Guinness’ execution “needs to be a bit sharper” if the beer brand is to stay ahead of growing competition in stout, Diageo CEO Dave Lewis has said.
Speaking to analysts after Diageo reported Q1 sales figures this morning (5 November), Lewis said the hot summer weather and competitive pressure had contributed to a low-single-digit decline in beer sales in Great Britain and Ireland.
While Guinness continued “to be a powerhouse for Diageo”, improvements were needed if the stout was to retain its dominant market share, Lewis said.
“Success draws competition, and Guinness has been very successful,” Lewis said. “There is a need to make sure we stay competitive at every touchpoint. There is some work for us to do. It’s not rocket science, but we need to do it.”
Diageo was in the early stages of exploring how it could offset softer stout sales during warmer weather, Lewis revealed. However, the “very, very, very warm summer” had contributed to softer sales.
Therefore, the brand needed “to be a bit sharper in some of the executional touchpoints in both the on and off-trade”, he said.
“Guinness is eminently capable of doing that but as we keep pushing the equity of the brand forward, we need to make sure we deal with some of that competitive pressure straight on.”
Guinness’ share of the total stout market was flat year-on-year over the quarter, Lewis revealed. Over the past 52 weeks, supermarket sales for the brand remain in both value and volume growth, The Grocer’s Top Products Survey will next month show.
However, other stout brands are making inroads, with Heineken’s Murphy’s Stout in particular gaining distribution in pubs, bars and supermarkets. In the year to April, Murphy’s off-trade sales climbed by more than 1,500% to £11.1m [NIQ].
Other smaller craft brewers have also launched stouts of their own into supermarkets in the past year, including Brew York, Northern Monk and Arbor Ales.
Meanwhile, there was no danger of a repeat of Guinness shortages ahead of the festive period, Lewis reassured investors, adding there were “no capacity constraints” in the UK and Ireland, following significant investment in expanding production capacity over the past 18 months.
Price repositioning
Net sales at Diageo climbed by 1.4% organically in the three months to 30 September, with the London-listed spirits giant calling out “targeted price repositioning” as a key driver of volumes over the quarter.
The group achieved volume gains in all markets bar North America and India, driven by price/mix cuts of around 2% in Latin America, Asia Pacific and EMEA.
There had been “no major, fundamental repositioning of price”, Lewis insisted. However, the business would continue to tweak prices as it sought to be “agile to market situations” in certain markets and categories.
“We’re not talking about dramatic repositioning here,” he said. “We’re talking about precision, portfolio-specific work. That twisting and tweaking carries on.”
Shares in Diageo climbed 2.5% in mid-morning trading.
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