Diageo has reported a 4.2% rise in net sales in its half-year results driven by strong performance of its tequila brands and continued growth in Greater China.
For the six months to 31 December 2019, the spirits company posted net sales of £7.2 billion. Operating profit increased by 0.5% to £2.4 billion, however its half year results in 2018 saw a surge of 11%.
Diageo’s net sales of tequila grew 31% driven by strong double-digit growth of Don Julio and Casamigos in US Spirits and Don Julio in Latin America and Caribbean.
Vodka, which represents 11% of Diageo’s net sales, declined by 1% driven by a 5% drop in North America. Vodka performance was driven by Smirnoff but offset by a softening of 19 Ketel One and continued declines in Cîroc vodka.
North America, Diageo’s largest segment, delivered a 6% increase in net sales with growth across all three key markets. Its tequila net sales grew strongly at 35%. Greater China grew 24% driven by strong performance in both Chinese white spirits and scotch.
Despite its global giants representing 41% of Diageo’s net sales, these grew only by 1%. All brands witnessed growth except for Johnnie Walker which was down 4%. The scotch whisky witnessed declines across all regions lapping last year’s strong performance of “White Walker by Johnnie Walker”, except Africa which was up double digits.
Meanwhile, its local stars’ net sales grew 8%, thanks to strong growth of Crown Royal in US Spirits, Chinese white spirits in Asia Pacific and Buchanan’s in Latin America and Caribbean.
Net sales for Diageo Beer Company USA rose by 11% with continued strong performance of ready to drink driven by good growth across the Smirnoff RTD range.
Diageo continued to witness growth in its gin brands at 7%. Both Tanqueray and Gordon’s grew across their core brand and innovation variants, despite lapping a strong prior year.
Baileys grew 8% with performance supported by Baileys Red Velvet innovation, and a continued focus on reminding consumers that Baileys is an indulgent treat year-round.
Diageo CEO Ivan Menezes said: “Diageo has delivered another good, consistent set of results in the first half, with broad based organic net sales growth across regions and categories. We have continued to increase investment behind marketing and growth initiatives, while expanding organic operating margins.
“For the full year, we therefore expect organic net sales growth to be towards the lower end of our 4 to 6% mid-term guidance range. We continue to expect organic operating profit to grow roughly one percentage point ahead of organic net sales.”
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