Yesterday, Diageo announced that it will be combining all of its luxury assets under a new global business division, the Diageo Luxury Group. The division will be responsible for overseeing all Diageo brands priced at USD $100 (approx. AUD $150) and above, and reflects a renewed focus on the fastest growing spirits price tier.
Additionally, the division will also be responsible for overseeing 15 Diageo brand homes and distillery visitor experiences, including Johnnie Walker Princes Street, and will oversee the Casks of Distinction cask ownership program, which allows consumers to buy individual casks of Scotch from Diageo’s stocks.
The Group will also be responsible for overseeing Justerini & Brooks, one of the UK’s oldest fine wine and spirits merchants.
“We are privileged to hold Diageo’s finest assets in our possession - a collection of exceptional brands and talented individuals that allow us to combine heritage with a forward-thinking drive,” said Julie Bramham, Managing Director of the Diageo Luxury Group.
“Bringing the breadth of our luxury offering together, alongside a focus on expansion of our luxury-based experiences, has Diageo incredibly well-placed to deliver for our clients and customers. I look forward to an exciting future.”
Diageo’s choice to build a new global division around ultra-premium spirits and experiences follows on from IWSR data showing it to be the fastest growing price bracket for the past four consecutive years. This growth has seen sprits priced USD $100 and above grow at a compound annual growth rate of 12% by volume and 18% by value, with the luxury spirits category now worth just under AUD $20 billion globally.
Spiros Malandrakis, Head of Alcoholic Drinks at Euromonitor International, says that premiumisation remains firmly in the spotlight across all categories as consumers pursue escapism through occasional luxuries.
“This is premiumisation against all the odds,” he said.
“Aspirational momentum is overcoming the cost of living crisis. In fact, iconic segments that are now intricately associated with aspirational consumption and increasingly higher end offerings are among the top sales performers.”
The growth of this market has prompted other major global spirits groups to increase their focus on luxury releases. According to Luiz Schmidt, Bacardi's Managing Director for Australia and New Zealand, opportunity for ultra-premium spirits is especially high in Australia.
“If I look at the portfolio in Australia, more than 70% of our sales in Australia are coming from premium plus brands…I think we do really well just because of the fact that we are playing in a more profitable segment of the market,” Schmidt told Drinks Trade.
When asked what role premium plus releases such as GREY GOOSE Altius and Patrón Alto have for Bacardi-Martini Australia, Schmidt believes the benefits extend beyond the revenue driven from sales.
“Obviously the commercial part comes as a result of it, but it certainly helps to generate an even more premium halo effect for brands like Patrón," he said.
"To your point, Patrón is a well-established tequila brand that is massive in the US - it's still the leading super premium tequila in that market. But obviously, as you become more popular, it has an impact in terms of the equity, so brands such as Patrón El Alto, which is just a prestige entry, it definitely would help us to elevate the credentials of all Patrón, and that luxury prestige halo effect will certainly support the branding into the future.”
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