CEO of spirits giant Diageo: Dips in consumer confidence haven't fazed 'very strong' liquor trends

  • "People are moving to spirits and cocktails in a bigger way from wine and beer, and people are trading up for more premium brands," Diageo CEO Ivan Menezes says.
  • The largest spirits company in the world is not feeling effects from the economic slowdown because it has benefited from changing trends, he says.

British distiller Diageo is dodging consumer confidence headwinds by taking advantage of trends in alcohol and drinking preferences, CEO Ivan Menezes told CNBC on Thursday.

"We are benefiting from consumer trends where people are drinking better and want better brands and experiences," he said in an interview with Sara Eisen of "Squawk on the Street."

Diageo, the world's largest spirits company, reported 7.5 percent growth in global sales in its half-year earnings report. Receipts of tequila brands, which make up 3 percent of Diageo's net sales, spiked 29 percent, including double-digit growth in Don Julio and Casamigos labels in North America.

"It's part of this trend of people wanting more premium brands and enjoying the quality that's behind a Don Julio tequila," Menezes said. "People are moving to spirits and cocktails in a bigger way from wine and beer, and people are trading up for more premium brands."

The company also makes Smirnoff, Johnnie Walker, and Captain Morgan labels.

As the partial shutdown of the U.S. government dragged through most of January, consumer confidence hit a 1½-year low while markets worried about the outlook of 2019.

Menezes said the spirits industry is not immune to global economic and spending declines, but they're "better positioned" to weather the storm by following trends. Furthermore, sales grew 20 percent in China with scotch brands.

"[It's] hard to see a sustained shift yet, but ... we're watching it closely," he said. "That trend is very strong and continues on a secular basis, so while there will be some impact from an economic slowdown, we're not seeing it yet."

Shares of Diageo are trading up more than 5 percent midday and reached year-over-year highs.