‘Gin boom’ continues to drive growth for Diageo

By Stuart Stone contact

- Last updated on GMT

Lifted spirits: drinks giant Diageo revealed that its net sales increased by 5.8% in the second half of 2018
Lifted spirits: drinks giant Diageo revealed that its net sales increased by 5.8% in the second half of 2018
Spirits maker Diageo, which owns brands Smirnoff, Guinness and Johnnie Walker, has revealed that continued growth in gin sales helped the drinks mogul achieve a 5.8% net sales increase in the second half of 2018.

In its interim results for the half year ending 31 December 2018, Diageo revealed its net sales had risen to £6.9bn, with the company’s latest operating profit of £2.4bn – an 11% increase.

Moreover, the drinks giant also revealed that all regions had contributed to broad-based organic net sales growth, which increased by 7.5%, with organic volume rising by 3.5%.

Discussing the results, chief executive Ivan Menezes summarised: “Diageo delivered broad-based volume and organic net sales growth across regions and categories. We continue to expand organic operating margins while increasing investment in our brands ahead of organic net sales growth.

“These results are further evidence of the changes we have made in Diageo to put the consumer at the heart of our business, to embed productivity and to act with agility to enable us to win sustainably.”

In November 2018, Diageo revealed that it had sold 19 of its spirit brands to privately owned US firm Sazerac for approximately £428m in order to focus on its premium spirits offer.

£660m share buyback unveiled

Menezes also revealed that the world’s biggest spirits maker will buy back more than £500,000 worth of share from investors.

“At £1.3bn, we delivered another period of strong free cash flow. As a result, the board approved an incremental share buyback of £660m, bringing the total programme up to £3bn for the year ending 30 June 2019.

“This half has benefited from some one-time and phasing gains in both organic net sales and operating profit, and therefore we expect to continue to deliver mid-single-digit organic net sales growth for the year and to expand operating margins in line with our previous guidance for the three years ending 30 June 2019.

“As we deploy our strategy, we remain focused on building the long-term health of our brands and ensuring we grow our business in a consistent and sustainable way.”

Sustained gin boom

Discussing the performance of its gin, beer, vodka and whisky categories over the last six months of its financial year, Dayalan Nayager, managing director of Diageo Great Britain, Ireland and France, explained that the continued popularity of gin, and sales of beer brands old and new, had driven growth.

“We’ve experienced a very strong half in Great Britain, with net sales up 14% and our key brands, including Guinness, Tanqueray, Gordon’s and Smirnoff, all performing well."

Diageo's latest results revealed that net gin sales in Europe increased by 28% in the second half of 2018, with volume rising by 25% over the same period. 

Nayager continued: “The gin category continues to boom. Tanqueray and Gordon’s remain firm favourites among consumers, with both brands delivering strong double-digit growth over the last six months.

“In beer, we are outperforming the category. Guinness delivered net sales growth of 6% and increased its market share, driven by a strong performance from Hop House 13 lager. In December, Guinness was announced as the new title sponsor and official beer of the Six Nations from 2019, reinforcing the Guinness brand’s position as one of rugby’s biggest supporters.

“Smirnoff returned to growth with net sales increasing 4% despite the category being in decline in Great Britain. It also cemented its position as the UK’s biggest spirits brand. Summer saw the launch of the Smirnoff Soda Smash, which encouraged consumers to put a modern twist on the classic vodka and soda.”

Game of Thrones​ partnership

Nayager also revealed that a partnership between the spirits giant and HBO series Game of Thrones​ had helped increase sales of flagship whisky brand Johnnie Walker.

“Johnnie Walker grew 6% partially driven by the launch of the limited-edition ‘White Walker by Johnnie Walker’, in collaboration with HBO and Game of Thrones​, which was released in Great Britain in October 2018,” he explained.

“The launch proved hugely popular, selling one bottle a minute on Amazon UK in the first 24 hours of it being available.”

Related topics: Spirits & Cocktails

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