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Plagued by weak consumer confidence and a troubled on-premise market, Diageo’s total North American volumes fell 4% (the largest percentage decline of Diageo plc's major regions) and net sales declined by 6% to £1.69 billion ($2.6b) during the first half of its fiscal 2010 (ending December 31, 2009). To help compensate during the difficult period, Diageo NA reduced its marketing spend by 5% to £228 million ($358m), but operating profit still dropped 2% to £661 million ($1.03b) for the region.
Diageo NA’s key spirits portfolio was hit hard amid the ongoing economic slump. Johnnie Walker was the company's only key brand to hold its ground in North America during the fiscal first half, although a shift to Johnnie Walker Red Label from the higher marques hindered the brand’s net sales. Smirnoff declined 5% as Diageo reduced North American shipments and the brand competed against vodkas willing to endure price reductions. Diageo notes that Smirnoff’s flavor extensions outperformed core brand Smirnoff Red during the half. Captain Morgan declined by 4% in North America, but strong expansion in travel retail and Northern Europe kept the brand level globally. Jose Cuervo’s North American volumes plummeted 13% (-11% globally) due to intense competition from 100% agave Tequilas priced under $20 and price reductions amongst its key competitors. Baileys was also hit hard in North America, where a 15% falloff contributed to an 8% global decline “as consumers viewed liqueurs as a luxury purchase.” Other priority brands that fell sharply in North America were Crown Royal (-7%) and Tanqueray (-5%). The North American volume of recently acquired Ketel One vodka was down 10% through the period. Diageo’s North American wine volumes were buoyed 6% by consumers trading down below the $10 price point, but that shift left the division’s sales growth short 3% against the previous year. For its fiscal first half, Diageo plc reported a 2% sales drop to to £5.2 billion ($8.16b) and a 10% falloff in after-tax profit, to £1.02 billion ($1.6b).
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