Guinness owner Diageo sees lockdown sink Irish sales

The company – which also owns Johnnie Walker whisky, Tanqueray gin, Captain Morgan rum and Smirnoff vodka - reported a better-than-expected rise in full-year organic net sales.

Guinness sales have been rocked by Covid restrictions imposed on the hospitality sector in both Ireland and the UK.

Guinness and Baileys owner Diageo has reported a 23% slump in overall annual sales in Ireland due to the negative impact of Covid restrictions on the hospitality sector.

The global drinks giant said its business in Ireland declined “significantly” over the course of the 12 months to the end of June due to the “severe” restrictions imposed on the on-trade here. Diageo would be heavily reliant on sales – particularly through Guinness – from the pub and bar sector here.

While Diageo’s overall global annual sales impressed, its net beer sales in Europe fell 21%. That was mainly due to the hit to Guinness sales through closed pubs across Ireland and the UK.

Guinness sales, alone, fell by 19% in the 12 months. Diageo’s 23% Irish sales fall measures organic net sales. On a reported basis, the group’s Irish sales were down 30% in the year.

On an overall group basis, Diageo reported a better-than-expected rise in full-year organic net sales.

The company – which also owns Johnnie Walker whisky, Tanqueray gin, Captain Morgan rum and Smirnoff vodka - said results were propelled by the US, its biggest market, where easing lockdowns had driven replenishment of stocks at bars and restaurants.

Group organic net sales in North America were up by 20%.

In the European region, Turkey and Northern Europe were the strongest performers, helped by strong demand for scotch whiskies in shops.

Signs of resurgence were also emerging in Africa, Latin America and Asia.

Total group organic net sales rose 16% for the year, beating the 13.7% rise analysts had expected.

"It comes as no surprise that the shuttering of bars and nightclubs left Diageo with a nasty hangover of problems," said Sophie Lund-Yates, equity analyst at Hargreaves Lansdown.

"However, the strength of the group's brands means it was able to recoup some of its losses through a huge increase in supermarket trade in some key markets, and it has come out of the pandemic in remarkably resilient shape."

Diageo said it expected organic net sales momentum to continue, but with volatility in the short term.

"While our business has recovered strongly in fiscal 21, with net sales growth on a constant basis ahead of fiscal 19 in three of our five regions, we expect near-term volatility in some markets," said Diageo chief executive Ivan Menezes. 

"However, I remain optimistic about the growth prospects for our industry, with spirits continuing to gain share of total beverage alcohol globally and premiumisation trends remaining strong," he said.

Diageo rival Anheuser-Busch InBev underwhelmed on second-quarter profit as costs increased even though the world's largest brewer drove revenues to above pre-pandemic levels.

The Budweiser brewer reported lower core profits in its two biggest markets, the US and Brazil, as cans and distribution became more expensive.

AB InBev retained its earnings growth forecast of 8%-12% for this year, with revenue increasing at a faster pace.

- additional reporting Reuters