Gin and tequila popularity helps Diageo post global sales rise

Diageo posted strong growth in the first half of its fiscal year with sales increasing in all of its regions and its gin and tequila brands performing particularly well.

For the six months to 31 December 2017, net sales rose by 1.7% to reach £6.53 billion and operating profit increased by 6.1% to £2.19 billion.

Growth was strongest in its Latin America and Asia Pacific regions, which both saw net sales rise by 7%. The company’s key rum brands posted double-digit growth in Latin America and Johnnie Walker is growing in popularity in Brazil, Mexico and Colombia.

Its North America region delivered net sales growth of 2%, with US Spirits growing 3%. However, vodka sales were down 8% due to a poor performance of Smirnoff, Cîroc and Ketel One. Don Julio tequila, which Diageo bought in 2014, saw sales increase by 39%.

Growth was broad across all key categories in Europe, but primarily driven by gin, where Tanqueray gained share in a growing category and Gordon’s benefited from the launch of its Pink variant. Scotch net sales were up 2% led by growth in Russia. Meanwhile, sales of Captain Morgan grow by double digits.

Diageo CEO Ivan Menezes

Diageo CEO Ivan Menezes said: “These results demonstrate continued positive momentum from the consistent and rigorous execution of our strategy. We have delivered broad based improvement in both organic volume and net sales growth. We have increased investment behind our brands and expanded organic operating margin through our sustained focus on driving efficiency and effectiveness across the business.

“By consistently delivering on our six strategic priorities, Diageo continues to get stronger: we have better consumer insight through superior analytics, improved execution on brand and commercial plans and have embedded everyday efficiency across the business through our productivity initiatives. This has enabled continued growth, improved agility, and consistent cash flow generation.

“Our financial performance expectations for this year remain unchanged. We are confident in our ability to deliver consistent mid-single digit top line growth and 175bps of organic operating margin improvement in the three years ending 30 June 2019.”

Last year Diageo said it expects to deliver £500 million in savings by the end of 2019, along with a considerable improvement in its organic margins. It has been reinvesting some of the savings produced through cost-cutting initiatives into advertising, particularly in the US.