Beam Suntory reported a 10% rise in net sales for the first half of 2023, driven by ready-to-drink (RTD) brands and the company’s premiumization strategy, but nevertheless did face performance struggles in North America.
As a private company, Beam Suntory is not required to release its financial statements. But information provided in a statement did echo its competitors, who have also suffered volume or sales declines in the U.S. recently. Results were flat in North America versus the first half of last year as the business contends with a “slowdown in consumer demand” in the U.S. and category resets post-Covid.
“Our geographic diversity has benefitted us this year with strong performance in our Asia Pacific and international regions, which has helped offset a challenging environment in North America,” said Albert Baladi, president and CEO of Beam Suntory in the statement. “We are optimistic about the second half as we are starting to see signs of improvement in the U.S. market dynamics, and we remain committed to our long-term strategy to build a premium-plus portfolio that delivers value over volume.”
Globally, RTDs contributed to the growth with double-digit sales figures. The company has prioritized a premium take on the category: this year it made a minority investment in The House of Delola, co-founded by Jennifer Lopez, where Beam Suntory is also the global distribution partner. It also expanded its On The Rocks cocktail line, which sits among the top five RTD spirit-based cocktails off-premise according to NIQ data from 3 Tier.
“Our premiumization strategy and competitive advantage in ready-to-drink continue to deliver quality results for our business as we accelerate our work to transform our company and position ourselves as a truly global spirits leader,” Baladi said.
In October, Baladi will be stepping down and passing the baton to Greg Hughes, who serves as the company’s senior vice president and chief growth and brands officer. Baladi’s 12-year tenure includes five years as president and CEO, during which the company’s annual sales grew to over $5 billion, with an emphasis on premium brands, which have become the majority of its sales.
Jim Beam, Maker’s Mark and Roku gin delivered mid to high-single digit sales growth in the first half of the year. Maker’s Mark announced a new Cellar Aged expression today, available in the U.S. for a suggested retail price of $150 in September, joining other major spirits companies making a play for the luxury whiskey category with new releases this week. The company announced plans to increase production of American whiskey last year, expecting to complete its $400 million distillery expansion in Kentucky by 2024. The company also officially moved on plans last week to build a $191 million Scotch whisky maturation facility in East Ayrshire, Scotland.
Japanese whiskies, a category where Suntory dominates, delivered double digit sales growth versus last year, driven by releases celebrating the House of Suntory’s 100 year anniversary — the campaign tapped John Wick star Keanu Reeves and the Coppola family. As part of its centennial celebration, Suntory committed 10 billion JPY ($77 million USD) for the upgrade of its Yamazaki and Hakushu distilleries. The growth of Japanese whiskey exports is led almost entirely by Suntory Holdings and Asahi Group Holdings, which together control more than 90% of Japanese whisky production.
Tequila was also a highlight with single digit sales growth from Hornitos and double- and triple-digit growth for Tres Generaciones and El Tesoro, respectively. Both those tequilas are priced in the super premium and ultra segments, which have picked up more of the category share over the past four years. Aiming to enhance their position in agave spirits, the company entered a strategic distribution partnership with Mezcal Amaras this year.
The North America business unit’s results were offset by Asia Pacific regions where sales rose 16% from last year, and the international region, which grew sales 10%.
Other spirits companies have also blamed flat or negative U.S. sales on post-pandemic normalization and the impact of inflation. Diageo reported U.S., net sales of spirits declined 1%, and cited elevated demand as driving inventory to low levels for several key brands, such as Crown Royal, followed by distributors increasing inventories of imported products in response to the shipping and logistical challenges in fiscal 2022. That resulted in U.S. shipments growth being ahead of depletions. The owner of Jose Cuervo also reported a drop in net sales in Q2 in the group’s biggest market, the U.S. and Canada, (-12.9%) due to volume decreases and foreign currency effects from the appreciation of the Mexican peso against the U.S. dollar.