Diageo’s performance improves as COVID-19 recovery begins

Chief Executive of Diageo PLC, Ivan Menezes, says the company has made a good start to its fiscal year, with sequential improvement in performance across all regions.

Menezes said the growth is driven by strong execution, robust demand in the off-trade channel and the gradual re-opening of the on-trade channel in most markets.

Diageo is a global provider of alcohol beverages with brands including  spirits and beer.

Menezes said 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.

“While the pace of recovery is uncertain, I am confident in our strategy…and Diageo’s ability to emerge stronger.”

– Chief Executive of Diageo PLC, Ivan Menezes

The comments were made in a statement issued ahead of the company’s annual general meeting on September 28, 2020.

Additionally, 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.

“The pace of recovery from the COVID-19 pandemic and easing of government restrictions varies by market,” he noted.

In Europe, he outlined, “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.”

In China, Diageo has seen its on-trade channel continue to recover, although larger banqueting occasions are returning more slowly.

He noted that while the on-trade has also begun to re-open in Africa, India and Latin America and the Caribbean, the company expects the pace of recovery in those markets to be more gradual.

Travel retail continues to be severely impacted, Menezes stated.

He said, “We are continuing to support our customers and we are seeing the positive impact of the actions we took to help the on-trade recover. As demand recovers, we are using our consumer insights and marketing effectiveness tools to accelerate smart investment behind innovation and marketing as well as behind new opportunities in the at-home occasion and in the e-commerce channel.”

He said the continues to expect sequential improvement in organic net sales and operating profit compared to the second half of fiscal 20.

“Compared to the first half of fiscal 20, we still expect lower organic net sales and margin dilution,” he clarified.

The CEO said he was pleased with the resilient performance of the company’s business in the current challenging operating environment and encouraged by our progress.

“While the pace of recovery is uncertain, I am confident in our strategy, the long-term fundamentals of our business and Diageo’s ability to emerge stronger,” he said in conclusion.