Diageo toasts ‘good start’ to year as drinkers’ thirst resilient despite economic slump
Guinness owner Diageo has raised a glass to resilient demand for drinks despite a consumer spending slowdown.
In a brief trading update on Thursday morning, the London-listed beverage giant said it had made a “good start” to its 2023 fiscal year.
Chief executive Ivan Menezes noted “organic net sales growth across all regions” as the economic crunch did little to abate consumers’ thirst for popular brands such as Johnnie Walker and Smirnoff.
However, the operating environment was expected to “remain challenging” in the coming months, Menezes added.
The drinks firm pointed to “ongoing volatility due to geopolitical uncertainty, a weakening of consumer spending power, inflationary pressures and disruption related to Covid-19.”
However, Diageo was “well positioned” to meet its expectations for the 2023 to 2025 financial years, it said on Thursday.
The company anticipates organic net sales growth consistently in the range of five per cent to seven per cent and organic operating profit growth sustainably in the range of six per cent to nine per cent.
“As Diageo’s chief executive has indicated, times are still very challenging but I think by keeping demand-led dynamics at the heart of their strategy has helped pay off,” Sarah Riding, retail and supply chain partner at law firm Gowling WLG, explained.
One secret to success within the alcoholic drink sector had been “the reselling value of popular brands throughout an immensely large/ diverse network of domestic retailers,” Riding said.
“But this doesn’t come by accident as the likes of Diageo clearly have the supply chain insight and depth of understanding about customer demographics to service this network on a demand-led basis.”
It comes as hospitality chiefs have been optimistic that consumer demand will remain buoyant for pub and bar visits, despite the severe pressure on household budgets this year.
Brits will continue to be “social animals” at the pub, the boss of Marston’s told CityA.M. earlier this year.
“Having been locked up for two-three years, we are even more social animals,” Andrew Andrea insisted.
Pubs were well placed to take up market share from restaurants as consumers pursue cheaper nights out, the CEO said.
“In times of economic challenge, people look for flight to value,” he said.
However, both retailers and hospitality bosses have warned of the pressure from cost increases, with monster hikes in energy and supply costs.