Diageo in good spirits despite US slowdown as drinkers continue to splash
Guinness and Smirnoff maker Diageo has dodged a bad hangover from the economic crisis as drinkers splash out on expensive spirits.
The world’s largest spirits producer said its particularly expensive brands were behind 65% of its sales growth.
Sales in the six months to December 31 jumped 18.4% to £9.4billion as punters’ thirst for products such as Johnnie Walker whiskey, Bulleit bourbon and Don Julio tequila grew. holding.
Diageo sales increased 1% in Great Britain, driven by double-digit growth in Guinness2 sales. The world’s largest spirits producer said its particularly expensive brands were behind 65% of its sales growth
However, the shares fell almost 6% yesterday after warning of slowing growth in its critical North American market.
Consumers are increasingly keen to try premium drinks after experimenting with making cocktails during shutdowns.
Diageo has reaped the rewards. Sales rose 1% in Britain, driven by double-digit sales growth at Guinness.
Pub-goers shrugged off price hikes and were keen to support their post-pandemic residents. Events such as the World Cup and the Six Nations have also seen Britons order pints of Irish stout.
The operating environment “remains challenging” with inflationary pressures, chief executive Ivan Menezes said.
But he took a glass-half-full approach, saying: “I remain confident in the resilience of our business and our ability to weather volatility.”
Neil Shah, analyst at Edison Group, said: “The outlook is rosy for 2023 and beyond.
The glass remains more than half full for Diageo after a strong run against industry inflation.
But a 4% drop in sales volume in North America dragged the stock down.
Analysts said enthusiasm for more expensive products could wane, following a boom in lockdowns.
“Alcohol is supposed to be fairly recession-proof, but Diageo has raised concerns among investors,” said AJ Bell manager Russ Mould.
Fevertree falls flat
Fevertree shares lost steam after the tonic seller said energy bills added £2million to the cost of making glass bottles.
Its shares fell 8.8% despite global sales rising 11% to £344.3m last year. Its UK market fell 2%.
Although energy bills were “significantly” down, prices were “at least three times higher than 2021 levels”, he said.
Boss Tim Warrillow expects 2023 earnings to be at the same level as 2022.
“When 80% of sales are bottled in glass, fluctuating energy prices are bound to have a significant impact,” said Aarin Chiekrie, analyst at Hargreaves Lansdown.