Diageo sees 20% sales growth in H1
Johnnie Walker owner Diageo registered organic net sales growth of 20% for the first half of fiscal 2022, underpinned by the premiumisation trend.
In its interim results released today (27 January), Diageo revealed volume growth of 9%, driven by recovery of the on-trade and demand in the off-trade.
On a reported basis, net sales grew by 15.8% to reach £8 billion (US$10.7bn).
More than 70% of Diageo’s net sales growth was in the premium-plus price tiers, and the company noted the US sales of luxury Tequilas Don Julio Primavera and Don Julio Ultima Reserva contributed to this boost.
“We delivered strong organic net sales growth across all regions and operating margin expansion,” commented Diageo CEO Ivan Menezes.
“This performance demonstrates our world-class brand building capability, supply chain excellence and agile culture, and reflects the strength of our portfolio across geographies, categories and price tiers.”
Growth in operating profit led to a free cash flow of £1.6bn (US$2.14bn), while reported operating profit grew by 22.5%. Diageo noted that it had ‘significantly improved’ its organic operating margin.
The most growth was seen in Latin America and the Caribbean, with a 45% increase in organic net sales. Diageo said this was due to strong performances of premium brands, a boost in demand for Scotch, and increasing prices across key markets in this region.
The company owner saw organic net sales of 27% in Europe, 13% in North America, 23% in Africa, and 13% in Asia Pacific, particularly in China and India.
Category and brand performance
Across all regions, the Tequila portfolio grew by 56%, accounting for 9% of Diageo’s overall net sales. Its super-premium-plus Tequila portfolio ‘grew very strongly’.
The firm credits its success in agave spirits to the strong US performance of Don Julio and Casamigos, the brand co-founded by actor George Clooney. Diageo increased the prices of both brands by just over 4.5% in the first half of fiscal 2022.
Scotch grew by 27%, benefitting from recovery in the on-trade channel, particularly in Great Britain, southern Europe, Ireland and the US. Johnnie Walker saw overall growth of 31%, supported by the performance of its Black Label bottling.
Gin saw a 21% rise in organic net sales, with brands Tanqueray and Gordon’s both experiencing a double-digit boost.
Diageo reported an overall 27% jump in marketing investment in fiscal ’22, with particular emphasis on increased spend for Tanqueray. The gin brand grew by 28%, with Tanqueray No. Ten increasing by 33%, led by partnerships with American actor Stanley Tucci and House of Gucci.
Chinese white spirits saw sales rise by 26%, boosted by the firm’s investments in the market.
Sustainability and future goals
Diageo also noted its achievement of ‘significant milestones’ in sustainability under its Society 2030 plan.
Recent developments towards its sustainability goals include its new carbon-neutral Bulleit whiskey distillery in the US, its forthcoming carbon-neutral Chinese whisky distillery, and the firm’s investment towards making Quebec-based Valleyfield distillery carbon neutral by 2025.
Diageo predicted continued sales momentum in the second half of fiscal 2022, as well as continued resilience in the off-trade. Volatility is expected to remain as the market adjusts to supply chain constraints and the impacts of Covid-19 are still felt.
For 2030, the firm aims for a 50% increase in Diageo’s total beverage alcohol market share ambition, from 4% to 6%, as ‘there is significant headroom for long-term, sustainable growth’.
Diageo’s full-year sales climbed by 16% in fiscal 2021.