Guinness manufacturer Diageo Plc has said that its new financial year is off to a "strong start" and forecast a boost to operating margins as people opt for premium brands and spend more at restaurants and bars.
Recovery in Europe has been ahead of its own expectations, while in North America, despite supply constraints, the business has been "performing strongly", the company said in a statement.
Sales at bars and restaurants, hit by COVID-led restrictions last year, are recovering strongly in both regions as higher vaccination rates encourage more people to venture out.
Sales in Africa, Asia Pacific and Latin America and the Caribbean markets are also performing well, but Diageo warned it expects some volatility in these markets to persist.
"We have made a strong start to fiscal '22...as we benefit from resilience in the off-trade (retail) and continued recovery in the on-trade [bars and restaurants]," Diageo chief executive Ivan Menezes said.
The company is also benefitting from customers trading up to more premium drinks and from a rise in sales through higher margin channels such as e-commerce, Menezes added.
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Full Menezes Statement
Menezes's full statement, as published on Diageo's website, is as follows, "We have made a strong start to fiscal '22, with organic net sales momentum across all regions. This reflects excellent execution, as we benefit from resilience in the off-trade and continued recovery in the on-trade. However, we expect near-term volatility to remain, including the potential impact of any future waves of COVID-19.
"Our North American business is performing strongly, despite some supply chain constraints, reflecting resilient consumer demand. We continue to invest ahead in marketing and innovation to underpin long-term growth. Our business in Europe is recovering ahead of our expectations. Off-trade demand has remained robust and there is good momentum in the on-trade. Our businesses in Africa, Asia Pacific and Latin America and the Caribbean are performing well, although volatility in these markets is likely to persist. Travel Retail continues to be disrupted.
"We expect organic operating margin to benefit from a further recovery in sales volumes, positive channel mix and premiumisation trends, while we are continuing to invest in our marketing and commercial capabilities. As previously indicated, we are managing rising inflationary pressures, which are partly due to supply chain constraints.
"I am pleased with how our business is performing and I remain confident in our ability to deliver long-term sustainable growth and shareholder value. We will continue to do business in the right way, from grain to glass, for all our stakeholders."
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