Premium brands lift sales at Johnnie Walker whisky-maker Diageo

Drinks maker Diageo has benefitted from customers treating themselves to premium brands to drink at home during the pandemic. Reuters/Shamil Zhumatov (Shamil Zhumatov / Reuters)

Whisky and beer giant Diageo (DGE.L) reported a 16% rise in first-half sales, boosted by higher sales volume and the strong growth of premium brands.

Reported net sales for the first half to the end of December came in at £8bn, an increase of 15.8%, underpinned by positive industry trends, especially premium-plus brands of scotch, tequila and Chinese white spirits.

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Operating profit at the Smirnoff vodka producer rose 22.5% to £2.7bn and the interim dividend was lifted by 5% to 29.36p a share.

"We expect organic net sales momentum to continue through the second half of fiscal 2022, albeit we are lapping a tougher comparator," Ivan Menezes, chief executive, said.

"We believe we are well positioned to benefit from resilience in the off-trade and continued recovery in the on-trade. However, we expect near-term volatility to remain, including potential impacts from covid and global supply chain constraints, and for disruption in travel retail to continue."

Shares in the distiller of Johnnie Walker whisky have fallen 11% this year but were up more than 1% this Thursday.

Diageo's share price was up by 1% as the whisky producer reported 15.8% sales rise. Chart: Yahoo Finance UK (Yahoo Finance UK)

The world's largest spirits maker benefited from shoppers stocking up on spirits and beers at home during the COVID pandemic, with sales showing that more drinkers were turning to its high-end spirits.

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Richard Hunter, head of markets at Interactive Investor, said: “Diageo has again proved its worth as a core portfolio constituent, with a performance which has underlined both its pricing power and its ongoing growth potential."

"Cost inflation has been the subject of much debate in corporate boardrooms, but Diageo benefits from the nature of the sector in which it operates. Its ability to pass on price increases, as well as ongoing productivity savings, has more than offset such inflation, with its move towards 'premiumisation' providing additional insurance."

The company reported broad-based growth across most categories, with particularly strong performance in scotch, tequila and beer.

Premium plus brands contributed 56% of reported net sales and drove 74% of organic net sales growth.

Diageo, which also produces Guinness, said it planned to accelerate capital returns, having completed £500m of share buybacks.

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