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Diageo Boosted By U.S. Spirits Sales, As Pressure Rises From Stronger Pound

January 25, 2018

Diageo enjoyed solid first half results across all global regions, reporting total organic net sales growth of 4.2% to £6.5 billion ($9.3b) and operating profit up 6.7% to £2.19 billion ($3.1b) for the six months through December 31. The group’s North American unit posted an organic net sales gain of 2%, bolstered primarily by solid growth within its U.S. spirits portfolio, which collectively grew sales 3%.

Whiskies led the way in the six-month period, with U.S. sales of Crown Royal increasing 4%, driven by the brand’s Deluxe and Regal Apple offshoots. Scotch also made a strong showing, as Johnnie Walker—which has benefited from investment in its “Keep Walking America” campaign—carved out a 5% sales gain and Buchanan’s rose 2%. U.S. vodka sales, meanwhile, remained sluggish, weighed down primarily by Cîroc and Ketel One, which fell 12% and 13%, respectively, as portfoliomate Smirnoff also remained soft. Tequila brand Don Julio, however, continued its standout performance, with U.S. sales up 39%.

Despite the positive performance, Diageo’s outlook is tempered by a negative currency exchange impact from the strengthening pound. As a result, the company warned that sales for the year ending June 30 would be adversely affected, with net sales expected to be reduced by around £460 million ($658m) and operating profit by about £60 million ($86m). —Christina Jelski

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