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Drinks

Diageo Tops Sales Estimates, Helped By Premium Brands

By Reuters
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Diageo Tops Sales Estimates, Helped By Premium Brands

Diageo, the world's largest spirits maker, beat first-half sales forecasts as it raised prices and more people drank premium spirits.

The London-based company, which makes Tanqueray gin, Captain Morgan's rum and Ketel One vodka, said organic net sales rose 9.4% in the six months to December 31, beating analyst forecasts for a 7.9% rise.

The growth reflected organic volume growth of 1.8%, indicting 7.6 percentage points of higher price growth. Organic operating profit grew 10%.

Resilient Market

The spirits market has been resilient amid a global cost of living crisis that has otherwise hit volumes at other consumer goods companies, with people continuing to buy what they consider occasional treats for themselves even as they trade down to cheaper food brands.

Diageo's "premium-plus" brands - which are more expensive than brands such as Smirnoff vodka but under about £50 (€56.80) , drove 65% of its organic net sales growth, the company said.

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Since the pandemic, Diageo has benefited from people buying more expensive types of alcohol while staying home under lockdown. The company and its rivals invested heavily in marketing and improving their products to capitalise on newfound demand, focusing on premium brands such as Bulleit Bourbon and Don Julio tequila.

Medium-Term Guidance

"We believe we are well-positioned to deliver our medium-term guidance of consistent organic net sales growth in the range of 5% to 7% and sustainable organic operating profit growth in the range of 6% to 9% for fiscal '23 to fiscal '25," chief executive Ivan Menezes said in a statement.

The company, which said people mainly drank more tequila, scotch and Guinness, added it would return up to 500 million pounds to shareholders -- in addition to its existing buyback commitment -- this financial year. It raised its interim dividend by 5% to 30.83 pence per share.

Diageo also said it was "confident" Chinese consumers would "return" as COVID-19 infections fall in that country.

News by Reuters, edited by by ESM – your source for the latest drinks news. Click subscribe to sign up to ESM: European Supermarket Magazine.

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