Diageo 'super pleased' at lifting of US whisky tariff as locked-down drinkers boost sales
Johnnie Walker and Haig Club owner Diageo has reported strong annual sales, provided a robust outlook and raised a glass to the suspension of Scotch whisky tariffs in the US.
Net sales rose 8.3 per cent to £12.7 billion in the year to the end of June after factoring in the adverse impact of foreign exchange movements.
North America was a standout performer with organic growth of 20.2 per cent helped by “resilient consumer demand” and the replenishment of stock levels by distributors and retailers.
Ewan Andrew, president of global supply chain and procurement, highlighted double-digit growth in Scotch sales and said he was “super pleased” to see the US tariff dispute move towards a resolution.
He said the group, which is Scotland’s biggest whisky producer by volume and also owns Bell’s, had adapted to global lockdowns and restrictions by “understanding consumer needs”, upping “premiumisation” efforts and accelerating e-commerce growth.
Andrew praised the efforts of Diageo’s staff in responding to the pandemic and said hundreds of Scottish venues had benefited from a $100 million (£72m) global on-trade recovery fund, which has reached more than 35,000 outlets in 11 countries.
The latest results showed that reported operating profit was up 74.6 per cent to £3.7bn. Organic operating profit growth came in at 17.7 per cent, following a decline the year before, with growth reported in all regions except Europe and Turkey.
The firm said UK spirit sales grew 16 per cent as shoppers bought more whisky, Baileys, vodka and gin, with boosts from new product lines such as Gordon’s Sicilian Lemon and Captain Morgan Tiki rum.
However, the Guinness maker noted that beer sales fell due to the “significant impact” of enforced hospitality closures in the UK.
Chief executive Ivan Menezes said: “These results demonstrate the strength and relevance of our brands and the extraordinary efforts of our talented people.
“While our business has recovered strongly in fiscal 2021… we expect near-term volatility in some markets. However, I remain optimistic about the growth prospects for our industry, with spirits continuing to gain share of total beverage alcohol globally and premiumisation trends remaining strong.
“I believe Diageo is very well positioned to capture these exciting opportunities to drive long-term sustainable growth and shareholder value.”
Sophie Lund-Yates, senior equity analyst at financial services group Hargreaves Lansdown, said: “As the maker of Smirnoff, Guinness and Gordon’s it comes as no surprise that the shuttering of bars and night clubs left Diageo with a nasty hangover of problems.
“However, the strength of the group’s brands means it was able to recoup some of its losses through a huge increase in supermarket trade in some key markets, and it’s come out of the pandemic in remarkably resilient shape. It’s now poised to make the most of the re-opening of Europe’s bar and nightclub scene.
“Something to keep in mind is the volume of footfall in bars and nightclubs. There’s certainly excitement about re-opening, we’ve all seen the early queues, but there’s also a have-fun-at-home sentiment that’s been bred by lockdowns.
“It’s possible this could see a permanent reduction in the number of feet on dancefloors as things get back to normal, which could see the likes of Diageo face a headwind.”