Brexit bonanza for Diageo as weak pound leads to surge in profits and revenue

Brexit bonanza for Diageo as weak pound leads to surge in profits and revenue

Diageo grew profits by 25% to £3.6bn in the financial year July 2016 - June 2017, as the collapse in the value of sterling increased the value of overseas sales.

Reported net sales worldwide were up 15% to £12.1bn. Organic sales growth accounted for 4.3% of that, with increased volumes accounting for 1.1%, and the rest coming from an improvement in prices and product mix.

But the bulk of the sales growth came from the big changes in exchange rates that followed last June’s EU referendum.

Diageo spent an additional £236m on marketing across the year, but again, most of this was a result of changing exchange rates, with £101m of the increase coming in North America.

Chief executive Ivan Menezes said: "Diageo is a strong company today and we are confident in our ability to deliver sustainable growth. We are raising our productivity goal to £700m with two thirds being reinvested in the business."

Most of the company’s brands and product categories performed well, especially North American whiskey, with organic sales growth of 11%, gin (8%), and the Johnnie Walker (6%) and Captain Morgan (6%) brands. But vodka declined 4% on an organic basis, with Smirnoff down 1% and premium vodka brand Ciroc down 12%.

In the UK, Diageo enjoyed growth across most of its key brands, while product innovation such as Smirnoff Cider also boosted sales.

Guinness sales grew 5.8% across the trademark, thanks especially to the growth of lager Hop House 13, which was launched in 2015 as part of Guinness’s craft-brewing project.

Charles Ireland, general manager, Diageo Great Britain, Ireland and France, said the drink "continues to broaden appeal for a lighter, accessible liquid building on Guinness’s vibrant trademark. It shows the strength of our Open Gate Brewery initiative to explore the opportunities we have in our brewing skills."

Smirnoff, the largest spirits brand in the UK, was growing market share in a falling category, Ireland said, while Captain Morgan was the fastest-recruiting spirits brand, which he put down partly to the success of the "Captain, captain" campaign, starring footballer Wes Morgan and cricketer Eoin Morgan.

There was also growth in the UK for premium brands such as Ketel One vodka, Tanqueray Ten gin, and Bulleit bourbon.

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