Diageo Posts Strong U.S. Growth In Fiscal First HalfJanuary 28, 2021
Solid gains in North America led Diageo to an organic sales increase of 1% to £6.9 billion ($9.4b) in its fiscal first half ended in December, despite ongoing challenges like on-premise restrictions and a depressed travel retail market. Organic operating profit was down 3.4% to £2.2 billion ($3b), as productivity gains were offset by cost of goods inflation.
“North America, our largest market, performed particularly strongly and ahead of our expectations,” said chief executive Ivan Menezes. “Consumer demand has been resilient and the spirits category continues to gain share of total beverage alcohol.” Diageo also cited “positive category mix and the replenishment of stock levels by distributors and retailers” as contributing to U.S. gains.
The company’s U.S. net sales jumped 15% for the first half. Its super-premium and luxury Tequila stable was a particularly strong performer, with net sales for the category up 80% in North America. Breaking that down, Don Julio leapt 56% and Casamigos was up 139%. Diageo also reported that Crown Royal was up 4%, propelled by the performance of its apple, peach, and vanilla flavors. Bulleit was up 17%, and Diageo’s Scotch portfolio grew by 6%, driven by gains in Johnnie Walker (11%) and Buchanan’s (+23%). The company’s Scotch blends grew enough to offset a 33% decline for its single malts, which the company attributed to the on-premise shutdowns. For its vodka brands, Cîroc’s net sales were up 17%, Smirnoff grew by 3%, and Ketel One was flat. Among other key brands, Captain Morgan enjoyed 9% growth and Baileys increased 12%.
Outside of the spirits category, Diageo Beer Company USA saw net sales rise 7%, driven by growth in Smirnoff’s RTDs. The overall FMB portfolio was up 26%, more than offsetting the 15% decline in the company’s beer stable, with Guinness hindered by on-trade closures.
“We expect ongoing volatility and disruption in the second half of the year, particularly in the on-trade channel, which will make performance more challenging,” Menezes noted, adding that Diageo’s “$100 million global commitment to support the recovery of the hospitality sector has already reached around 30,000 outlets in seven countries.”
While the company declined to provide forward-looking sales guidance due to the market uncertainty, it’s expecting “continued momentum in North America, augmented by a lapping of inventory reductions by distributors. The pace of recovery in other regions will be more closely aligned with the gradual reopening of the on-trade and the degree to which restrictions continue to be in place.”—Daniel Marsteller & Shane English
|Diageo—Top Five Brands in the U.S.1
(millions of 9-liter case depletions)
|2||Crown Royal||Canadian Whisky||6.9||7.6||10.0%|
|3||Captain Morgan||Virgin Islands Rum||5.5||5.6||1.0%|
|4||Ketel One||Imported Vodka||2.4||2.7||10.5%|
|5||Johnnie Walker||Scotch Whisky||1.9||1.9||2.0%|
|Total Top Five2||25.4||26.6||4.6%|
|1 Includes flavors.
2 Addition of columns may not agree due to rounding.
3 Based on unrounded data
Source: IMPACT DATABANK © 2021