Diageo delivers ‘strong’ H1 resultsBy Georgie Collins
Don Julio owner Diageo has reported an 18.4% net sales increase for the first half of fiscal 2023, boosted by the firm’s premium-plus brands.
In its interim results published today (26 January), Diageo revealed it had seen organic net sales growth of 9.4% across all regions, which it credits to a ‘diversified footprint’, its advantaged portfolio, and the premiumisation trend.
Sir Ivan Menezes, Diageo CEO, commented: “We have made a strong start to fiscal 23. Organic net sales grew 9%, with growth across all regions, organic volume grew 2%, and organic operating profit grew 10%.
“In a challenging cost environment, our organic operating margin increased 9 basis points whilst we also continued to invest for the future.
“Today, Diageo is 36% larger than it was prior to Covid-19, reflecting the strength of our diversified footprint and advantaged portfolio.”
Diageo has continued to optimise its portfolio through acquisitions and disposals.
The firm acquired Australian premium-priced coffee liqueur Mr Black in September, and added Texan single malt whiskey producer Balcones Distilling to its portfolio in November.
Furthermore, Diageo agreed to purchase super-premium Philippine rum brand, Don Papa, for €260 (US$281.5m), with a further €177.5m (US$192.2m) payment agreed through to 2028, subject to the brand’s performance.
Menezes continued: “Sales growth was supported by our continued focus on premiumising our portfolio, bolstered by strong global premiumisation trends, with our super-premium-plus brands growing organic net sales 12%.”
Spirits net sales grew by 10%, with 3% volume growth. Growth was seen across most categories, including double-digit performances in Scotch, Tequila, and Indian-made foreign liquor (IMFL) whisky.
Scotch net sales grew by 19%, with 7% volume growth. This was underpinned by Johnnie Walker, which boasted 21% growth. Single malts grew at 28%.
Tequila net sales grew by 28%, with 15% volume growth, while rum saw a 5% increase driven by Zacapa’s 11% growth across all regions.
Despite seeing positive growth in the firm’s full-year 2022 results, vodka net sales declined by 2% overall, with Ketel One and Cîroc net sales plummeting by 11% and 34% respectively across North America.
Canadian whisky also saw an 8% decline, as did liqueurs, which reported a 1% drop.
Meanwhile, Chinese white spirits continued to experience the negative impact of Covid-19 on-trade restrictions.
Despite a drop in sales for Tanqueray, the gin category delivered a 3% increase overall.
In North America, net sales grew by 19%, primarily driven by a favourable impact from foreign exchange, mainly due to the strengthening of the US dollar, and organic growth.
Growth was primarily driven by Tequila, which grew by 24% and was led by Casamigos and Don Julio, which saw net sales increase by 28% and 20% respectively.
US whiskey saw double-digit growth in the region, led by Bulleit whiskey, which saw 19% net sales growth, while the firm’s spirits-based ready-to-drink category grew by 12%, driven by the launch of Cîroc Vodka Spritz.
Meanwhile, vodka, Canadian whisky, and Scotch all saw declines.
Despite single malts seeing a net growth of 61%, primarily driven by Lagavulin, the Scotch category declined 5% in total, with a 10% loss from Johnnie Walker, and a 12% depletion from Buchanan’s.
In Europe, growth was mainly driven by price increases and continued premiumisation, while holding volume.
The on-trade benefitted from continued recovery, particularly in Southern Europe, which was supported by stronger tourism.
Asia Pacific boasted 20% net sales growth, reflecting a favourable impact from foreign exchange. Double-digit growth in Scotch and IMFL whisky contributed to spirits growth of 20% in the region.
Specifically in Southeast Asia, Scotch grew by 49%, mostly driven by Johnnie Walker premium variants and Scotch malts.
Furthermore, Korea and Japan net sales grew by 29%, also driven by Johnnie Walker and Scotch malts.
Tequila led sales growth in Mexico, which saw an upswing of 16%, while Johnnie Walker drove Scotch growth in the country.
Further growth was driven by a strong performance from Scotch followed by gin, vodka and rum.
“As category growth trends continue to normalise following Covid-19, winning quality market share remains a key focus,” Menezes added. “I am pleased to say that we gained or held share in 75% of total net sales value in our measured markets, demonstrating our strong commercial execution.
“We have delivered targeted price increases across all regions, enabled by our expertise in revenue growth management and supported by strong consumer demand for our brands. This, combined with our culture of everyday efficiency, has allowed us to increase our investments.
“We are investing in world-class brand building, digital and data capabilities and our ambitious 2030 sustainability plan to create a stronger and more resilient business for the long-term.
“As we look to the second half of fiscal 23, whilst the operating environment remains challenging, I remain confident in the resilience of our business and our ability to navigate volatility.
“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.”