Diageo brands include Smirnoff, Gordon's, Pimm's and Baileys
Anheuser-Busch and Diageo – the world’s largest and fourth largest alcohol companies – have both been given a lift this morning after reporting an increase in revenues.
Anheuser-Busch saw revenue grow 5% in the second quarter, driven by revenue management initiatives and the continued premiumisation of its brands. The world’s largest brewer, which makes nearly a quarter of the world’s beer, has also realised dramatic synergies after its $106 billion takeover of SABMiller.
Second-quarter revenue stood at $10.8 billion, while gross profit for the quarter was $6.58 billion with pre-tax earnings of $4.01 billion.
In Diageo’s fiscal full-year results, also released today, net sales grew 15% to £12.1 billion and operating profit was 25% higher at £3.6 billion.
The company said the increases reflected “favourable exchange and accelerated organic growth”. For the UK-based company, which has a firm footing in the spirits category, organic sales growth was boosted by strong performance in all regions and organic volume growth of 1.1%.
Shares in Diageo were up 6.6% following the results announcement; Anheuser-Busch was up 6.7%.
Diageo chief executive Ivan Menezes said: “We delivered a strong set of results including broad-based improvement in organic net sales and operating profit. Our performance demonstrates the effective delivery of our strategy through disciplined execution of our six priorities put in place four years ago. We have delivered consistent strong performance improvement across all regions and I am pleased with progress in our focus areas of US spirits, Scotch, and India.”
For Anheuser-Busch, revenue growth was underlined by improvements to its volumes, too. Total volume grew 1% to 115 million hectolitres, while own-beer volume was up by 2.1% to 105 million hectolitres. Good growth in Anheuser-Busch’s own-beer volume was achieved in South Africa, Mexico and Australia, while declines were recorded in the US, Brazil and Colombia.
Its three biggest brands continued to post good performance. Budweiser revenues were up 5.7% overall, with 11.7% growth in revenue outside the US. Stella Artois was up 6.6%, driven mainly by growth in Argentina and South Korea. And Corona had a solid quarter, with revenues growing 16.6% across-the-board and 26.2% outside of Mexico as a result of growth in the UK, Australia and China.
Nominal declines in some markets – both in terms of revenue and volume – were more than offset by AB’s performance in other areas.
And sustained efforts to premiumise the company’s brand portfolio also bore fruit, particularly in markets such as Western Europe and China.
Anheuser-Busch CEO Carlos Brito said: “Our growth accelerated in the second quarter. Our continued focus on driving premiumisation allows us to generate top-line growth in emerging as well as developed markets. Our global brands continued to deliver strong revenue growth with revenue up by 8.9% this quarter. Corona led the way, with global growth of 16.6% and 26.2% growth outside of Mexico.
Brito added: “The integration with SABMiller continues to go as planned, with additional synergy capture this quarter of $335 million coming primarily from all of our new markets. We are also well underway sharing best practices, with intellectual synergies driving a new approach to category growth.
“2017 has been off to a good start and we will continue to push ourselves to deliver good results throughout the balance of the year. While the second half of the year looks promising, our focus remains on growing the global beer category as well as generating top-line growth in a sustainable way to position ourselves for long term success.”
For Diageo, it was a year characterised by consistent strong performance, and delivery against its strategy for growth. The business continues to expect ‘mid-single digit organic net sales growth’ and improved margins by the year ending June 2019.
Diageo’s Menezes continued: “Our productivity work is delivering ahead of expectations, allowing us to reinvest in our brands, drive margin improvement and generate consistent strong cash flow. Through productivity we have embedded an everyday efficiency mind set in the business and with improved data and insight we are making faster, smarter decisions on investment choices.
“Diageo is a strong company today and we are confident in our ability to deliver sustainable growth. We are raising our productivity goal to £700 million with two thirds being reinvested in the business. We continue to expect mid-single digit top line growth, and we are raising our operating margin expansion objective to 175bps over the three years ending 30 June 2019.
“Following three years of consistently improving cash flow generation the Board has approved a share buy-back programme of up to £1.5 billion in full-year 2018.”
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