Diageo takes Captain Morgan Gold hit

Diageo admitted yesterday that customers have not taken to its new ready-mixed bottled drink, Captain Morgan Gold, which will now never meet initial sales expectations.

Reporting full-year results, the drinks giant admitted it had botched the introduction of the "ready-to-drink" rum and coke drink. The new beverage was launched in May but consumers have not reacted favourably to it.

The setback meant Diageo has been left with stocks of the drink that are not now needed and the company has forced to take a £24m charge to account for this surplus inventory. The company had hoped that Captain Morgan Gold would emulate the success of the Smirnoff Ice vodka ready-to-drink product that has been a runaway success since it was introduced 18 months ago. The Captain Morgan rum brand came with the Seagram acquisition, which was only completed this year.

Paul Walsh, the chief executive, said: "Not all brands can become a Smirnoff Ice. It is already apparent that the performance of Captain Morgan Gold has not met our expectations. We now think it's unlikely that it ever will."

Analysts said the experience with the rum drink raised questions about the whole ready-to-drink market. Diageo's ready-to-drink sales were £814m last year.

Nigel Popham, at Teather & Greenwood, said: "It [Captain Morgan Gold] would have helped growth going forward. I regard ready-to-drink as low-quality, fickle earnings, that are unlikely to be sustainable over the longer term."

Rob Malcolm, Diageo's president of marketing, explained that Captain Morgan Gold was brought to market too quickly, without proper market testing.

"Vodka is a neutral tasting drink. Captain Morgan is a spiced rum, which is an acquired taste," he said.

Mr Malcolm said it had been hoped that Captain Morgan Gold may be half or two-thirds as big as Smirnoff Ice. Now its likely sales were uncertain, he said.

Overall, the spirits, beer and wine group reported a 3 per cent rise in pre-tax profits for the year to June 30, before exceptional items and goodwill, to £2.04bn. Diageo indicated that it would run another large-scale share buyback programme this financial year, having returned £1.7bn to shareholders in this way last year.

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