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Spirits Industry: Diageo's Loudly Singing Tequila! Tequila! Tequila!

Thomas Paulson
Aug 5, 2022
Spirits Industry: Diageo's Loudly Singing Tequila! Tequila! Tequila!

  • The spirits industry, especially the premium and deluxe segment, has been a structural winner coming out of the pandemic, as many consumers discovered new, better tasting, and higher quality liquids (a topic we discussed in our recent BevAlc retail industry whitepaper).
  • This was on display in Diageo’s recent 1H22 results where overall revenue gained +21% on the continuation of that trend, plus a robust on-premises recovery. The image below demonstrates how substantial premiumization and valorization are to that growth.
  • Diageo's U.S. spirits revenue was up a similarly strong +19%, on top of +36% growth in 1H21 and nearly flat results in 1H20. That's correct – Diageo U.S. spirits sales are up 60% from 2019. As we pointed out in our report, tequila is the star with Don Julio sales and volume of +36% and +30% and Casmigos sales and volume up +88% and +81%.
  • CEO Ivan Menezes said on tequila, "If you look at it regionally, so the most developed states are places like California and Texas and Arizona, where the percent of spirits volume in those states, Tequila represents about 20% of the volume [versus 15% nationwide]. The value will be higher. If you look at the rest of America, states like New York, Florida, New Jersey, there's a lot of America where the share of tequila is still sub 10% of the total market. And the consumer traction [for premium tequila], we're seeing everywhere."
  • On the vibrancy of the U.S. consumer and a potential pullback Ivan said, "We are not seeing either a slowdown or down-trading trends just broadly. … [And] we're feeling good about the on-trade momentum. … There is strong consumer exuberance this summer in [the U.S.]"
  • These favorable trends suggest continued strength for off-premises beverage retailers. Shown below are Yo3Y visitation trends for Total Wine.

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Thomas Paulson

Director of Research and Business Development, Placer.ai

Thomas Paulson spent 20 years as a Wall Street analyst and a member of asset management teams at AllianceBernstein and Cornerstone Capital, representing top-50 ownership positions including Target, Home Depot, Nike, Amazon, Google, and many more.

He brings consumer related expertise and knowledge of enterprises in retail, CPG, financial services, telecom, and entertainment.

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