Brewing giant Diageo beat full-year sales forecasts on Tuesday as people continued treating themselves to expensive scotch, whiskey and tequila despite high prices.
The world’s largest spirits maker, which also makes Johnnie Walker whiskey, Captain Morgan rum and Ketel One vodka, said organic net sales rose 6.5 per cent in the year to June 30th, marginally beating analyst forecasts for a 6.4 per cent increase, according to a company-provided consensus.
“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,” Diageo’s new chief executive, Debra Crew, said in a statement.
Diageo said its organic net sales increase reflected 7.3 percentage points of price/mix and a decline in organic sales volumes of 0.8 per cent.
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The results cover the period up to the end of June, which excludes the latest price increase announced in July - which lifted the pint of Guinness by 4 cents.
This time last year, Diageo said cost inflation had risen 7-8 per cent since the start of the war in Ukraine. But that went up to “squarely in the double-digits” in the fiscal year ended June 2023, finance chief Lavanya Chandrashekar said in an interview.
“For us, the biggest exposure from a cost perspective comes from energy,” she said, noting the impact energy prices have had on fertilisers, cereals, glass and transportation costs.
A pint of Guinness, sometimes served in a glass bottle, is created using five key ingredients – roasted barley, malted barley, hops, yeast and water. Diageo also makes Johnnie Walker whiskey, which “all starts with the cereal: barely or grain”, according to the brand’s website.
The company’s Baileys Irish Cream uses dairy, sugar and cocoa extracts.
“Sugar prices have gone up quite a bit. I mean, cereals have been much higher than historic levels. So we’re really seeing inflation pretty much across the board,” Ms Chandrashekar said.
