By James Atkinson
Diageo Australia's strong growth in premium spirits last year was hampered by the poor showing of its Smirnoff Signature Serves product, according to managing director Tim Salt.
Diageo this week revealed that its Australian sales grew at a third of the Asia-Pacific rate in what was an otherwise solid performance by the region and the company worldwide.
Tim Salt this week told TheShout that the culprit was Signature Serves, which had failed to consolidate its "phenomenal" performance the previous year.
"This year, a lot of competition came in, they took price down, offered lower margins and we struggled there," Salt said.
"Signature Serves was our 'achilles heel' this year unfortunately."
But Salt said he was pleased that Diageo had outperformed the Australian market in what had proven to be his most challenging period in the 27 years he has been in business.
"I've never had a tougher year, with the consumer confidence where it was," he said.
"We're continually increasing our share of the market, but it was against a backdrop of a very tough market this year."
Salt said mainstream brands Bundaberg, Johnnie Walker and Smirnoff had all achieved solid growth, and the company's 'premiumisation' strategy was clearly paying dividends, with Diageo Reserve brands achieving growth of 80 per cent.
"People are spending less, but those who are choosing to spend are looking for trade-up opportunities, whether it's in wine, beer or spirits," he said.
"Consumers love it and it's better for retailers because they make more margin. We just happen to be in a sweet spot because we've got some nice brands in that area," he said.
Salt said Diageo had done an excellent job of engaging with retailers over the past 12 months.
"We got recognised as the number one supplier last year with the LMAA survey, which is a big change from where Diageo has been in the past," he said.