Diageo records 4% GB sales slump as global profit halves

By Stuart Stone

- Last updated on GMT

Year of two halves: 'after good, consistent performance in the first half of fiscal 20, the outbreak of Covid-19 presented significant challenges for our business,' Diageo chief executive Ivan Menezes said
Year of two halves: 'after good, consistent performance in the first half of fiscal 20, the outbreak of Covid-19 presented significant challenges for our business,' Diageo chief executive Ivan Menezes said

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Beverage behemoth Diageo recorded a 4% drop in net sales in Great Britain as the company saw its global operating profit cut by 47.1% by the Covid-19 pandemic.

Diageo GB’s latest full year results revealed growth during the first half of the year was offset by the impact of on-trade closures as overall net sales for the 12 months to 30 June 2020 slumped by 4%.

According to managing director, Dayalan Nayager, the impact of pub and bar closures was further negated by the cancellation of sporting and cultural events, despite increased off-sales after the enforced on-trade closure from 20 March. 

“Our solid first half results were offset by the impact of on-trade closures from March, despite an increase in off-trade sales,” he said. 

“The impact was further amplified by the cancellation of significant sporting and cultural events, such as the Guinness Six Nations Rugby Championship matches.”

Nayager added that continued growth in rum and liqueurs was offset by declines in beer, scotch and vodka sales. 

“In beer, Guinness was impacted by on-trade closures and we took the decision to support customers and maintain product quality through a keg return scheme in Great Britain,” he said.

As previously reported by The Morning Advertiser (MA)​, global drinks supplier Diageo created a £1m fund to help operators​ during the coronavirus pandemic within days of the enforced closure of pubs and bars being announced on 20 March, as well the launch of a new information line for the independent, licensed business owners.

What’s more, on top of pledging more than 10m bottles of hand sanitiser to support frontline health care workers across 20 countries, Diageo topped up Britain’s on-trade with nearly £30m in financial support​ via its “Raising the Bar” programme. 

Continental drift

When compared net sales figures across the rest of Europe, Diageo GB appeared to weather the Covid-19 pandemic better than the vast majority of continental counterparts.

According to Diageo’s latest results statement, net sales across Continental Europe declined by 15% – with Central European net sales down by 9%, Iberia’s net sales down 22% and trading in its “Mediterranean hub” down by 26%.However northern Europe net sales only declined by 1%.

These figures come as global intelligence platform Streetbees found that Brits have increased their drinking more than any other country since the start of the pandemic with 68% increasing their alcohol consumption and only 24% drinking less.

This compares to only 29% of Italians drinking more during lockdown, while 50% and 61% of French and German respondents respectively claimed to have increased their alcohol intake during the pandemic. 

Year of two halves

The sales slump across Europe comes as the FTSE 100 drinks group behind Johnnie Walker and Guinness revealed a net sales drop of 8.7% from £12.9bn to £11.8bn globally while its reported operating profit was slashed by 47.1% to £2.1bn driven mainly by “exceptional operating items” and organic net sales.

As previously reported by The​ MA​, the drinksmaker previously forecast the ongoing pandemic could hit Diageo net sales ‘by up to £325m’.

"Fiscal 20 was a year of two halves: after good, consistent performance in the first half, the outbreak of Covid-19 presented significant challenges for our business, impacting the full year performance,” Diageo chief executive Ivan Menezes said of the figures.

“Through these challenging times we have acted quickly to protect our people and our business, and to support our customers, partners and communities.”

Menezes, however, added the actions taken to strengthen Diageo over the last six years provide “a solid foundation” to respond to the impact of the Covid-19 pandemic. “We are now a more agile, efficient and effective business,” he said.

“We have taken decisive action through the second half of fiscal 20, tightly managing our costs, reducing discretionary expenditure and reallocating resources across the group. 

“We are further enhancing our data analytics and technology tools to rapidly respond to local consumer and customer shifts triggered by the pandemic. We have strengthened liquidity, giving us flexibility to continue to invest effectively in the business for the long term.

“While the trajectory of the recovery is uncertain, with volatility expected to continue into fiscal 21, I am confident in our strategy, the resilience of our business and am very proud of the way our people have responded. We are well-positioned to emerge stronger."

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