On Tuesday, Diageo, the producer of Tanqueray gin, managed to surpass full-year earnings estimates by a narrow margin. This success was attributed to the strong performance of its premium liquor brands, which helped compensate for lower sales volumes.
Amidst the Covid-19 pandemic, the largest spirits maker in the world capitalized on increased demand from home mixologists. The rising trend of at-home cocktail-making has driven higher sales for the company during this period.
As time went on, households started upgrading their preferences, opting for premium brands like Bulleit Bourbon and Don Julio tequila.
After the lockdowns were lifted, a significant number of people remained loyal to these brands, continuing to purchase them at bars and restaurants.
According to Diageo, their most premium brands contributed to 57% of the company’s overall organic net sales growth. As a result, shares in Diageo saw a 2.3% increase during early trading.
The company behind renowned brands like Johnnie Walker whisky, Captain Morgan’s rum, and Ketel One vodka reported a 6.5% increase in organic net sales for the year ending on June 30. This figure slightly exceeded the 6.4% growth anticipated by analysts, as per the consensus provided by the company.
Diageo attributed its full-year sales growth to a robust performance during the first half of the year.
“Results were roughly in line with expectations,” said Tineke Frikkee, a portfolio manager at Diageo investor Waverton Investment Management. “The next 12 months will be second-half weighted as comparatives will be tough for the rest of this calendar year.”
Looking to fiscal 2024, Diageo’s new CEO Debra Crew said in a statement, “I expect operating environment challenges to persist, with continued cost pressure and ongoing geopolitical and macroeconomic uncertainty.”
Crew was appointed CEO in June after the death of long-time boss Ivan Menezes.
Diageo said its organic net sales increase reflected gains of 7.3 percentage points from higher prices and a more premium mix while organic sales volumes fell 0.8%.
Diageo’s organic operating profit rose 7%, beating the 6.3% expected by analysts.
