Diageo sees 'big opportunity' in no, low-alcohol

Diageo believes the no- and low-alcohol category is a “big opportunity for the industry” and for the company, its CEO has said.

Speaking at a press briefing for Diageo’s financial results for the first half of fiscal 2025 at its London headquarters, CEO Debra Crew voiced her optimism for the no-and-low segment and noted that the group’s non-alcoholic portfolio is up by approximately 56 per cent.

The firm’s alcohol-free portfolio includes Seedlip, Ritual Zero Proof and non-alcoholic alternatives for its Gordon’s, Tanqueray and Captain Morgan brands.

Crew believes the zebra striping trend “keeps people” within the group’s alcohol-free brands.

“People want this kind of sophisticated experience, they want to feel like when they’re out, that you know you’re still out, but you know you’re also wanting to moderate and so you can switch back and forth,” she explained. “And so that’s a big trend for us, and we are absolutely looking at that.”

In September 2024, Diageo fully purchased Ritual Zero Proof after initially taking a minority stake in the US-based brand in 2020.

Founded in Chicago, Illinois, Ritual Zero Proof offers alternatives to whiskey, Tequila, gin, rum and apéritifs.

Regarding the non-alcoholic category, Crew said Diageo is the “leader in spirits” with Ritual Zero Proof being the “number one non-alcoholic spirit brand in the US”.

“We’re very excited about it,” Crew told members of the press. “It’s done incredibly, had quite a run, and we’re very excited about what more we can do there.”

Diageo saw its organic sales rise by 1 per cent in the six months to December 2024 with growth led by its Tequila portfolio (up 20 per cent), which represented 13 per cent of net sales by category.

Referring to wider industry trends, Crew affirmed that whisky is “still very much in trend” despite a double-digit drop for the group’s Scotch malts portfolio (down 20 per cent), while its blended Scotch brand Johnnie Walker fell by 6 per cent. However, Johnnie Walker Blonde is seeing growth in emerging markets, Crew highlighted.

With Scotch, Crew was quick to point out that it faces competition from other domestic whiskies around the world, but she noted that the group wants to make sure it “really defends Scotch”, particularly in the face of potential tariffs.

Speaking about “what is off-trend”, Crew stated that rum “is a big quieter right now” while vodka is “getting hit” by convenient formats like ready-to-drink products.

The group’s rum portfolio dropped by 8 per cent with Captain Morgan also down by 8 per cent.

Vodka also struggled to grow its sales, with the segment falling by 9 per cent. Ketel One was flat, but category leader Smirnoff managed to post a sales increase of 3 per cent.

Cîroc vodka suffered the biggest organic sales decrease of all key brands in Diageo’s portfolio, plummeting by 32 per cent.

Over the past six months, the group has offloaded two Venezuelan rum brands, Pampero and Cacique, alongside flavoured liqueur brand Safari.

When asked about the group’s portfolio management, Diageo chief financial officer Nik Jhangiani said they were “still assessing” in terms of the categories and brands that they would consider selling.

He added that the company would also “look selectively at acquisitions” in terms of “how do we actually look at that play and are we right with the brand that we have, or is there a gap, based on that classic point around price laddering”.