When Other Companies See Recession Diago, And Other Luxury Alcohol Brands Explode!
Diageo sales jump as drinkers choose luxury spirits
Sales surged at Johnnie Walker maker Diageo after drinkers celebrated the easing of lockdown restrictions by splashing out on high-end spirits. Shares in the company, which also owns major brands including Guinness and Pimm’s, ticked higher on Thursday morning.
Diageo revealed net sales grew by 21.4% to £15.5 billion over the year to June 30, compared with the previous year. The group said just over 11% of this growth was due to higher prices and customers choosing to buy more expensive drinks.
Further buoyed by the continued recovery of pubs, bars, and restaurants – known as the on-trade – after easing pandemic restrictions. As a result, Diageo’s operating profit increased by 18.2% to £4.4 billion for the year, towards the top of market forecasts.
Chief executive Ivan Menezes said: “In a year of significant global supply chain disruption, our double-digit volume growth demonstrates our teams’ tremendous agility and resourcefulness. “Our net sales growth was across categories.
“We benefitted from the on-trade recovery, continued global premiumization trends, with our super-premium-plus brands up 31%, and from price increases across our regions.”
The group’s European operation witnessed a 26% jump in sales, with sales across Great Britain up 20% for the year. Beer sales were strong as the reopening of pubs helped drive a 52% jump in British Guinness sales.
It also highlighted a 12% increase in spirits sales in Britain, driven by rises across vodka, rum, Baileys, and scotch. However, it highlighted a “decline” in gin after the recent boom in demand appeared to stall.
The world’s largest spirits maker, which also makes Tanqueray gin, Captain Morgan’s rum, and Ketel One vodka, said net sales jumped 21.4% to 15.5 billion pounds ($18.9 billion) in the year to June 30, beating analyst forecasts for a 16.1% rise.
Diageo has benefited since the start of the pandemic from drinkers trading up to more expensive types of alcohol, investing along the way in its premium brands such as Bulleit Bourbon and Don Julio tequila.
“Consumers are choosing to drink better, and that’s leading to the premiumization of the category,” Diageo’s head of finance, Lavanya Chandrashekar, said.
The company said its high-end brands contributed 57% of reported net sales.
Diageo said it was able to raise prices to “more than offset” its cost inflation of roughly 7-8% since the start of Russia’s invasion of Ukraine. Diageo said that cost inflation is not expected to abate this financial year.
This report correlates with a boom in hiring at Terebelo Distillery, as we will report on Monday next week.