Diageo sales rise as UK drinkers indulge in spirits during pandemic

The company, which makes Gordon’s gin and Smirnoff vodka, revealed that net sales rose by 16% to £12.7 billion for the year to June.

Henry Saker-Clark
Thursday 29 July 2021 13:36
Diageo has enjoyed a jump in sales as drinkers have bought more spirits during the pandemic (Andrew Milligan/PA)
Diageo has enjoyed a jump in sales as drinkers have bought more spirits during the pandemic (Andrew Milligan/PA)

Guinness maker Diageo has cheered a leap in sales on the back of recovering consumer demand as its British business was boosted by strong retail spirit sales.

The company, which also makes Gordon’s gin and Smirnoff vodka, revealed that net sales rose by 16% to £12.7 billion for the year to June, surpassing analyst expectations.

It added that underlying operating profits jumped by 18% to £3.7 billion.

The group faced significant disruption over the year due to the pandemic with bars closing for large periods across many regions.

Diageo has seen a surge in profits on the back of increased spirits sales but beer sales slumped (Damien Eagers/PA)

Bosses warned that they still expect “near-term volatility” in some markets but they are broadly positive about the recovery of the sector.

The group’s annual performance was significantly driven by a strong recovery in North American as US bars and restaurants reopened, sparking a jump in tequila and scotch sales.

Chief executive Ivan Menezes said it was aided by sales growth for its Johnnie Walker and Buchanan scotch brands but also hailed the recent turnaround by the US over its tariff rules.

“Scotch levels have recovered to pre-pandemic levels and we’ve seen success in the emerging markets too,” he said.

“We were obviously very happy with the removal of tariffs, although that was specifically affecting single malts.

“We’ve also seen success with younger drinkers, who have been keen to buy scotch and particularly premium scotch.”

Net sales increased by a fifth in North America as it also hailed a 10% rise in beer sales.

Meanwhile, it was also buoyed by growth of around 20% in Africa, 30% in Latin America and the Caribbean, and 14% in its Asia Pacific area.

In its Europe and Turkey business, net sales grew by 4% as it was lifted by retail sales with strong supermarket sales largely offsetting the impact of hospitality closures.

Its British operation reported 7% sales growth on the back of “strong consumer demand” in retail while online sales were also lifted during the pandemic.

The firm said British spirit sales grew 16% as shoppers bought more scotch, Baileys vodka and gin, with boosts from new product line such as Gordon’s Sicilian Lemon and Captain Morgan Tiki rum.

However, beer sales slumped by 16% due to the “significant impact” of enforced hospitality closures in the UK.

Mr Menezes said: “We were well-positioned to successfully manage the challenges created by Covid-19, we have responded quickly to changing consumer trends and we have emerged stronger.

“While our business has recovered strongly in fiscal 2021, with net sales growth on a constant basis ahead of fiscal 2019 in three of our five regions, 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.”

Elsewhere in the drinks sector, the world’s largest brewer, AB InBev, revealed a 27.6% increase in total revenues for the past three months.

The Budweiser owner delivered a 1.5 billion US dollar (£1 billion) operating profit as it continued to be impacted by pandemic disruption.

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