Diageo has received a 15% boost from US spirit sales in its half-year results, helping offset declines in coronavirus-impacted markets.
The company’s overall net sales were down by 4.5% to £6.87 billion, compared to £7.2 billion at the same time last year. In the six months ended 31 December 2020, Diageo recorded organic growth of 1% despite significant impact from travel retail and on-trade restrictions amid the Covid-19 pandemic.
The owner of Gordon’s gin and Smirnoff vodka reported operating profit of £2.24 billion, representing an 8.3% decline. However, Diageo witnessed improvement in all regions compared to the second half of fiscal 2020, partially reflecting improved performance in the off-trade and the reopening of the on-trade in certain markets.
Diageo’s largest unit, North America, saw its organic net sales rise by 12.3% which helped offset declines in other regions. US spirit net sales increased 15% with growth across all categories: tequila grew 80%, Scotch went up by 6%, vodka 6%, Baileys 12% and Captain Morgan 9%.
Meanwhile, Diageo Beer Company USA recorded a 7% rise in net sales with strong growth in Smirnoff flavoured malt beverages, partially offset by a decline in Guinness.
Ivan Menezes, Diageo CEO, said: “North America, our largest market, performed particularly strongly and ahead of our expectations. Consumer demand has been resilient and the spirits category continues to gain share of total beverage alcohol.”
Europe and Turkey net sales were down by 10%, while Asia Pacific fell by 3% due to international travel and local market restrictions. Nevertheless, Greater China recorded a 15% net sales increase driven primarily by Chinese white spirits and Scotch, representing a significant improvement to its performance last year when the region was first impacted by Covid-19.
Africa sales were roughly flat, contributed by a 10% decline in South Africa partly due to alcohol bans in the country. Latin America and Caribbean net sales declined 1%.
During the half-year, the company also completed the acquisition of Aviation American Gin and Davos Brands as it aims to further premiumise its portfolio.
Menezes added: “We delivered a strong performance in a challenging operating environment, returning to top line organic sales growth during the half. We rapidly pivoted to the channels and occasions most relevant to consumers and invested behind new opportunities. This more than offset the impact of on-trade restrictions and the decline in travel retail.”
Diageo expects continued impact in the second half of fiscal 2021 from on-trade restrictions and disruption to travel retail.
© FoodBev Media Ltd 2020
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