UK avoids the worst as pandemic sees Diageo sales tumble

Diageo has reported a 47.1% decline in operating profit and an 8.7% drop in sales in the year to the end of June, as Covid-19 hit the drinks industry, though the UK appears to have got off relatively lightly.

The Smirnoff, Gordon’s and Guinness producer’s UK sales were down 4% for the year. compared to a drop of 15% for continental Europe.

The impact of on-trade closures was particularly harsh on Diageo’s beer sales in Europe, which fell by 20%.

Beer (-15%) and Scotch (-16%) were the two product categories to take the biggest volume hit over the year globally. Johnnie Walker volumes were down 22% as its global brands took the brunt of the hit.

Despite almost halving since 2018/19, Diageo’s full-year profits were £2.1 billion on net sales of £11.8 billion.

A 23% fall in sales in the second half of the financial year [January to June 2020) followed a 4% rise in the previous six months, before the pandemic.

Chief executive Ivan Menezes described it as “a year of two halves”.

He added: “After good, consistent performance in the first half [of the financial year], the outbreak of Covid-19 presented significant challenges for our business, impacting the full year performance.

“The actions we have taken to strengthen Diageo over the last six years provide a solid foundation to respond to the impacts of the pandemic.

“We are now a more agile, efficient and effective business.

“We have taken decisive actions through the second half [of the financial year], tightly managing our costs, reducing discretionary expenditure and reallocating resources across the group.

“We are further enhancing our data analytics and technology tools to rapidly respond to consumer and customer shifts triggered by the pandemic.

“We have strengthened liquidity, giving us flexibility to continue to invest effectively in the business for the long term.”

He added that “we are well-positioned to emerge stronger”.

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