Recently, Diageo, a world-renowned spirits group, announced its results for the first half of fiscal year 2024 (July 1 to December 31, 2023). In Latin America and the Caribbean, the decline in consumption due to macroeconomic pressures led to a slight decline in Diageo's overall sales volume, value and profit.
Thanks to the good performance in Europe, Asia Pacific and Africa, the global markets of the entire Group remained relatively balanced. Among them, Greater China, where the Chinese market is located, achieved a significant increase in volume, with organic sales volume and net sales increasing significantly.
The overall volume and volume both fell, and the operating profit fell by 5 year-on-year4%
According to the financial report, Diageo's global sales in the first half of fiscal year 2024 fell by 5% year-on-year2%；Net sales were 109US$6.2 billion, down 0.0 percent year-on-year6%；Operating profit was 33US$1.7 billion, down 54%, in terms of volume, amount, and profit, there was a slight decline.
By region, Latin America and the Caribbean was the worst performer, with volume down 19% organically and net sales down 235 percent, while organic operating profit declined by 41 percent year-on-year, with the region accounting for nearly 10 percent of Diageo's net sales. North America, the world's largest regional market, also saw a slight decline, with sales down 3% year-on-year and net sales down 15 percent, while organic operating profit was down 1 percent year-on-year.
Despite some growth in Europe, Asia-Pacific and Africa, the decline in these two regions, particularly in Latin America and the Caribbean, was a direct drag on the overall performance.
In Europe, the second largest regional market, net sales increased by 3.0 year-on-year, despite lower volumes4%；Net sales in the Asia-Pacific region, the third largest regional market, also increased organically by 59%, which is the best performing regional market (since there is no specific net sales mentioned in the financial report, the spirits business estimates that the Asia-Pacific market has net sales of about US$2.2 billion based on the 20% share of the Asia-Pacific market given in the report); Net sales in Africa also increased by 9.Qo3%。
Diageo said in the report that in the North American market, demand in the United States is shrinking. And due to ** competition, especially ** competition for whiskey and tequila**, the company lost part of the market share. Mexico, on the other hand, in Latin America and the Caribbean, identified the problem in October last year due to a large backlog of inventory in the local market due to slowing sales, and issued a related profit warning in November.
For his part, Diageo CEO Debra Crew said: "The first half of the 2024 financial year was challenging for Diageo and the industry as we delivered high-single-digit growth in the last financial year and faced a volatile global consumer environment. So in this context, the strategy and depth of our diversified layout is more important than ever. ”
In terms of sales categories, spirits are still its first category, accounting for 80%, of which Scotch whisky is still Diageo's largest liquor, accounting for 26% of its total net sales, and its sales volume and value in the first half of the year fell by 10%, making it the only category with double-digit declines in volume and value.
The double-digit growth in Greater China was mainly due to the large increase in Shuijingfang's performance
The best-performing Asia-Pacific market accounted for approximately 20% of Diageo's market share in the first half of fiscal 2024. Greater China, where the Chinese market is located, has become the secondary regional market with the largest contribution to performance, with double-digit organic growth rates in volume and value, respectively.
However, the financial report also pointed out that one of the backgrounds of the rapid growth in Greater China is based on the lower growth rate in the first half of fiscal 2023.
Across the Asia-Pacific region, spirits net sales increased organically by 8 percent, driven by strong double-digit growth in Chinese liquor and double-digit growth in whisky.
Among them, the year-on-year growth rate of Chinese liquor represented by Shuijingfang reached %, which is not only the largest growth brand in Diageo Asia Pacific, but also the brand with the largest growth in the global market.
Diageo also said that net sales increased organically by 18% across Greater China, also due to the strong growth of Chinese liquor, which reflects the recovery of consumption in the market after the easing of Covid restrictions, and Greater China is the second largest market in the Asia-Pacific region after India.
At the same time, the product mix across the Asia-Pacific region was also 8% year-on-year. According to the financial report, it is mainly driven by the overall product *** and the growth of sales of high-end and ultra-premium products of Chinese liquor, Scotch whisky and tequila.
From the perspective of major brands in the Asia-Pacific region, in addition to Shuijingfang in the liquor category, Solvay's brands such as The Singleton, Royal Challenge, and Black & White have achieved double-digit growth in volume and value, becoming another major "engine" for growth in the Asia-Pacific region.
Diageo is mainly whisky in the domestic market, in addition to baijiu and shuijingfang. Among them, Johnnie Walker and Sugden are Solvay brands that have a certain reputation and market in China. However, since the second half of last year, the entire domestic whisky market has cooled significantly. At least from the perspective of channels and end markets, overall sales are declining. Therefore, the data in the financial report either reflects the growth of other regions, or the situation in the Chinese market has not yet been passed on to the manufacturers. A whisky merchant in Fujian said.
As for the sharp increase in Shuijingfang's performance, a senior liquor marketing expert also told the spirits business: "At least from the performance of the first three quarters of 2023, Shuijingfang has not increased significantly, and even declined slightly. Therefore, the growth of Shuijingfang in Diageo's financial report is more than that of other businesses in the group. In fact, judging from the longitudinal data in recent years, Shuijingfang's own performance growth is not so obvious. ”
However, according to the latest operating data released by Sichuan Shuijingfang Co., Ltd., the listed entity of Shuijingfang in China, it is indeed expected that the annual revenue in 2023 will increase by 2 percent year-on-year800 million, an increase of about 6% year-on-year. And in the first half of 2023, its revenue is still at 26The sharp decline of 38% shows that its growth in the second half of 2023 is relatively obvious, which is in line with the statement of the parent company Diageo's financial report.
At the end of Diageo's earnings report, Diageo expects its organic net sales growth to gradually improve in the second half of the 2024 financial year compared to the growth rate in the first half of the year. And ** By FY2025, with the improvement of the global consumption environment, the performance will further improve compared to FY2024. Profitability will be broadly in line with organic operating profit growth and organic net sales growth.