Diageo: ‘Our US business is performing strongly and ahead of expectations’

By Rachel Arthur contact

- Last updated on GMT

Diageo's key brands cover whisky, vodka and rum. Pic:getty/kmk-vova
Diageo's key brands cover whisky, vodka and rum. Pic:getty/kmk-vova

Related tags: Diageo, Us, coronavirus

Diageo says it has made a ‘good start’ to fiscal 21 as markets start to recover from the COVID-19 pandemic: with the US in particular showing ‘resilient consumer demand’.

Like other beverage businesses, Diageo’s FY2020 was hit by the coronavirus pandemic, with reported net sales down 8.7% (year ending June 30, 2020).

In a trading update this morning, Diageo’s chief executive Ivan Menezes says it is seeing sequential improvement across all regions thanks to strong demand in the off-trade and the reopening of the on-trade in most markets.

Optimism for US spirits

The US – which is Diageo's biggest market accounting for around 39% of the company's sales  - has been performing well over the last three months, according to Menezes. Spirits make up the majority of Diageo's sales in the country. 

"Our US business is performing strongly and ahead of our expectations, reflecting resilient consumer demand and the spirits category continuing to gain share within the total beverage alcohol market," ​said Menezes.

Increased retailer confidence is resulting in some re-stocking in the off-trade channel. The on-trade channel is now open in all states, with some capacity restrictions.

Diageo US spirits

Tequilas Don Julio and Casamigos enjoyed strong growth in FY20 (year ending June 30) thanks to the popularity of the tequila category, as did whisky Crown Royal. Johnnie Walker, Ciroc and Captain Morgan, however, all declined across the year.

Menezes notes that the pace of recovery from the COVID-19 pandemic varies by market, particularly due to varying government restrictions.

“In Europe, off-trade demand remains robust and the on-trade channel has largely re-opened with the easing of lockdown measures in most countries, although the risk of additional restrictions remains where infection rates are worsening,” ​he notes. The UK and France are two countries which have recently tightened restrictions for the on-trade.

“In China, the on-trade channel continues to recover, although larger banqueting occasions are returning more slowly,” ​continued Menezes. “While the on-trade has also begun to re-open in Africa, India and Latin America and the Caribbean, we expect the pace of recovery in those markets to be more gradual. Travel retail continues to be severely impacted.

Diageo’s brands include Johnnie Walker, Smirnoff, Captain Morgan, Baileys and Guinness.

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