Diageo outperforms with strong off-licence sales

Global drinks giant Diageo managed to preform better than expected as heavy falls in sales from pubs closures and fewer airport passengers were partially offset by supermarket and off-licence trade.

The company behind Johnnie Walker, Guinness and Baileys said net sales in the six months to the end of 2020 fell 4.5% to £6.9 billion, with pre-tax profits down 8.3% to £2.2 billion.

In the UK, net sales grew 2%, with sales in supermarkets and off-licences offsetting the fall from pub closures during long periods.

Beer sales were hardest hit – primarily driven by Guinness pumps not being pulled as pubs faced restrictions and lockdowns.

Bosses said the famous stout did however see a surge in off-licence sales, with cans of Guinness draft rising 24% during the period.

Spirits sold strongly, rising 15%, with ready-mixed cocktails and Baileys also popular – up 8% and 4% respectively; however, Scotch sales were down 10% in the UK and Ireland.

The company’s strongest performance during the final half of 2020 was seen in North America, where net sales rose 12%. US spirits sales were up 15% with tequila the strongest driver.

Diageo’s tequila sales in North America jumped 80%, with Don Julio and Casamigos particularly impressive.

Scotch was up 6%, with Johnnie Walker and Buchanan’s offsetting falls in malt whisky sales. Ciroc and Smirnoff vodka also saw growth of 6% and 17% respectively.

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Diageo investment plan

There was a less impressive performance in Europe and Turkey however, with the reduction in airport passengers hitting its significant travel division.

Johnnie Walker whisky is particularly popular among international visitors to Europe from Asia.

Sales in Diageo’s Travel Retail Europe division dropped 72% during the period, while pub, cafe and restaurant closures hit on-trade business.

Beer net sales in the region fell 34%, with Guinness raised as a significant factor, but there was growth of 15% in spirits.

Diageo finance director Kathy Mikells said off-licence sales saw strong growth across the globe.

She told the PA news agency: “We’ve been particularly strong in the United States, Australia, Brazil and France where we’re gaining very strongly.

“We’re seeing very strong share gains and performance in the off-trade, notwithstanding that we are being impacted by the restrictions that are on trade.”

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Ms Mikells added that customers are turning to trusted brands and premium products during the pandemic and looking for home comforts.

“People are really interested in the occasional treat and indulgence,” she said. “Baileys was up 12% in North America, and our apple pie Baileys exemplifies innovation to help support that brand.”

Diageo’s Great Britain boss, Dayalan Nayager, said customers here helped the company gain market share for Johnnie Walker, Bell’s, Bulleit, Haig Club, Singleton and Talisker.

“Innovation remained a key focus, with 43% of all spirits innovation in Great Britain coming from Diageo in the half,” he said.

“Gordon’s 0.0% hit the shelves in December, providing consumers with choice for different occasions, and we introduced Villa Ascenti Rosa in September as part of our super-premium gin offering.”