At-home cocktail-quaffing lifts sales at Diageo as drinks giant ups dividend

Locked-down consumers drinking spirits in increasing numbers has helped propel drinks giant Diageo to better-than-expected results.

The FTSE 100 firm’s net organic sales were up 1% in the six months to December 31 despite lockdowns, with spirits sales up 15% in the UK, and sales in North America - Diageo’s largest market - up 12.3%.  Analysts at RBC Capital Markets labelled this US performance “extraordinary”. 

Revenues in the US were fuelled by increased demand for premium tequila and the firm’s Bulleit bourbon in particular.  Sales of the firm’s tequilas were up 80%  in the period, with its Casamigos brand - bought for a reported $700 million from George Clooney in 2017 - seeing a 139% sales bump in the half.

Chief financial officer, Kathy Mikells, put Casamigos’ sales growth down to the drink’s 100% agave base tuning into continued wellness focus, the “ongoing trend” towards the “super premium space” in home drinking, and cocktail options for tequila continuing to evolve.

The firm said “strong momentum in the off-trade more than offset declines due to on- trade restrictions and closures” in the UK in the period. UK managing director, Dayalan Nayager, told the Standard that he believes the consumer shift to home-drinking is here to stay - at least to some extent.

He said: “There’s definitely going to be some habits that are formed that will stay… I do think you will get people that have been buying Guinness and drinking it at home, that that penetration and increase will stay."

The company -  which is also behind brands including Guinness, Johnnie Walker, Tanqueray and Smirnoff –  said that net sales fell 4.5% to £6.9 billion in the period, with reported operating profit  down 8.3% to £2.2 billion “driven by unfavourable exchange and a decline in organic operating profit”. 

Mikells said the firm delivered “a strong performance in what was a challenging operating environment”. “These results are ahead of our expectations at the start of the fiscal year, and show strong sequential improvement across all of our regions versus the second half of fiscal 20," she said.