Diageo sparkles on home-drinking boom
Locked-down consumers drinking spirits in ever-increasing numbers helped propel drinks giant Diageo to better-than-expected results.
Demand for tequila and bourbon saw net organic sales up 1% in the six months to December 31 despite lockdowns, with spirits sales up 15% in the UK and US, and sales in North America – the FTSE 100 firm’s largest market – up 12.3%.
Diageo saw sales of its tequilas up 80% in the US, with its Casamigos brand – bought for hundreds of millions from George Clooney in 2017 – seeing a 139% sales bump in the half.
Chief financial officer, Kathy Mikells, put Casamigos’ sales growth down to the drink’s 100% agave base tuning into continued wellness focus, the “ongoing trend” towards the “super premium space” in home drinking, and cocktail options for tequila continuing to evolve.
The company – owner of brands including Guinness, Johnnie Walker, Tanqueray and Smirnoff – said that its reported operating profit for the period was down 8.3% to £2.2 billion.
Mikells said the firm delivered “a strong performance in what was a challenging operating environment”. “These results are ahead of our expectations at the start of the fiscal year, and show strong sequential improvement across all of our regions versus the second half of fiscal 20,” she said.
The firm said “strong momentum in the off-trade more than offset declines due to on- trade restrictions and closures” in the UK in the period.
UK managing director, Dayalan Nayager, told the Standard that he believes the consumer shift to home-drinking is here to stay – at least to some extent.
He said: “There’s definitely going to be some habits that are formed that will stay… I do think you will get people that have been buying Guinness and drinking it at home, that that penetration and increase will stay.
“We’ve been really proud here in GB in the pace at which we have innovated. Every three months the landscape was changing, and the business has adapted and moved quickly to where consumers and the customers are at.”
Raising a glass to investors, the firm said it would issue an interim dividend up 2% at 27.96p.
Shares in the company, down by about 9% since the start of 2020, were up 3.6% this morning.
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