Diageo Rises As People Drink More Baileys, Tequila

Alcohol producer Diageo plc DEO said in its semiannual earnings report that spirit sales in the U.S. were higher by 15% with notable strength in the tequila category.

Strong US Market: Diageo's U.S. sales in the back half of 2020 were supported by more consumers switching away from beer and wine to spirits.

Consumers have picked up a new habit of enjoying higher priced alcohol and duplicating a bar experience at their home. Global net sales were down year-over-year from 7.2 billion pounds ($9.86 billion) to 6.87 billion pounds. 

Sales of the tequila brands Don Julio and Casamigos surged by 80% and the spirit's percentage of total sales rose from 1% five years ago to 7%, according to The Wall Street Journal.

Management's attempts to market Baileys as a year-long beverage paid off, as sales were up 12% in the period in the U.S.

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Global Environment Challenged: Despite strength in the U.S., sales in Europe and Turkey were down 10% and sales in the Asia Pacific fell 3%.

The company noted consumers in several emerging markets were trading down to less expensive brands.

Global beer sales were down 11% in the period, led by weakness in sales of Guinness, which is typically consumed at bars. Scotch sales were down 8% as sales at airports remained depressed.

Recovery 'Hard To Predict': It is "hard to predict" when the COVID-19 pandemic will ease and sales at key categories like bars and airports will improve, Diageo CEO Ivan Menezes said on CNBC. When the world is ready to reopen, Diageo will be able to capitalize through a $100-million recovery fund it launched last year to address the pent-up demand, he said. 

"The consumer desire to socialize, to go to sporting events, to go to festivals is stronger than ever," the CEO said. "So the consumer is going to return."

Photo: Diageo.