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The Guinness and Smirnoff maker Diageo reported a fall in profits in the second half of 2020 but largely weathered the storm of the coronavirus pandemic as supermarket and online alcohol orders helped offset the closure of pubs, bars and restaurants.
Global pre-tax profits were down by 10% but still came in at £2.2bn, on sales that fell 5% to £6.9bn.
Despite the decline in sales and profits, a relatively resilient performance in the face of Covid-19 meant Diageo still felt able to continue its policy of annual increases in its dividend, which rose 2% to 27.96p per share for the half-year payout.
In the UK, Diageo managed a 2% sales increase, despite venues where its drinks are sold being closed for large parts of the year due to coronavirus restrictions.
Diageo said “off-trade” drinking – from shops and online – had more than offset the impact of hospitality closures, with spirits proving particularly resilient, up 15%. The company also gained market share from rivals over the period.
“We rapidly pivoted to the channels and occasions most relevant to consumers and invested behind new opportunities,” said the chief executive, Ivan Menezes.
Diageo’s experience mirrors the trend in the UK market, where official figures released towards the end of 2020 showed an overall decline in alcohol sales but significant increases at supermarkets and online, as locked-down consumers bought alcohol to drink at home.
“Under the circumstances, Diageo’s results could have been a lot worse given the ongoing disruption to the hospitality and travel sectors as fewer people have been able to go to bars, hotels, pubs and restaurants, as well as shop for spirits at airports,” said Russ Mould, the investment director at stockbroker AJ Bell.
“Working in its favour is a rise in alcohol sales during lockdown as people are forced to entertain themselves at home. Notably, spirit sales have held up well and pre-mixed drinks have been very popular. But longer-term Diageo really needs all the leisure establishments to reopen as they are also key drivers of premium spirit product sales.”
Source: The Guardian
Keyword: Store and online sales help Guinness owner Diageo offset Covid impact | Diageo