Drinks giant Diageo has reported net sales up 15% to £12.1bn ($15.8bn) and operating profit ahead by 25% to £3.6bn ($4.7bn) in its fiscal year ended 30 June 2017.

 

The company said this impressive result reflected both ‘favourable exchange and accelerated organic growth, while all regions are said to have contributed to the ‘broad based organic net sales growth’ which rose 4.3%. In addition, organic operating profit was reported up at 5.6%.

 

Commenting on the results, Diageo CEO Ivan Menezes said: “We delivered a strong set of results including broad based improvement in organic net sales and operating profit.

 

‘CONSISTENT STRONG PERFORMANCE…’

“Our performance demonstrates the effective delivery of our strategy through disciplined execution of our six priorities put in place four years ago. We have delivered consistent strong performance improvement across all regions and I am pleased with progress in our focus areas of US Spirits, Scotch and India.”

 

These results have been well received by the city, along with Diageo’s stated intention to launch a share buy-back exercise alongside its new drive on tightening costs.

 

Looking at the company’s ‘global giant brands’ Diageo said all of these grew ’with the exception of Guinness’ which remained flat and Smirnoff which fell by 1%.

 

 

In its brand performance précis report, Diageo attributed the following comments to these leading brands:

 

• Johnnie Walker net sales were up 6% with growth in all regions. Latin America and Caribbean and Europe were the largest contributors with 11% and 9% growth, respectively. North America was up 6%, accelerating growth in the second half. In Asia Pacific, net sales grew 1%, with growth driven by South East Asia, China and India partially offset by Travel Retail Asia and Middle East. Reserve variants grew 6% driven by Johnnie Walker Gold Label Reserve and Johnnie Walker Green Label.

 

• Smirnoff net sales were down 1%. Declines in US Spirits, Europe and Latin America and Caribbean were partly offset by Asia Pacific up 1%, and Africa growth up 22% driven by the strong performance of Smirnoff 1818 in South Africa. The decline in Europe was driven by Great Britain, Benelux and France performance, partly offset by Iberia up 16% and Ireland up 9%.

 

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  Diageo Portfolio performance 2017 – click to expand. Source: Diageo.

  Baileys net sales grew 5% across all regions driven by 6% growth in its biggest market, Europe, following an exceptional on-trade execution. Latin America and Caribbean contributed with double digit growth behind Mexico Mother´s Day shopper platform and North America contributed with brand innovations.

 

CORE BRANDS UNDERPIN RESULTS

• Captain Morgan net sales grew 6% across all regions, with a strong performance in Europe driven by Europe Partner Markets, France and Great Britain. In US Spirits net sales grew 4% and gained share, supported by innovation.

 

• Tanqueray net sales grew 9% across all regions except for North America. Europe led the growth with strong double digit growth driven by Great Britain, Italy and Germany, Austria and Switzerland.

 

• Guinness net sales were flat. Africa declined 5% largely driven by the shift to value beer in Kenya and Nigeria partially offset by growth in Europe and Africa Regional Markets. Guinness in Europe grew 2% driven by expansion of distribution in Europe Partner Markets supported by media investment and the success of Hop House 13 Lager in Great Britain and Ireland.

 

‘LOCAL STAR BRANDS’ GREW BY 9%

At the same time, Diageo reported that its ‘Local Star’ brands represented 20% of net sales and grew 9%. These were driven by Crown Royal in North America growing 12%, Buchanan’s up 16% and double-digit growth in Chinese white spirits.

 

The company added: “Solid growth in Yenì Raki in Turkey and McDowell’s more than offset the declines in Windsor in Korea. Black & White growth of 16% was driven by Latin America and Caribbean and Asia Pacific.

 

“Reserve brands represent 16% of net sales and grew 7%, across all regions. Chinese white spirits and strong performance in Don Julio growth in US Spirits and Mexico were partly offset by Cîroc and Ketel One vodka declines in US Spirits.

 

“Scotch reserve brands grew 4% with Johnnie Walker driving the growth. Bulleit continued its strong growth with net sales up 24%. Tanqueray No. TEN grew strong double digit, up 25%. Malts up 2%, was driven by Lagavulin in North America and The Singleton in Asia Pacific and North America.”

 

ASIA STILL DIAGEO’S BIGGEST TR REGION…

Looking at the regions, Diageo said that Asia represented Diageo’s largest travel retail region, followed by Europe, Russia and Turkey and Latin America and North America, although it mentioned no volume figures.

 

These would have been meaningless anyway following a reorganisation in the geographical reporting surrounding its travel retail regions over the last year.

 

This saw the geographical regions and the results of the Lebanon and other Middle Eastern and North African countries – formerly reported in both the Asia Pacific and Africa geographical regions – reallocated under the reporting lines within the Europe, Russian and Turkish regions.

 

SOUTH KOREAN DUTY FREE BUSINESS DOWN…

Within its limited references to its global travel retail business, it was no surprise that Diageo reported a continuing contraction in its duty free and travel business in South Korea, with the company adding: “Travel Retail Asia and Middle East continued to decline net sales at 13% with lower spend by travellers and currency volatility impacting performance.”

 

The company added: “The business in India grew net sales by 2%, largely driven by IMFL whisky and Scotch, despite the impact of demonetisation and the Supreme Court ruling banning sales in certain outlets near state highways.

 

“South East Asia net sales grew 3% and Australia net sales also grew 3%, driven by Scotch and ready-to-drink innovation.”