Maker of Guinness, Johnnie Walker, Smirnoff Vodka and other alcoholic beverages, Diageo has recorded a 16 percent rise in sales in the second half (H2) of 2021, with earnings totaling £8 billion.
The sales of the beverages soared in the last six months of 2021, thanks to the reopening of bars, pubs and restaurants across countries easing COVID-19 restrictions.
It should be recalled that many during the lockdown in Europe, North America and other parts of the world stocked up liquor in their homes. This, however, did not help sales of alcoholic beverages due to the closure of bars, restaurants and other entertainment services.
Diageo in the H2 of 2021, noted that it witnessed a recovery in its ‘on-trade’ business, which refers to sales to hotels and bars and restaurants. This is because these relaxation centres had to restock and buy more than the previous year.
The company also continued to receive high demands in its ‘off-trade business’ – or sales to supermarkets and food retailers.
According to the liquor company, sales of its premium alcohol, which include its scotch, tequila and beer, brought in more than half of the percentage of its H2 revenue, as the ‘pandemic trend for finer booze’ continued.
Diageo products sales in Britain alone, during the last six months rose to 19 percent, with Guinness particularly strong, up more than 30 percent compared to the second half of 2020.
The London-based company further noted that all its drink categories recorded growth, with its tequila, Don Julio and Casamigos sales rising 56 percent globally. These brands are enjoying rising popularity, Diageo stated. Its Whiskey sales also witnessed a 27 percent rise, including a 31 percent rise for Johnnie Walker.
Although Diageo recorded high sales in more than 200 brands it owns in 180 countries, its gin products appear to have fallen out of public favour, with sales dipping in the last six months. Some of its popular gin brands include Gordon’s Gin, Tanqueray gin, Captain Morgan rum, Baileys and Talisker whisky.
The spirits sales were however strong in Britain, rising 13 percent thanks to booming demand for vodka, in which sales shot up by 21 percent, driven mostly by Smirnoff.
Despite the boost in sales, Diageo has not been immune to rising inflation in all aspects of its business, due to the surge in fees from shipping to acquiring raw materials and higher energy bills.
According to the liquor company’s finance chief, Lavanya Chandrashekar said that the inflation has led to price rises in some categories.
“We don’t do pricing action across the board. We have taken price (rises) in tequila in the US by 4.5 per cent.” She also said the company has taken some price in emerging markets such as Nigeria and Turkey. “we’ve taken several rounds of pricing in these markets. It’s really on a case-by-base basis and it is done selectively in a very disciplined manner,” Chandrashekar added.
With its brands having differing range in prices, Diageo is well equipped to weather these price pressures, as customers who choose to go for an affordable liquor will still likely opt for an alternative Diageo product.
“Cost inflation has been the subject of much debate in corporate boardrooms, but Diageo benefits from the nature of the sector in which it operates. Its ability to pass on price increases, as well as ongoing productivity savings, has more than offset such inflation, with its move towards “premiumisation” providing additional insurance,” Head of Markets at Interactive Investor, Richard Hunter explained.
