Broker snap: Nomura admires Diageo's innovative spirit

26th Mar 2010 13:09

Nomura Securities has reiterated its 'buy' recommendation on Diageo after a presentation from the drinks company's US marketing director which emphasised the enduring importance of brands in the spirits trade.Guinness-brewer Diageo believes that the worst of the recession is over for the US drinks industry which should herald a return of enthusiasm for premium brands.The company is planning to produce variations on its standard lines, such as Captain Morgan branded Long Island Ice tea offerings, and is also investing in new premium products such as Swedish vodka Rokk and so-called super-premium products such as Ciroc vodka.'We see the introduction of new products [in the vodka category] as designed to protect existing price points in a category where top end pricing is under pressure, e.g. Ursus at under $12 should protect Smirnoff at $13+, and Rokk at high teens will compete against Pernod's Absolut brand and also provide protection for super-premium brands like Ciroc and Ketel One at over $20,' Nomura suggests.'Some other spirits companies criticise Diageo for throwing too many new products out into the market,' notes Nomura. 'On the other hand, this does show a strong commitment to innovation,' the broker argues.