Diageo celebrates growth in 2017 interim results

By Jo Gilbert

Published: 26 January, 2017

Spirits giant Diageo has reported a better than expected rise in sales helped by improvements in its US business and its Scotch portfolio.

After being plagued by les than favourable results over the past few years, chief executive Ivan Menezes welcomed improvement in both organic volume and top line growth.

Reported net sales (£6,421 million) and operating profit (£2,065 million) were up 14.5% and 28% respectively, reflecting an accelerated organic growth rate.

In Great Britain, Diageo GB continued to win share in both the on and the off-trade.

Net sales for the six months ended December 31, 2016, were broadly flat driven by changes in selling patterns across channels according to the company.

Diageo GB's results were buoyed by sales of Guinness brand, a healthy premium core portfolio performance, continued growth of the luxury reserve business and several successful Innovation initiatives.

Within the premium core portfolio, sales of Baileys were positive net sales up 2%, while

Captain Morgan became the biggest brand in the rum category in Great Britain, overtaking Bacardi in value share.

Tanqueray net sales grew 42% due to expanded distribution within the gin category and Smirnoff gained share in both the off-trade and on-trade.

Reserve brands experienced profitable solid growth, driven by scotch malts and Tanqueray No. TEN.

Ciroc has increased its share of vodka and share gains in Scotch whisky have been boosted through a focus on flavour led malts.

"Diageo is the undisputed leading distiller by volume in the world, thanks to the acquisition of UB Group's spirits operations, United Spirits, which almost doubled its volume share of global spirits to 10%," Jeremy Cunnington, senior alcoholic drinks analyst at Euromonitor, said.

"With limited volume growth prospects in mature Western markets, Diageo should look to drive value growth where possible. This should take the form of launching or developing more premium and super premium products, such as Cîroc, as well as by not discounting as heavily its core brands, instead using its portfolio of economy brands to fill the gap.

"While Diageo has been successful in developing its core brands in mature markets in which it is underdeveloped, such as Germany, with Smirnoff and Captain Morgan, it should also look to develop niche high-growth and high-margin areas, such as it is already doing in bourbon/other US whiskey, and in areas such as super premium gin, with boutique brands."

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