gin.
Another difference between the generations includes brand loyalty, or lack thereof. While 52% of baby boomers know which alcohol brands they intend to buy in advance, only 24% of millennials do. This gap poses a lucrative opportunity for alcohol manufacturers to lure millennials with premium ingredients, unique flavor profiles and eye-catching label art.
The beverage industry has also found success by selling consumers on the idea they should “drink less, but better,” Fortune reported last year. That marketing has convinced many drinkers that they will have a better experience if they consume alcohol made from top ingredients. And it is certainly paying off.
The Distilled Spirits Council recently reported record spirits sales and volumes, and market share gain for hard alcohol compared with beer in 2017. Strongest growth came from high-end and super premium products across almost all categories, council Chief Economist David Ozgo said in the report. Key drivers included American whiskey, tequila, cognac, and Irish whiskey.