Diageo profits jump to £4bn as gin boom drives UK sales

Spirits giant Diageo has posted a rise in profits for the year as the gin boom continued to drive sales growth in the UK.

The Gordon’s owner saw operating profits jump by 9% to £4 billion for the year to June 30.

The company said rising profits were driven by organic growth of its key brands following significant investment.

Sales for the year rose by 5.8% to £12.8 billion on the back of growth “across regions and categories” and successful new product innovation, the company said.

Diageo said sales remained strong in Europe, pushed higher by a particularly strong performance in the UK and Ireland, where it has continued to pump investment over recent years.

The company’s chief finance officer Kathryn Mikells said that the “gin phenomenon” has continued to drive sales globally, but particularly in continental Europe and the UK.

She said: “The growth of gin has been contagious across all areas and that has continued to accelerate as we have launched new products in the category.

“The category is growing but we have also strengthened our market share in gin, so we feel pretty good about the category going forward.”

Brands Tanqueray and Gordon’s both reported double-digit growth in Europe as they were boosted by new product releases, such as Gordon’s pink gin.

The spirits giant also hailed strong growth for Johnnie Walker, which saw sales rise by 7%, although in Europe Scotch sales were largely flat as this was offset by weaker sales of J&B.

Earlier this week, talks between Diageo and its Scottish union workers fell apart, increasing the likelihood of strikes at its whisky sites.

Members of the Unite and GMB unions, who make up more than half of Diageo’s 3,500 Scottish workforce, will ballot workers over strike action after rejecting an “insulting” 2.8% pay increase.

Ms Mikells said the firm holds itself as a “very good employer” and that it is committed to coming to agreement with frustrated employees.

In North America, Diageo’s largest market, net sales rose by 5% to £4.4 billion as it also saw profitability improve on the back of its sale of a portfolio of 19 spirit brands to Sazerac for 550 million US dollars (£440 million).

Ivan Menezes, chief executive of Diageo, said: “Diageo has delivered another year of strong performance.

“Organic volume and net sales growth was broad-based across regions and categories, with new product innovation being a strong contributor.

“These results reflect the steady progress we are making and as we look ahead we see attractive opportunities to deliver consistent growth and create shareholder value.”