Diageo has posted full-year profits slightly ahead of expectations after price rises and robust sales of its more expensive brands offset lower volumes.
The world’s largest spirits maker saw its organic net sales rise 6.5% in the year to 30 June, after the at-home cocktail-making trend established during the pandemic led to people buying more premium lines in bars and restaurants. Diageo revealed that its most expensive brands accounted for 57% of its overall organic growth.
Whilst the sales increase reflected gains of 7.3 percentage points from higher prices and a more premium mix, organic volumes fell 0.8% amid reduced demand from some cash-strapped shoppers.
Organic operating profit grew 7.0% with margin expanding by 15bps, supported by cost management. The company noted that price increases more than offset the absolute cost inflation impact on gross margin.
Looking ahead, Debra Crew, who recently took over the CEO role after the sudden death of long-time boss Ivan Menezes, said: “I expect operating environment challenges to persist, with continued cost pressure and ongoing geopolitical and macroeconomic uncertainty.
“This requires us to move with greater speed and agility. My near-term opportunities to drive the business focus on bolder and faster innovation, stepping up operational excellence to meet consumers’ evolving tastes and preferences while driving scotch, tequila and Guinness.”
NAM Implications:
- The New Norm raises the issue of the increasing consumer divide:
- Between those that like and can afford the increased prices
- And those that want to, but cannot afford to buy…
- However, as per the Circana report (see yesterday’s NamNews: Economic Pressures Impact FMCG Brand Innovation)…
- …Diageo are using innovation to drive the business forward.
