Guinness manufacturer Diageo is demonstrating that good things truly do come to those who wait as, having ridden out the worst of the pandemic, the company reports a really strong start to its new financial year.
The company is benefiting from people opting for premium brands and greater on-trade spending as people get back to restaurants and bars.
“Impressively this is expected to bolster margins, despite the company facing extra costs associated with supply chain constraints,” said AJ Bell’s Russ Mould.
“Most of Diageo’s drinks portfolio is spirits and this is a part of the industry with attractive qualities, including strong growth as consumption increases in emerging markets, cheap costs of production but significant brand power and high selling prices.
“After all people are usually willing to fork out more for their favourites – be that Johnnie Walker whisky or Captain Morgan rum – in a way they wouldn’t necessarily seek out a specific brand of wine, for example.
“The off-trade business which was so crucial while Covid restrictions were in place has remained robust and the Diageo is still to enjoy the benefits of a recovery in the duty-free trade associated with travel hubs.
“The company is not complacent, signalling continuing volatility in its markets but its decision to continue investing in marketing and its commercial know-how demonstrates refreshingly long-term thinking.”