Diageo, owner of Johnnie Walker, Crown Royal and more said it plans to sell 19 of its “less successful” labels to privately owned distiller Sazerac for $550m.
The Wall Street Journal says that the company’s goal is to swap profits for growth, remedying a sales dip in the company’s US market.
No one wants the cheap stuff
These days, consumers in big markets have less of a palate for well whiskey Cokes than they do for the good stuff.
Last year, Diageo began easing into its ‘premium only’ mentality, buying Casamigos, an upscale tequila brand co-founded by actor George Clooney, for roughly 20x its sales — compared to the 3x in sales Diageo will get back for selling Seagrams, Goldschlager, and others.
Let the hangover begin
Monday’s announcement will reportedly cut earnings per share by 2% next year, and to make good with shareholders the company will return about $438m in proceeds through the repurchase.
Meanwhile, they still have to wait on Casamigos to turn a profit (which isn’t projected for another 3 years).