Drinks giant Diageo saw its first-half sales climb 15.8% to £8bn, benefitting from continued high demand for premium spirits for home use and on-trade venues increasing orders as Covid restrictions eased.
The maker of Johnnie Walker whisky, Tanqueray gin, and Guinness saw its operating profit increase by 22.5% to £2.7bn in the six months to 31 December, with its operating margin up by 190 basis points. Diageo stated that this was primarily driven by a recovery in gross margin and leverage on operating costs, while increasing marketing investment.
The group added that supply productivity savings and price increases more than offset the impact of cost inflation that is hitting manufacturers across the food & drink industry.
The world’s largest spirits maker has benefited from shoppers stocking up on alcohol at home during the pandemic, often trading up to more expensive types of alcohol. Sales of premium products made up 56% of net sales during the period and drove 74% of organic net sales growth.
Meanwhile, the easing of lockdowns in Europe and North America has meant pubs, bars and restaurants are buying more than the previous year. Diageo’s organic net sales grew 13% in North America and were up 27% in Europe. The Latin America and Caribbean region saw a 45% jump, whilst the Asia Pacific grew 13%.
Shares in Diageo have repeatedly touched record highs since the company said in November that it expects organic net sales growth to be between 5% and 7% for its 2023-2025 financial years, against 4% to 6% growth over 2017-2019. Its share price rose again this morning on the positive update.
Ivan Menezes, the group’s Chief Executive, said: “I am very pleased with our financial results, which build on our growth momentum in fiscal 21. We delivered strong organic net sales growth across all regions and operating margin expansion.
“In the off-trade channel, where consumer demand has remained resilient, we have gained or held market share across the majority of our measured markets. We also benefitted from the continued recovery of the on-trade channel, particularly in Europe and North America.
“Strong sales volume growth and continued premiumisation drove an improvement in organic operating margin during the half. This was achieved while increasing our investment in marketing to gain share and support innovation, particularly in North America and Greater China. In addition, our focus on revenue growth management and productivity savings are helping to mitigate the impact of cost inflation.”
