Gin, vodka and Baileys fuel Diageo Ireland revenue growth, but Guinness goes flat

Gin, vodka and Baileys fuel Diageo Ireland revenue growth, but Guinness goes flat

Rising demand for Baileys, Rockshore lager and its chief spirits brands drove a 3% increase in annual net sales at global drinks giant Diageo's Irish division.

However, net sales of Guinness fell by 2% in its home market, due to what Diageo called "difficult competitive conditions".

The Rockshore brand, which launched in early 2018, was the main driver of a 4% rise in the group's net lager sales in Ireland.

Diageo's other relatively new lager label - Hop House 13 - helped growth in the overall European lager market.

Beer represents 16% of Diageo's annual sales and it grew by 3% in the year.

Though down in Ireland, worldwide sales of Guinness grew by 2%, largely helped by demand for the Guinness Foreign Extra Stout label; which is the main Guinness brand in Africa, Asia and Caribbean countries.

In its latest financial year Diageo Ireland saw double digit percentage net sales growth in spirits, chiefly driven by its Smirnoff vodka, Gordon's gin and Baileys brands.

On a group-wide basis, Diageo - which ranks as the largest drinks group in the world - reported higher annual profit for the 12 months to the end of June; helped by growth across all of its markets, an improved price mix and cost controls.

Group operating profit rose by 10% to £4bn (€4.5bn) and total reported net sales increased by 5.8% to £12.9bn.

The company reported pre-exceptional earnings per share of 130.8 pence, beating company supplied estimates of 128.8 pence.

Diageo has been restructuring in recent years to improve performance and streamline its portfolio by selling non-core businesses and underperforming labels, while trying to bulk up on newer, hipper brands.

It has looked to focus on its Scotch business and grow its operations in India and the US.

“In the medium term I expect Diageo to maintain organic net sales [which were up by 6.1% in the latest year] growth in the mid-single digit range and to grow organic operating profit ahead of net sales in the range of 5%-7%.” chief executive Ivan Menezes said.

Diageo also launched a new brand of gin called Villa Ascent earlier this year to capitalise on the growing gin craze in Britain, dubbed the “ginaissance”.

More than 66 million bottles of gin were sold in Britain last year, up 41%, according to the UK's Wine and Spirit Trade Association.

However, Diageo, which makes an array of scotch whisky drinks, faces pressure from President Donald Trump’s use of tariffs as a weapon in trade conflicts because Scotland’s most famous export could get caught up in one.

- Additional reporting Reuters

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