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Diageo in good spirits despite slowdown in US as drinkers continue to splash
Guinness and Smirnoff maker Diageo dodged a nasty hangover from the economic crisis as drinkers splurged on expensive liquor.
The world’s largest spirits producer said its particularly expensive brands were responsible for 65 percent of its sales growth.
Sales in the six months to 31 December rose 18.4 per cent to £9.4 billion as gamblers’ hunger for products such as Johnnie Walker whisky, Bulleit bourbon and Don Julio tequila continued.
Diageo sales grew 1% in the UK, driven by ‘double-digit’ sales growth from Guinness2. The world’s largest spirits producer said its particularly expensive brands were responsible for 65% of its sales growth
However, shares plunged nearly 6 percent yesterday after it warned of a growth slowdown in its critical North American market.
Consumers are increasingly eager to try premium drinks after experimenting with making cocktails during the lockdown.
Diageo has reaped the benefits of this. Sales grew 1 percent in the UK, driven by double-digit sales growth from Guinness.
Pub-goers were hesitant about price hikes and eager to support their locals after the pandemic. At events such as the World Cup and Six Nations, the British also ordered pints of the Irish Stout.
The business environment “remains challenging” with inflationary pressures, according to CEO Ivan Menezes.
But he took the glass half full and said, “I remain confident in the resilience of our business and our ability to navigate volatility.”
Neil Shah, an analyst at Edison Group, said: “The outlook is bright for 2023 and beyond.
The glass remains more than half full for Diageo after strong results despite industry inflation.”
But a 4 percent drop in sales volumes in North America drove stock prices lower.
Analysts thought enthusiasm for more expensive products could wane after an explosion of lockdowns.
“Booze should be pretty recession proof, but Diageo raised some investor concerns,” said AJ Bell CEO Russ Mould.