The headline: Number one drinks group stays upbeat on growth and ex-Seagram brands despite tough trading
Turnover for six months to 31 December 2002: £5,428 million /US$8,616 million (compared to £6,478 million, including £1,455 million from former food arm Pillsbury in 2001)
Operating profit: £1,243 million (US$1,973 million) +0.6%
Premium drinks turnover: up +11% to £4,949 million (US$7,856 million)
Premium drinks operating profit: up +23% to £1,188 million (US$1,886 million)
Volume growth of main brands: Johnnie Walker +5%, Smirnoff +6%, Baileys +12%, Tanqueray +2%
Comment: The world’s biggest spirits group, beat forecasts with first-half profits last week and said it was confident of improving organic growth in the second half despite a tough trading environment. The company, which sells Smirnoff vodka, Johnnie Walker Scotch whisky, Baileys, Gordon’s gin and Guinness, said profit before tax, goodwill and exceptional items rose slightly. In the premium drinks sector organic growth was +1% in volume term and +4% in sales, driven by growth in the group’s “global priority brands”. The ex-Seagram brands (Crown Royal Canadian whisky, Seagram’s Californian wines and Captain Morgan rum) contributed volume equivalent to 9.4 million cases, sales of £518 million (US$822 million) and attributable operating profit of £211 million (US$335 million).
Diageo CEO Paul Walsh commented: “When we announced our preliminary results in September we anticipated that we would face more challenging market conditions in many markets. Top and bottom line growth has been constrained by economic weakness particularly in Latin America and parts of Europe. However, we have delivered strong performances in North America, in UK, in many of our key markets especially in Africa and across our venture markets. Our scale, our diverse geographic reach and our unrivalled range of brands has enabled us to increase market share and deliver organic operating profit growth even in difficult times.”
Commenting on current tough trading Walsh said: “We acknowledge that these are without doubt uncertain times. However, in the absence of any significant change to market trends we expect organic growth in the second half to improve against the first half. Seagram brands continue to perform ahead of our expectations.” In the global duty free liquor category Diageo has a 26.8% market share and sales volume of 3.747 million cases (2001 Global Drinks Record figures). It also has four of the leading ten brands in travel retail, with Johnnie Walker alone accounting for 1.4 million cases in duty free.
