Diageo Plc DEO is positioned to make the most of the shift in trends to ready-to-drink bar-quality cocktails through the launch of its Crown Royal ready-to-drink canned cocktail line. This will mark the Crown Royal Whiskey brand’s debut in the ready-to-drink cocktail space.
The brand’s new line features three flavors, including Washington Apple, Whisky & Cola and Peach Tea. The Washington Apple flavor features Crown Royal whisky, apple and sparkling cranberry flavors. The Whisky & Cola will include Crown Royal whisky with Cola, while the Peach Tea flavor will comprise Crown Royal whisky, peach flavor and brewed tea.
Notably, the pandemic-led closures of bars and restaurants have resulted in a shift in alcohol consumption trends to more at-home occasions. This has led to the rise in popularity of bar-like ready-to-drink cocktails in canned packaging available in retail and liquor stores. Alcohol companies have been taking advantage of the new trend through the launch of innovative varieties of ready-to-drink cocktails. Between 2016 and 2019, the ready-to-drink category has witnessed growth of 20% in the United States on 259% growth in the hard seltzer segment.
In North America, which is Diageo’s largest market, sales accelerated 12.3% in the first half of fiscal 2021, which ended on Dec 31, 2020. Sales growth in North America was backed by strong consumer demand, market share growth in the spirits category, positive category mix, and uninterrupted stock replenishments by distributors and retailers. Much of the growth was backed by the increasing sale of ready-to-drink drinks in the Smirnoff, Ketel One Botanical and Tanqueray portfolios. Some of Diageo’s recent launches in the canned cocktail space are Ketel One Botanical vodka spritz, Tanqueray crafted gin drinks and Crown Royal cocktails.
Another trend, which has gained prominence due to the pandemic and the shift to at-home consumption, is rising e-commerce sales of alcoholic beverages. Prior to the pandemic, there was little awareness about the online purchase of alcohol, with less than one in three consumers being aware. Consequently, e-commerce made for less than 2% of total sales of alcohol in early 2020.
However, at the peak of the pandemic, there was a notable shift, with increased consumer preference for e-commerce purchases due to restrictions on movements. As a result, one in three alcohol drinkers is now buying their drinks through the e-commerce platform.
Diageo is relentlessly working to leverage its existing e-commerce capabilities and accelerate investments in the online platform to cater to the pandemic-driven shift in consumer shopping behavior. It has diverted its efforts to connect with consumers and maintain brand relevance by responding to increased opportunities of at-home consumption occasions. This included new occasions like wanting to enjoy bar-quality drinks at home.
Further, the company has inspired consumers with cocktail recipes, new serves and ways to enjoy its brands with food. It also rapidly responded to the increased demand for home delivery. In the United States and Latin America, it reached customers with new “cocktail to go’ programs. In East Africa, the company explored new ways to get products delivered to consumers’ homes through partnerships with motorbike delivery companies known as boda-bodas.
Overall, shares of this Zacks Rank #2 (Buy) company have gained 20.6% in the past six months compared with the industry’s growth of 8.4%.
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