Diageo Expands Portfolio

Zacks

The premium hard beverage company Diageo Plc. (DEO) expanded its product portfolio by adding two new lines of frozen malt beverage pouches in the rum and vodka category. The company now offers ‘freeze and squeeze’ pouches under its Smirnoff vodka and Parrot Bay rum brands.

These frozen pouches were aimed to make the cocktail parties more hassle free during the summer months by shortening the elaborate preparation process of ice crushing and blending. Moreover, the users of the handy pouches will be freed of the messy cleaning up work after the party is over. The drinks are naturally flavored premium malt products.

While Parrot Bay freeze and squeeze pouch is available in varieties including Frozen Strawberry Daiquiri, Frozen Mango Daiquiri and Frozen Pina Colada, Smirnoff offers flavors such as Frozen Strawberry Lemonade, Frozen Blue Raspberry Lemonade and Frozen Cherry Limeade.

Smirnoff and Parrot Bay are flagship brands of Diageo’s vodka and rum series and enjoys popularity across the world.

In June this year, the company announced that it is expanding its Chateau & Estate Wine portfolio by adding three more varieties: Stark Raving, Butterfly Kiss and Rose'N'Blum. Also in June, Diageo bought Cabin Fever Maple Flavored Whiskey in order to tap the growing markets of flavored whiskey and craft distilling.

Diageo’s earnings of 89 cents per share in the first half of fiscal year 2012 went up 16% as compared with 75 cents a year ago. The growth in earnings was driven by increased investments in the form of recruitment as well as promotional campaigns behind each brands and a strong foothold in Western Europe.

Management did not provide any earnings guidance for fiscal 2012, but has revealed that it will remain cautious regarding the consumer spending and economic trends of the global economy.

The introduction of the new freeze and squeeze pouches of vodka and rum is expected to contribute to the earnings of the company in the fiscal year 2012 by generating sales and widening its customer base. The newer innovations and product differentiation also adds value to the already strong brand portfolio of the company.

The Zacks Consensus Estimate is pegged at $5.82 for the fiscal year 2012 and $6.40 for fiscal year 2013.

Diageo has been adding flavors to its strong brand portfolio and is creating differentiated value propositions for its customers in order to have an edge over its close rivals like Molson Coors Brewing Company (TAP) and SABMiller Plc (SBMRF).

Based in London, United Kingdom, Diageo is involved in producing, distilling, brewing, bottling, packaging and distributing spirits, wine and beer.

Currently, we have a long-term Neutral recommendation on Diageo, which carries a Zacks #3 Rank (short-term Hold rating).

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