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Robust retail demand reverses fortunes at Diageo

Published:  29 September, 2020

Drinks giant Diageo has revealed that its outlook for the first half of the fiscal year 2021 has “improved since the year-end”, reversing a moribund earlier forecast for a year that has been rocked by Covid-19.

Diageo seems to have resisted many of the headwinds expected from the coronavirus.

At the beginning of 2020, it slashed sales expectations in global markets for the coming year as it faced increased volatility in key markets as a result of the growing epidemic.

Via trading commentary released ahead of its AGM 2020 however, chief executive Ivan Menezes said the company has had a “good start to the year”, particularly in its US retail business where consumers splashed out on more expensive products to enjoy at home.

While performance has improved across all regions, driven by strong execution, robust demand in the off-trade channel and the gradual re-opening of the on-trade channel in most markets, Menezes said the pace of recovery from the Covid-19 pandemic and easing of government restrictions varies by market.

“In Europe, off-trade demand remains robust, while 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, the on-trade channel continues to recover, although larger banqueting occasions are returning more slowly. While the on-trade has also begun to re-open in Africa, India and Latin America and the Caribbean, we expect the pace of recovery in those markets to be more gradual. Travel retail continues to be severely impacted,” Menezes said.

Diageo also told the Financial Times that it has benefitted from consumers buying more expensive spirits to make cocktails at home as they venture out less during the coronavirus pandemic.

The world’s largest spirits maker confirmed it expected first-half sales and operating profits for the fiscal year 2021 to be ahead of the previous six months, after a strong start to the year in retail channels in the US.