Dive Brief:
- Diageo reported a return to growth for its sales in the U.S. market, with a 10% increase in the second half of the year leading to a 3% jump in organic sales in the region for the year.
- Net profit for fiscal 2016 fell to £2.24 billion ($2.94 billion) from £2.38 a year earlier.
- Overall, net sales declined to £10.49 billion ($13.80 billion) from £10.81 billion, though organic net sales saw a 2.8% uptick.
Dive Insight:
This could signal a turnaround for Diageo in a critical market for the company, as sales declines in the U.S. had dampened overall results in previous earnings reports. Diageo called the past year a time of transition as the company shifted its focus and ramped up innovation to spark a turnaround in the North American market.
That shift in focus includes following "depletions," or the amount of product retailers actually sell, versus the amount the company ships to distributors. With depletions in the U.S. increasing 3% for the year, Diageo execs say they have confidence that growth in this market will continue.
Whiskey brands like Bulleit and Crown Royal drove sales in North America, and Smirnoff vodka and Captain Morgan rum also posted gains. Those sales align with consumers' demand for premium spirits, which was partially what attracted them to craft spirits.
Diageo has answered the call for innovation in spirits in several ways, including shipping the first alcoholic beverage brand in the U.S. (Crown Royal) with a label containing nutrition information. Diageo's accelerator Distill Ventures also made its first investment in a non-alcoholic spirits company earlier this month.
Diageo execs said that it was too soon to notice any impact from Brexit. But the company expects a £1.1 billion ($1.5 billion) increase in net sales and £370 million ($487 million) for net profit due to exchange rate movements in fiscal 2017 after the recent weakness of the British pound. That's because profits Diageo generates outside the U.K. will be worth more when translated back into sterling.