Tequila and gin boost Diageo full-year sales
Diageo has reported a 5.8% net sales increase to £12.9 billion (US$16bn) in its 2019 fiscal year, boosted by the double-digit growth of Tequila and gin.
For the year ending 30 June 2019, the Johnnie Walker owner’s operating profit hit £4bn (US$5bn), an increase of 9.5%.
Last year, Diageo approved a share buyback programme of up to £2bn (US$2.5bn). During the fiscal year, Diageo sold 19 of its non-priority brands to US drinks group Sazerac in a deal worth US$550 million. The sale provided proceeds of approximately £340m (US$424m), which was returned to shareholders through the programme.
Earlier this year, the board approved a further incremental share buyback programme of £660m, bringing the total scheme to up to £3bn for fiscal 2019. A further £4.5bn has been approved and will be returned to shareholders between fiscal 2020-2022.
“Diageo has delivered another year of strong performance,” said Diageo CEO Ivan Menezes. “Organic volume and net sales growth was broad-based across regions and categories, with new product innovation being a strong contributor.
“We expanded organic operating margin ahead of our guidance and increased investment behind our brands ahead of organic net sales growth.
“Our focus on quality sustainable growth is backed by a culture of everyday efficiency that enables us to invest smartly in marketing and growth initiatives while expanding margins.”
On an organic basis, all of Diageo’s regions experienced growth during the period. The only category to decline was rum, which dropped 2% due to Captain Morgan’s decline in the US.
Tequila and gin both witnessed double-digit increases, up 29% and 22%, respectively. Tanqueray and Gordon’s led the growth of gin, while Tequila was boosted by “strong” double-digit gains from Don Julio in the US, and Latin America and Canada, as well as Casamigos in the US.
Vodka returned to growth with a 2% net sales increase, boosted by Smirnoff and Ketel One, which partially offset a decline from Cîroc, which dropped 8%.
Scotch growth was driven by Johnnie Walker (7%), which benefitted from the “successful launch” of the Game of Thrones-themed White Walker by Johnnie Walker.
US whiskey grew 4%, driven by “good growth” from Bulleit Bourbon in the US. Canadian whisky was up by 6%, bolstered by Crown Royal’s performance in the US.
The company’s ‘local stars’ grew 6%, mainly driven by the “strong growth of Chinese spirits”.
In terms of regions, North America grew by 5% with growth across all three markets.
Europe and Turkey reported a 4% net sales growth, which Diageo said reflects “another year of consistent performance” in Europe (3%) while Turkey grew double digits.
Africa delivered a 7% net sales increase, with growth across East Africa, Africa regional markets and South Africa, partially offset by a decline in Nigeria.
Net sales in Latin America and Caribbean, and Asia Pacific were both up by 9%.
“These results reflect the steady progress we are making and as we look ahead we see attractive opportunities to deliver consistent growth and create shareholder value,” Menezes continued.
“In the medium term I expect Diageo to maintain organic net sales growth in the mid-single-digit range and to grow organic operating profit ahead of net sales in the range of 5%-7%.”