- Half-year sales come in flat – -0.6% – on year prior at US$10.96bn
- Volumes from six months to end of December decline 5%
- ‘Latin America & Caribbean’ drag confirmed – region’s sales tumble 23%
- ‘North America’ also dips, by 2%
The threat of turbulence from the ‘Latin America & Caribbean’ region has been realised by Diageo in its latest results, as sales from the closing six months of 2023 stagnated.
For the half year to the end of December – the first half of Diageo’s financial year – the region was down in sales terms by almost a quarter on the corresponding period in 2022. As confirmed by the group in November, the impact of “macroeconomic pressures” on ‘Latin America & Caribbean’ (LAC), manifested by “lower consumption and consumer downtrading “, has hampered moves to reduce inventory in the region’s sales channels.
Subsequently, the company’s top-line came in down by 0.6%, although stripping out LAC, sales were up 2.5%.
Also causing concern for Diageo in today’s results was a 2% sales decrease in the key region for spirits brand owners of North America. The high comparable base of a year earlier, particularly for the Casamigos tequila and Johnnie Walker blended scotch brands in the US, was partly blamed for the performance, although a shift in consumer preferences “into other spirits categories” saw vodka brand Cîroc slide by double digits in the market.
While the majority of the ‘key brands’ struggled against the highs of a year earlier, Guinness stood out thanks to a 14% value jump on volumes of -1%. Indeed, the brand owner credited the beer with posting its sixth consecutive half-year of double-digit rises.
Elsewhere in the portfolio, the combined scotch brands, led by Johnnie Walker, were down 10%, predominantly due to the problems affecting LAC. The single malt portfolio also cycled successful innovation such as Lagavulin 11 Year Old Charred Oak Cask in late 2022, resulting in its sales falling 12%.
Returning to the geographical performance, and ‘Asia Pacific’ was up 6% in sales, thanks primarily to healthy figures from the Shui Jing Fang Chinese baijiu business in its domestic market: Greater China jumped 18% for Diageo in the six months. ‘Europe’ was solid at +3% as sales in the UK were up by high single digits.
“The first half of fiscal 24 was challenging for Diageo and our sector, particularly as we lapped strong growth in the prior year and faced an uneven global consumer environment,” said CEO Debra Crew. “While North America delivered sequential improvement in line with our expectations, we are focused on returning to high-quality share growth as consumer behaviour continues to normalise in our largest region.“
For the full financial year, to the end of June, the firm talked of persistent macroeconomic issues in LAC, where sales are forecast to be down by between 10% and 20% in H2. Over the “medium term”, which does not have a specified timeframe, Diageo maintained its +5%-to-+7% top-line forecast.
