FDBusiness.com

Challenging Year For Diageo

 Breaking News
  • Firmenich Launches Advanced Natural Flavour Solutions For High Protein Beverages Firmenich, the world’s largest privately-owned company in the flavour and fragrance industry, has officially launched its Protein Shield Flavors, a new line of natural flavour solutions aimed to help developers address the challenges they face when creating beverage products with high protein content. “These natural solutions confirm Firmenich’s deep commitment to advancing health and wellness,” says Chris [...]...
  • JDE Invests Heavily in Kenco Coffee Company Rebrand Jacobs Douwe Egberts (JDE) Professional has unveiled a fresh, new brand positioning for Kenco The Coffee Company, complete with a bold new logo and pack design. The new design brings to life the heritage, passion and expertise behind the well-loved brand, helping to further boost value and volume growth across the sector. The Kenco brand is [...]...
  • ABP Food Group in £22 Million Renewable Energy Project A £22 million investment by ABP Food Group’s renewable division in a green energy plant will produce enough sustainable energy to power the equivalent of 12,000 homes. ABP’s renewables division, Olleco, has just opened the new 15 MW Anaerobic Digestion facility in Aylesbury, Buckinghamshire. The ABP Food Group facility is located adjacent to the Arla dairy, [...]...
  • How Steel Packaging Contributes to Saving Food A new film from APEAL, the Association of European Producers of Steel for Packaging, has been launched to highlight the unique preservation qualities of steel packaging. Having recently welcomed the European Parliament’s (EP) initiative report – Resource efficiency: reducing food waste, improving food safety – APEAL is increasing its own efforts to drive improvements in managing food waste [...]...
  • New Website Brings Easy Access to Food Processing Equipment Interfood Technology has launched a new website to provide an easy-to-use resource for sourcing the latest in food technology and processing equipment. The site has been introduced to coincide with the company’s relocation to new, larger premises and marks another significant investment in Interfood’s development. The main reasons behind the complete revamp from the company’s previous [...]...

Challenging Year For Diageo

Challenging Year For Diageo
July 31
12:38 2015

Diageo has reported a 5.4% increase in net sales to £10.813 billion, reflecting the full consolidation of United Spirits which contributed £921 million, and a 3.3% rise in group operating profit to £2.797 billion for the year ended 30th June 2015. However, the full consolidation of United Spirits lowered reported operating margin for the group but organic operating margin improved by 24bps, largely as a result of cost savings and efficiencies, which more than offset the impact of cost inflation and negative market mix.

Indeed, productivity gains are expected to release a further £500 million of cost to invest in growth and improve margin over a three year period from financial year 2017.

Reported net sales and operating profit were significantly impacted by adverse exchange movements driven by the devaluation of many currencies against the pound, in particular the euro, the Venezuelan bolivar, and the Russian rouble. The exchange rate movements for the year ending 30 June 2016 are estimated to have adversely impacted both net sales and operating profit by approximately £370 million and £100 million, respectively.

DiageoNewGuinnessBrewhouseDiageo’s organic volume fell by 1% due chiefly to lower shipments in the United States, reduction in inventory levels in South East Asia and the impact of pricing in Venezuela and Brazil.

Ivan Menezes, chief executive of Diageo, comments: “Our F15 performance reflects the challenges we have seen on top line growth. However, it does not diminish my confidence in what we can achieve in F16 and even more so beyond that. Diageo has an enviable position, by geography, by brand and by category range, in an attractive consumer market place with strong long term growth drivers. This year we made further changes to build strong, sustained performance including embedding our sell out discipline, improving cash conversion and strengthening our route to consumer. We have consistently applied a long term perspective in making these changes, despite the short term challenges we have faced from an external environment where currency volatility continues to impact the emerging market consumer.”

Ivan Menezes, chief executive of Diageo.

Ivan Menezes, chief executive of Diageo.

The acquisition of control of United Spirits in India has given Diageo unparalleled access to one of the world’s most attractive spirits markets. Diageo also enhanced its position in tequila by acquiring the remaining 50% of Don Julio, a brand that is already growing net sales at double digit rates. Also during the year, Diageo disposed of the Gleneagles Hotel business. Since the year end, Diageo has sold the shares United Spirits owned in United Breweries, and restructured its South African operations to focus on spirits and monetise investments worth £125 million.

Ivan Menezies continues:  “We are delivering the change which will further strengthen this business and deliver our performance ambition. In F16 we believe stronger volume growth will deliver an improved top line performance. As we achieve our productivity gains from F17 we expect to deliver mid single digit organic top line growth on a sustained basis and operating margin expansion of 100 basis points over three years. Our brands, our global footprint and our people give me confidence that Diageo can deliver strong and sustained performance.”

European Business

Diageo’s European performance reflected an improved momentum in Western Europe, growth in Turkey, and a challenging environment in Russia. In Western Europe net sales were up 1%, as performance improved in more than half of the company’s markets. Reserve brands delivered another strong performance with net sales up 20% and growing double digit even in the more challenging economies in Southern Europe.

DiageoCraftBeersInnovation remained a key performance driver with net sales up 30%, driven by successes such as ‘The Brewers Project’ which helped put Guinness back in growth in both Great Britain and Ireland. Diageo continued to invest in its route to consumer, increasing the number of sales people by 30% and the number of outlets we cover by 60%. In Russia, which continued to be impacted by economic volatility, consumers traded down, and customers reduced inventory levels, while Diageo gained share in Scotch and rum. Turkey net sales were up 3% driving premiumisation in the raki category and gained share in scotch and vodka. Total operating margin for the region improved 75bps largely driven by gross margin improvement in Turkey, and overhead cost reduction in Western Europe, which was partially reinvested in marketing spend and route to consumer.

About Author

mike

mike

Related Articles



Food & Drink Business Conference & Exhibition 2016

Upcoming Events

  • October 19, 2017PMA Fresh Summit 2017
  • October 21, 2017Food & Nutrition Conference & Expo 2017
  • October 22, 2017Serbotel
  • October 22, 2017Natexpo
AEC v1.0.4

find food jobs

The Magazine

F&D Business Preferred Suppliers

New Subscriber





Subscribe Here



Advertisements