Diageo fiscal year ‘starts well’ despite trade challenges

Johnnie Walker maker Diageo expects to register organic net sales growth of around 5% in its 2020 fiscal year, but warned of “significant changes to global trade policy”.

Diageo has issued a confident trading update

In a statement issued ahead of the group’s AGM, which took place on 19 September, Diageo CEO Ivan Menezes confirmed that fiscal 2020 had “started well” with “consistent progress”.

“Our focus remains on delivering quality sustainable growth,” said Menezes. “This is supported by a culture of everyday efficiency that enables us to invest smartly in marketing and growth initiatives while expanding margins.”

In its 2019 fiscal year, Diageo reported organic net sales growth of 5.8%, boosted by the solid performance of its Tequila and gin brands. In H1 2019, the London-headquartered group reported an organic net sales increase of 7.5%, and an operating profit increase of 12.3%.

Following the “strong” year, Diageo predicts first-half 2020 organic operating profit to be “in-line with or slightly behind” organic net sales growth.

However, Menezes noted that Diageo “would not be immune to significant changes to global trade policy” – referring to geopolitical uncertainty caused by so-called ‘tariff wars’.

The US has been embroiled in a long-running spat over tariffs with a number of its international trading partners. Earlier this year, the White House threatened to slap tariffs on Scotch and Irish whiskey following a dispute with the EU over civil aircraft subsidiaries.

Speaking to The Spirits Business earlier this year, Diageo’s president of Europe, Turkey and India, John Kennedy, stressed that “free trade is critical” and said Diageo was “not immune to trade war escalation”.