While gin and tequila each account for a relatively small part of Diageo’s portfolio (4% and 3% of net sales respectively), gin rose 16% while tequila grew 43% (organic net sales).
Premium tequila Don Julio, which was acquired by Diageo in 2014, saw growth driven by sales in North America, up 39%.
A new addition to Diageo’s tequila portfolio is Casamigos, the ultra-premium tequila co-founded by George Clooney that Diageo bought in a $1bn deal in August last year, which Diageo says will strengthen its position in the fast-growing super premium tequila sector in the US.
Gin enjoyed broad growth across all regions. In Europe, Tanqueray and Gordon’s were the largest contributors to growth with both brands growing double digit. Gordon’s gin benefitted from the launch of its Pink variant, which boasts ‘the natural sweetness of raspberries and strawberries with the tang of redcurrant’, and was launched to appeal to millennials.
Tanqueray, meanwhile, tripled in value in Paraguay, Uruguay and Brazil; as well as growing the category in Mexico. In Great Britain it saw double digit net sales growth and is credited with driving a 13% rise in spirits in Ireland, along with the Gordon's brand.
Gin and tequila have both been enjoying popularity as a trendy spirit for millennial drinkers, particularly given their use in cocktails.
In other categories, Scotch whisky – Diageo’s largest category - grew 3% with broad based growth across all regions except Africa. Johnnie Walker saw net sales grow 7%. North American whiskey, represented by brands such as Crown Royal, grew 4%.
Rum grew 5% as it saw share gains in Diageo’s biggest markets of US Spirits and Europe. Captain Morgan grew 6%, with Diageo crediting its ‘Live like a Captain’ campaign for growth in the US, while Zacapa grew 21%.
Vodka and RTDs, however, declined by 3% and 2% respectively.
Diageo’s total reported net sales of £6.5 billion ($9.3bn) and operating profit of £2.2 billion ($3.1bn) were up 1.7% and 6.1%, respectively, as organic growth was partially offset by adverse exchange (six months ending 31 December 2017).
Organic net sales grew 4.2%, and organic volume grew 1.8%.
Organic operating profit grew 6.7%, ahead of top line growth, with higher marketing investments offset by efficiencies from Diageo’s productivity program.
Cutting out straws and stirrers
This month Diageo announced it would be phasing out the use of all plastic straws and stirrers from its offices, events, promotions, advertising and marketing globally, as well as advocating the same to its partners and customers.
Where the use of straws is deemed to be important to the enjoyment of its brands, it will only use reusable, compostable or biodegradable alternatives.