Diageo, maker of Johnnie Walker, beats first-half sales estimates
DiageoThe world’s largest spirits maker, beat first-half sales forecasts on Thursday as it hiked prices and more people drank premium spirits.
The London-based company, which makes Tanqueray gin, Captain Morgan rum and Ketel One vodka, said net sales rose 9.4% in the six months to December 31, beating analysts’ forecasts. an increase of 7.9%.
The growth reflected organic volume growth of 1.8%, indicating price growth of 7.6 percentage points. Organic operating profit increased by 10%.
“Every region of the world has seen growth. The high end of our portfolio, the most expensive 28%, the most expensive products, has seen double-digit growth in every region of the world,” said the managing director. Ivan Menezes at CNBC’s “Squawk Box Europe.”
“So the fundamentals of our consumer base are strong. People are enjoying spirits more than ever and drinking better, not more.”
The spirits market has held up well amid a global cost-of-living crisis, which has otherwise hit volumes at other consumer goods companies as people continue to buy what they see as occasional treats for themselves, even if they turn to less expensive food brands.
Diageo’s “premium-plus” brands – which are more expensive than brands such as Smirnoff vodka but under around 50 pounds ($61.92), drove 65% of its organic net sales growth, a said the company.
“If you look at the consumer, the consumer is very savvy,” Menezes told CNBC. “There are pressures on the cost of living, but the consumer decides where they want to save and where they want to indulge. And we, thankfully, are playing in an affordable luxury category.”
Since the pandemic, Diageo has also benefited from people buying more expensive types of alcohol while staying at home under lockdown. The company and its competitors have invested heavily in marketing and improving their products to capitalize on new demand, focusing on premium brands such as Bulleit Bourbon and Don Julio tequila.
The company, which said people were mainly drinking more tequila, Scotch and Guinness, added that it would return up to £500m to shareholders – on top of its existing buyout pledge – this financial year. It raised its interim dividend by 5% to 30.83 pence per share.
Diageo also said it was “confident” Chinese consumers would “come back” as Covid-19 infections plummet there.
— CNBC’s Jenni Reid contributed to this report.
Diageo, maker of Johnnie Walker, beats first-half sales estimates
