Premium brands drive double-digit growth for Diageo

Diageo has reported net sales of £9.4 billion, an increase of 18.4%, in its 2023 interim results for the half year ended 31 December 2022.

Organic net sales grew 9.4%, with growth in all regions, underpinned by favourable industry trends of premiumisation. Growth was delivered across most categories, primarily scotch, tequila and beer, with premium-plus brands contributing 57% of reported net sales and driving 65% of organic net sales growth.

“People are enjoying spirits more than ever and drinking better, not more,” Chief Executive Ivan Menezes told CNBC.

“If you look at the consumer, the consumer is very savvy. There are cost of living pressures, but the consumer is deciding where they want to save and where they want to treat themselves. And we, fortunately, play in an affordable luxury category.”

Among acquisitions by Diageo in the reporting period were Mr Black, a leading Australian premium-priced coffee liqueur, and Balcones Distilling, a Texas craft distiller and one of the leading producers of American single malt whisky.

Don Papa Rum

Diageo also announced an agreement to acquire Don Papa rum, a super-premium, dark rum from the Philippines.

Menezes said: “We have made a strong start to fiscal 23. Organic net sales grew 9%, with growth across all regions, organic volume grew 2%, and organic operating profit grew 10%. In a challenging cost environment, our organic operating margin increased 9 basis points whilst we also continued to invest for the future. Today, Diageo is 36% larger than it was prior to COVID-19, reflecting the strength of our diversified footprint and advantaged portfolio.

“Sales growth was supported by our continued focus on premiumising our portfolio, bolstered by strong global premiumisation trends, with our super-premium-plus brands growing organic net sales 12%. As category growth trends continue to normalise following COVID-19, winning quality market share remains a key focus. I am pleased to say that we gained or held share in 75% of total net sales value in our measured markets, demonstrating our strong commercial execution.

“We have delivered targeted price increases across all regions, enabled by our expertise in revenue growth management and supported by strong consumer demand for our brands. This, combined with our culture of everyday efficiency, has allowed us to increase our investments. We are investing in world-class brand building, digital and data capabilities and our ambitious 2030 sustainability plan to create a stronger and more resilient business for the long-term.

“As we look to the second half of fiscal 23, whilst the operating environment remains challenging, I remain confident in the resilience of our business and our ability to navigate volatility. We believe we are well-positioned to deliver our medium-term guidance of consistent organic net sales growth in the range of 5% to 7% and sustainable organic operating profit growth in the range of 6% to 9% for fiscal 23 to fiscal 25.”

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