Wednesday, April 27, 2016

Increase sales of luxury spirits

The luxury drinks market grows in Brazil, particularly in distillates. Growth, even in a recessionary economy, due to a number of factors: traditional lovers of this type of drink reduced the number of trips abroad and began to buy in the country; the demand in the State of São Paulo and in the Midwest, where agribusiness is going well, is heated; and the public who frequents bars and restaurants are more willing to try drinks made with vodka, rum and Gin.
Diageo, the world''s largest manufacturer of distilled and owner of brands such as Johnnie Walker, Tanqueray, Cîroc and Zacapa, being benefited by this movement. Cecilia Gurgel, Director of Diageo Reserve (area that includes the luxury portfolio company), said the luxury lines have grown two digits per year, surpassing the average market.
In Brazil, Diageo''s sales grew 12 percent in the second half of 2015 (which corresponded to the first half of the fiscal year the company''s 2016). The International Wine and Spirit Research (IWSR) estimates that the market for luxury drinks in the country has grown from 9% to 10% last year.
"The luxury market had a stronger growth in the last year. The sales revenue of these lines grew 200% in the last 12 months, "says Cecilia. According to the company, in the cumulative 12 months (may 2015 to April this year), the sales of Johnnie Walker Gold Label whisky, classified in the category of Super, grew 41% in revenue and were stable in volume. In the case of superpremium vodka, Cîroc French brand, sales are up 21% in volume and 77% in value. Sales of high value-added Gin-including Tanqueray brand-increased 61% in volume and 98% in value.
In the luxury category, the Diageo includes spirits such as whiskey, vodka, Gin and rum, with prices ranging from R$ to R$ 130 20 1000 per bottle. According to Cecilia, sales grow because the company also expanded the distribution of these brands in the country and promoted the drinks in restaurants, bars and parties. Since last year, according to Cecilia, Diageo has intensified efforts to expand sales of luxury drinks outside the Rio-São Paulo.
"There is a heated demand in São Paulo and in the Center-West of the country, on behalf of agribusiness, and growth in the Northeast", says the Executive. According to Diageo, sales rose 156% in volume in the region comprising Bauru, Marília, Presidente Prudente and Piracicaba, State of São Paulo. In the Federal District, sales of high-end Scotch increased 150%.
Cecilia notes that consumers of luxury drinks reduced the number of trips abroad and that factor also contributed to the increase in consumption in the country. Cecilia said that the consumption of vodka, Gin and rum also grows in the country because there are more consumers trying drinks based distillates.
The IWSR estimates that the total market of distillates in Brazil will present an annual average fall of 1.3% in sales volume until 2020, with the most significant losses in rum (fall of 2.1% per year), rum (2.1%) and brandy (2%). And predicts annual growth for the categories of tequila (with high of 5.3% per annum), Gin (4.3%), vodka (3.1%) and whiskey (1%).
The Executive says that Diageo will strengthen marketing activities this year to maintain the momentum of double-digit growth in sales of distillates. According to Cecilia, Brazil is among the ten largest markets of this type of drink to Diageo, and still has strong potential for expansion. While the luxury market represents 6% of the sales of Diageo in Latin America, in Brazil, this piece is 3%.
With regard to prices, the Executive reports that Diageo reset lines of distillates in the last year, but below the Exchange variation-all brands are imported. Cecilia said the company has sought to balance imported costs reducing costs of production of other lines such as Smirnoff vodka and cachaça Ypióca group.
In the first half of fiscal 2016 (closed in December of last year), Diageo had profit of 1.41 billion pounds ($ 2 billion), up 7 percent compared to the same range a year earlier. Net sales fell 5 percent to 5.61 billion pounds sterling on account of exchange rate variations.
Sales in Brazil grew by 12% in this period. The company does not disclose revenue per country. In the Latin America and Caribbean region, net sales rose 9%. Revenue in the region amounted to 522 million pounds sterling ($ 747.1 million), with emphasis on vodka sales, which grew 22 percent thanks to the performance of the category in Brazil and Mexico.
The company also highlighted performance in Brazil, sales increased 9% in Latin America with strong sales of the brands, Johnnie Walker Red Label, Black & White and White Horse in Mexico and in Brazil. In Paraguay, Uruguay and Brazil, the net sales of the luxury portfolio of Diageo have grown 14%, driven by Cîroc brand and marketing investments.
With respect to the segment of cachaça, the company reported that, despite the fall in the market as a whole, the sales increased 4% in revenue Ypióca group.
The Euromonitor International estimates that the total market of distillates (including rum) moved billion liters in 2014 1.08. The leader in the Brazilian market in 2014 was the Cia. Muller, owner of Cachaça 51, with 16.8% stake. Then are the Industries Gathered drinks Armadillo (owner of the Armadillo and Old cachaças Barreiro), with 9.5%, and Diageo, with 9.4%.
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