London (January 27, 2002). UK drinks giant Diageo reported double-digit sales and profits growth for the fiscal first half to December 31, driven by growth across all regions and ongoing premiumisation trends.
Reported net sales of £8bn increased 15.8%, with strong 20% organic growth. Reported operating profit of £2.7bn increased 22.5%, and reported operating margin increased 190 basis points, primarily due to growth in organic operating profit. Earnings per share (EPS) increased by 24.7% to 84.3 pence. Diageo said it would accelerate its £4.5bn share buyback to 2023, a year earlier than planned.
Diageo growth reflects the continued recovery in the on-trade, particularly in Europe and North America, resilient consumer demand in the off-trade and market share gains (in 85% of measured markets) and was underpinned by favourable industry trends of spirits taking marketshare of total beverage alcohol and premiumisation. Premium plus brands contributed 56% of reported net sales and drove 74% of organic net sales growth. Broad-based growth across most categories, with a particularly strong performance in Scotch, Tequila and beer.
The company increased marketing investment in marketing to gain share and support innovation, particularly in North America and Greater China.
The company saw double-digit sales growth across all five regions.
CEO Ivan Menezes said Diageo has been impacted by inflation in the cost of commodities, energy costs and supply disruptions. In response to the inflation across the supply chain, Diageo increased prices through the first half.
Menezes said that Diageo has been able to navigate the supply chain issues afflicting the industry: “We have been able to use our scale and operational excellence to mitigate the majority of supply disruptions which are impacting the consumer goods sector and we have strong relationships with key suppliers. For example, navigating port congestion has been helped by our relationships and agreements with global shipping lines, as well as having advantaged access to local ports.” Diageo conceded that both Crown Royal and Bulleit Bourbon had been impacted by the disruptions.
Menezes also said Diageo is benefitting from the tailwind from the continued recovery of the on-trade and travel retail.
In terms of guidance for H2, Menezes said: “We have made a strong start to fiscal 22. While we expect near-term volatility to remain, including potential impacts from Covid-19, global supply chain constraints and rising cost inflation, I am confident in our ability to successfully navigate these disruptions through the remainder of the year. Over the medium-term, from fiscal 23 to fiscal 25, we continue to expect organic net sales to consistently grow within a range of 5% to 7% and organic operating profit to grow sustainably within a range of 6% to 9%.”
Diageo sales by region:
• North America grew 13%, driven by the on-trade recovery, resilient consumer demand in the off-trade and market share gains. Diageo also benefitted from the favourable industry trends of premiumisation and spirits taking market share of total beverage alcohol.
• Europe grew 27%, reflecting the recovery of the on-trade, particularly in Great Britain, Southern Europe and Ireland. Off-trade demand remained resilient, and Diageo continued to be strong and gain share
• Asia Pacific grew 13%, primarily due to strong growth in Greater China and India. Net sales continued to recover across the rest of Asia Pacific, although performance was impacted by on-trade restrictions and reduced tourism.
• Africa grew 23%, with growth coming across all markets, particularly Nigeria and East Africa.
• Latin America and the Caribbean grew 45%, with strong double-digit growth across all markets. The growth reflects the recovery of the on-trade and resilient demand in the off-trade. Strong growth of premium plus Scotch drove positive mix, and Diageo increased price increases across key markets.
Diageo sales by category:
• The three-year CAGR for Scotch was 4%. Johnnie Walker grew 31%, ahead of Scotch, with particularly strong growth of Johnnie Walker Black Label and super-deluxe variants.
• Other international whiskies grew 6%. Supply constraints impacted the growth of Crown Royal and led to a decline in Bulleit sales in North America.
• Tequila was 9% of Diageo’s net sales. The 56% growth reflects the strong performance of Casamigos and Don Julio in the US. In the US, Diageo increased prices by an average of 4.5% across Casamigos and Don Julio.
• The strong performance of gin was driven by growth across Europe, Africa and Latin America. Tanqueray and Gordon’s both grew double-digits.
• Beer grew 22%, and Guinness was up 27%, with strong growth within Ireland, Great Britain and Africa as the on-trade continues to recover.
• Diageo’s Chinese white spirits maintained strong growth, with sales up 26%, underpinned by increased investment.
