Diageo credits marketing investment boost for powering growth

Diageo increased marketing investment by 27% in the six months to the end of last year, ahead of sales growth, as it looks to build the business for the future.

Diageo has credited increased investment in marketing with helping to drive up margins, increase sales and help a continued push for the “premiumisation” of its products, as it announced interim results for the six months to 31 December 2021.

The drinks giant’s net sales jumped 15.8% to £8bn in the second half of last year, which the company says was supported “by effective marketing and excellent commercial execution”.

Diageo increased marketing investment by 27% over the period, ahead of net sales growth of 20%, as it looks to fuel long-term growth.

Its premium brands contributed 56% of net sales and drove 74% of organic growth.

The group reported an operating profit of £2.7bn, an increase of 22.5%.

Operating margins were up and Diageo showed growth across most categories, with a particularly strong performance in scotch, tequila and beer sales.

It also says price increases and supply productivity savings have “more than offset” the cost of inflation.

The firm says this growth reflects the “continued recovery” of the on-trade following two years of disruption caused by the pandemic, as well as “resilient consumer demand” in the off-trade and market share gains.

Diageo has also committed to re-investing to drive sustainable long-term growth. The company plans to invest in talent, expand its digital capabilities and expand its production capacity, as well as progressing its 10-year sustainability plan.

“We delivered strong organic net sales growth across all regions and operating margin expansion. This performance demonstrates our world-class branding capability, supply chain excellence and agile culture, and reflects the strength of our portfolio across geographies, categories and price tiers,” says Diageo chief executive Ivan Menezes.

“Strong sales volume growth and continued premiumisation drove an improvement in organic operating margin during the half. This was achieved by increasing our investment in marketing to gain share and support innovation, particularly in North America and Greater China,” he adds.

 

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