Diageo profits jump on price hikes and premium whisky demand
- Pre-tax profit rose 7% to £4.7bn in the year to the end of June
- Sales rose 6.5% thanks to higher prices and rising sales of premium spirits
- Premium spirits have been responsible for 57% of Diageo's net sales growth
Drinks giant Diageo has reported booming profits for the last year thanks to price rises and drinkers around the world turning to more expensive tipples.
The maker of Johnnie Walker whisky, Smirnoff vodka and Guinness beer said pre-tax profit rose 7 per cent £4.7billion for the year to the end of June, from £4.4billion the year before.
Organic net sales grew 6.5 per cent, driven by a mix of higher prices, as it passed surging costs onto customers, and rising sales of its more expensive brands, particularly premium versions of Johnnie Walker's scotch.
In demand: Diageo said rising sales of its more expensive brands, particularly premium versions of Johnnie Walker's scotch, such as its Black Label, helped to lift profit
Premium spirits, which command higher prices, have been responsible for over half of Diageo's organic net sales growth, new chief executive, Debra Crew, told shareholders.
While overall sales volumes, or the amount of drinks bought, declined by 0.8 per cent, premium spirits sales volumes increased in most regions.
'In fiscal 23, we drove double-digit organic net sales growth in scotch, tequila, and Guinness, with our premium-plus brands contributing 57 per cent of overall organic net sales growth,' Crew said.
The group, which also makes Tanqueray gin and Captain Morgan rum, said net sales in Britain rose 7 per cent, mostly driven by strong demand for Guinness, tequila and vodka.
However, this was partly offset by a decline in sales of gin, a tipple which has seen a decade of strong growth thanks to a cocktail revival in Europe and the US.
During the pandemic, Diageo benefited from higher demand for premium spirits from people stuck at home treating themselves to cocktails.
Once lockdowns ended, many people stuck to these brands, buying them in bars and restaurants instead.
Victoria Scholar, head of investment at Interactive Investor, said: 'Quality over quantity has been a strategy that is successfully driving Diageo's growth.
'Premium spirits, which command much higher consumer prices, have been responsible for over half of Diageo's net sales growth, a trend that emerged during Covid lockdowns and has managed to persist beyond the pandemic.'
The group has also been benefiting from price hikes, as it looked to counter rising costs for energy and ingredients across its global markets.
Ms Crew, who took over in June after the death of former long-standing boss Sir Ivan Menezes, said she expected cost pressures to continue in the new fiscal year, though inflation was 'moderating'.
'In a challenging, albeit moderating, inflationary environment, we will continue to focus on revenue growth management, including strategic pricing actions and everyday efficiency,' she said.
Diageo shares rose 2 per cent in early trade, but lost some of those gains to trade 0.4 per cent higher at £34.11 on Tuesday afternoon.
