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Johnnie Walker-maker Diageo beats first-half sales estimates


Fundamentals with our consumer base are strong, Diageo CEO says

Diageo, the world’s largest spirits maker, beat first-half sales forecasts on Thursday 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 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%.

“Every region of the world had growth. The top end of our portfolio, the top 28%, the most expensive products, grew double digit in every region of the world,” Chief Executive Ivan Menezes told CNBC’s “Squawk Box Europe.”

“So the fundamentals with our consumer base are strong. People are enjoying spirits more than ever and drinking better, not more.”

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 pounds ($61.92), drove 65% of its organic net sales growth, the company said.

“If you look at the consumer, the consumer is very savvy,” Menezes told CNBC. “There are cost of living pressures, but the consumer is deciding where they want to save and where they want to treat themselves. And we, fortunately, play in an affordable luxury category.”

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Since the pandemic, Diageo has also 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 capitalize on newfound demand, focusing on premium brands such as Bulleit Bourbon and Don Julio tequila.

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.

CNBC’S Jenni Reid contributed to this report.



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James Thomas
James Thomashttps://businessadvise.org
Hello, I am James Thomas blogger and content creator who specializes in personal finance and investing at Business Advise. I have been writing for over 5 years and have built a large following of readers who value practical advice and actionable tips. I'm committed to helping people take control of their financial futures and achieve their goals.

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