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North America

Key financials

2012 Reported
(restated)£ million
Exchange
£ million
Aquisitions and disposals *
£ million
Organic movement
£ million
2013 Reported
£ million
Reported movement
%
Net sales 3,556 22 (24) 179 3,733 5
Marketing spend 547 6 (18) 50 585 7
Operating profit before exceptional items 1,360 14 (3) 113 1,484 9
Exceptional items (11)       -  
Operating profit 1,349       1,484 10

"Diageo's organic performance in North America, with volume up 1% and net sales up 5%, has been driven by our strength in US spirits which continues to benefit from positive demographics and the consumers' wish to premiumise. Great innovation, impactful marketing campaigns, and our superior route to market have resulted in 3% volume growth and 8% net sales growth in US spirits.

We have taken price increases across our brands, especially on our premium and super premium brands. The strong performance of Crown Royal, Johnnie Walker, Buchanan's, and Bulleit Bourbon, and double digit growth of our reserve brands, were the key contributors to mix. We have sustained our successful innovation pipeline and again we have 5 of the top 10 new launches in the United States, with Crown Royal Maple the number one US innovation this year. We have increased marketing spend 11% on our US spirits brands and we now have on air campaigns for all our core brands. DGUSA, in contrast, had a difficult year with increased competition from new entrants in flavoured beer. Wine has had a good year, benefiting from innovation and price increases. Canada has delivered good growth through price increases, innovation, and marketing investment in Tanqueray, Crown Royal, and Baileys. Strong price/mix across North America enhanced our gross margin and with our continued focus on overheads we were able to increase marketing investment while still delivering 120bpts of operating margin improvement"

Larry Schwartz, President, Diageo North America

  Organic volume movement **
%
Organic
net sales movement
%
Reported
net sales movement
%
Key markets and categories      
North America 1 5 5
US Spirits 3 8 7
DGUSA (7) (6) (6)
Diageo Chateau & Estate Wines 1 3 4
Canada - 8 7
       
Spirits 2 8 8
Beer (2) (1) (3)
Wine 1 4 4
Ready to drink (10) (10) (11)
       
The strategic brands:***      
Johnnie Walker 5 12 13
Crown Royal 14 17 17
Buchanan's 13 19 19
Smirnoff 2 5 6
Ketel One vodka 5 8 8
Cîroc 1 4 5
Captain Morgan - 4 4
Baileys 4 7 8
Tanqueray 7 11 12
Guinness (2) (1) -

* Diageo reported net sales of £267 million (2012 – £266 million) from Jose Cuervo in North America. Acquisitions and disposals are in respect of the year on year movement for Jose Cuervo, as a result of the termination of the distribution agreement, and for disposals made in the years ended 30 June 2013 and 30 June 2012.
The variance is primarily driven by the sales decline of Nuvo.

** Organic equals reported movement for volume except for Canada (1)%, beer (3)% ready to drink (12)%, and wine 0%, reflecting the disposals in North American wine and other disposals and the termination of the Jose Cuervo distribution agreement.

*** Spirits brands excluding ready to drink.

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