Despite
Covid-19 Diageo's sales got an
unexpected boost from US spirit
drinkers, these sales have been driven
by premium tequila and bourbon. Scotch
sales remained flat which was no doubt
due to the tax imposed by Donald Trump
during his time as US President which
would no doubt have made premium Scotch
whisky drinkers look elsewhere.
Ivan Menezes, Diageo Chief Executive,
and Kathryn Mikells, their Chief
Financial Officer, present the spirit
company's 2021 Interim Results Investor
Webcast.
In whisky business news Diageo
reported an unexpected rise in
underlying net sales growth for its
first half year although this rise has
not been driven by Scotch sales which is
no surprise given the tax imposed by
Donald Trump during his time as US
President when seriously impacted Scotch
sales in the US. The rise in underlying
net sales growth for Diageo's first half
year was driven by people who have
splurged on premium tequila and bourbon
at retail stores in the United States,
sending its shares up as much as 4%.
The coronavirus pandemic has hit beer
and spirits makers as bars, restaurants
and night clubs around the world had to
close and as travel was restricted.
But as more people drink at home,
Diageo, maker of Johnnie Walker whisky,
benefited from a strong performance in
United States, where it generates 80% of
sales from off-licence retail and
grocery stores.
Consumers drank more premium spirits
such as Don Julio and Casamigos tequilas
, Ciroc Vodkas and Bulleit bourbon.
North America sales rose 12% in the six
months to Dec. 31, driven by strong
consumer demand and a shift towards
spirits over beer and wine. Retailers
also replenished more stock ahead of the
holiday season. Beer sales dropped 15%.
In the United States, which contributes
39% to sales and makes up nearly 45% of
Diageo’s profits, the penetration of
spirits has grown three times that of
beer and wine, Chief Executive Ivan
Menezes said and he was confident these
drinking habits would stick.
While U.S. was a bright spot, the
company struggled in other markets such
as Europe and Turkey where sales
declined 10% and in the Asia Pacific
where they fell 3%, despite strong
performance in China.
The group, however, expects sales growth
in all regions in the second half year,
given easier comparables with last year,
strong momentum in North America, and
re-opening of bars and restaurants in
some other regions, chief financial
officer Kathryn Mikells told Reuters.
Overall, Diageo, the world’s largest
spirits maker, reported a 1% rise in
organic net sales growth for the first
half, compared with expectations for a
4.6% drop, according to company supplied
estimates.
"Time for us to eat humble pie. Diageo
announced an incredibly resilient set of
H1F21 results this morning, with beats
across the board," Bernstein analyst
Trevor Sterling wrote in a note.
Menezes also said that Diageo had ended
a dividend dispute with LVMH, with the
French company agreeing to pay it 181
million Euros in dividends from their
Moët Hennessy wine and spirits joint
venture.
Diageo had filed arbitration proceedings
against Moet Hennessy last year after it
said it was owed dividends for 2019.
"The dividend dispute is resolved and
our relationship with LVMH remains very
strong," CEO Menezes said.
Diageo also said it would bring back its
non-alcoholic Guinness beer to markets
this year after recalling the new drink
due to "microbial contamination" in
November.
Diageo also raised its interim dividend
by 2% to 27.96 pence per share.
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