Cocktail culture lifts drink giants: Diageo and Fevertree sales fizz
The rise of cocktail culture in the UK added fizz to the sales of Diageo and Fevertree after pubs and bars were hit by coronavirus restrictions.
Drinkers have used extra time at home to get creative, trying out new recipes and treating themselves to premium spirits.
Fevertree, which makes high-end mixers, increased sales to customers at home by a fifth in 2020.
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Diageo, the world’s biggest drinks maker, defied forecasts to increase sales by 1 per cent between June and December, as ‘off trade’ demand offset tough restrictions on bars, pubs and restaurants.
The owner of Captain Morgan, Baileys and Johnnie Walker said spirits grew faster than wine and beer as people ‘discovered cocktails’ and ‘indulged in higher end brands’.
In the UK overall sales were up 2 per cent, but spirits rose 15 per cent, leading chief executive Ivan Menezes to announce that ‘cocktail culture is alive.’
He said: ‘People are not drinking more, they’re drinking better.’
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The closure of pubs, bars and restaurants has led to more drinkers enjoying a tipple at home, boosting supermarkets and mail order companies.
Virgin, which licenses its brand from Sir Richard Branson’s empire, has hired the investment bank Liberum to get ready for a listing on the AIM market, Sky News reported.
Finance chief Kathy Mikells said: ‘This movement towards cocktails is really recruiting from beer and wine.
‘People can’t spend their money on going on vacation or going out to watch sport, so the idea of indulging in a nice cocktail at the end of the day is an easy trade.’
Life in lockdown has also led consumers to find new occasions to drink, for example, as a treat for finishing a long day on work Zoom calls, bosses said.
Diageo has swooped in to take advantage, for example, by marketing Baileys as a drink that can be enjoyed in the early evening, and not just an after-dinner liqueur.
As Britons turned to baking to while away afternoons at home, Diageo published recipes with Baileys for cakes and banana bread.
Group like-for-like sales rose 1 per cent to £6.9billion in the six months to December 31, despite the closure of pubs, bars and restaurants. Online sales more than doubled.
Diageo hiked the dividend by 1 per cent to 27.96p per share despite statutory profits falling by 10.7 per cent to £2.2billion as costs rose.
In recent weeks analysts have positioned the FTSE 100 company as a likely winner from a return to normality, especially in Asia.
Diageo’s big bets on tequila, including £1billion spent on George Clooney’s Casamigos brand, have also come good with 60 per cent sales growth over the half.
Fevertree, meanwhile, bumped up full-year sales forecasts to £252million, which is just 3 per cent less than 2019.
The robust performance was despite UK sales falling 22 per cent in 2020 because of the closure of bars and pubs.
Sales rose 23 per cent in the US as drinkers took to making cocktails, such as the tequila-based Paloma, and long drinks at home. Shares have rocketed, pushing the company’s valuation close to £3billion.
Fevertree’s chief executive Tim Warrillow said: ‘The pandemic has accelerated the growing interest in premium spirits and long mixed drinks as at-home mixing has taken hold.’