Diageo Redirects U.S. Beer Business -- WSJ

By Saabira Chaudhuri 

LONDON -- Diageo PLC is dropping Guinness from the name of its U.S. beer business as part of a plan to widen its investment in the market.

The name will change to Diageo Beer Co. USA from Diageo-Guinness USA to signal the company's "commitment to the broad category of premium beer," the company said Friday.

Diageo, which is the world's largest spirits maker, plans to ramp up investments in Irish beers Smithwick and Harp, which have struggled in the U.S., resulting in falling beer sales last year.

In the U.S., the company has historically plowed its money into Guinness and "alcopop" Smirnoff ice, which make up the bulk of its American business. On Friday, Diageo said it has "a deep innovation pipeline for beer and flavored malt beverages" including creating a new alcoholic soda line and launching a Smirnoff spiked seltzer.

Diageo's U.S. beer portfolio, which includes Smirnoff Ice, logged a 3% drop in volume in the fiscal year ended June 30. Net sales of beer fell 3%, as Smithwick and Harp showed declines and Guinness sales came in flat. The company blamed "a crowded craft beer segment."

Beer makes up about 20% of Diageo's global sales but is its biggest business in Africa, where it sees the drink as a means to promote its spirits brands.

The moves in the U.S. come as beer has been losing ground to liquor and wine and as beer companies such as AB InBev NV and MillersCoors LLC have responded by expanding into alcoholic soda. Diageo's global beer head, Mark Sandys, last year noted that growth is expected to come from Africa and Asia, while the U.S. and other mature markets will be flat.

"This change truly represents a culture and mind-set shift for Diageo's U.S. beer business," said Tom Day, president of the newly named Diageo unit. He said Diageo was responding to interest from U.S. consumers in "experimenting with new styles and brands."

Diageo Chief Executive Ivan Menezes has been working to re-energize the company's performance in the U.S., its largest and most profitable market, after a sustained period of slumping volumes. Some of his efforts are starting to pay off, with Diageo last week reporting positive sales trends in the market.

Write to Saabira Chaudhuri at [e-mail]

(END) Dow Jones Newswires

August 06, 2016 02:48 ET (06:48 GMT)

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