Leading brewer and distiller, Diageo plc DEO offers customers an opportunity to ring in the New Year with a toast to health. The new SMIRNOFF Spiked Sparkling Seltzer presents a win-win situation, as this malt flavored beverage comes with only 90 calories and zero sugar, providing a guilt free drinking experience.
The seltzer comes in 12 oz. serving cans and is composed of 4.5% alcohol by volume (ABV) with only 1g carbs, zero sugar and no artificial sweeteners. Diageo claims that a 12 oz. can of seltzer has lesser calories than a standard 5 oz. serving of leading champagne brands in the market. It comes at a retail price of $8.99 for a 6-pack of 12 oz. cans of seltzer. The Spiked Sparkling Seltzer are said to be gluten free and comes in three natural fruit flavors – Orange Mango, Cranberry Lime and Watermelon.
The company persistently carries out innovations to enrich its portfolio. In 2016, Diageo added Crown Royal Vanilla Flavored Whisky and Jack-O'Blast Limited Edition Pumpkin Spiced Rum to its already rich spirit portfolio.
We note that Diageo, which shares space with companies like Molson Coors Brewing Company TAP and Constellation Brands Inc. STZ, is making efforts to focus on its spirits business, as a result of which it has planned to divest non-core assets. Recently, the company sold the majority of its U.S. and British wine operations to the Australian company, Treasury Wine Estates. Earlier in July, Diageo had sold luxury hotel and golf resort, Gleneagles, located in Scotland, to a private equity firm Ennismore Capital, to cut costs and bolster profits. The move reaffirmed its plans to focus more on the core spirits business.
Though the above mentioned initiatives boost our confidence in the stock, certain inherent issues raise our concerns for the same. Declining volumes has been a drag on top line for the past few quarters. Moreover, increasing restrictions on alcohol consumption by governments worldwide have dented revenue growth for the industry as a whole. However, the aforementioned initiatives taken have been able to cushion the stock to an extent. The shares of the company declined 7% in the last three months, outperforming the Zacks categorized Beverages Alcohol industry which has slumped almost 14% in the same period.
Zacks Rank & Key Pick
Diageo currently carries a Zacks Rank #3 (Hold).
A better-ranked stock in the same sector includes Boston Beer Inc. SAM carrying a Zacks Rank #2 (Buy) and an expected long-term growth of 12%. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
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