G&T at end of lockdown day does wonders for Diageo

Office workers stuck at home due to COVID-19 are increasingly ­celebrating the end of the work day with an alcohol-based treat.

Diageo Australia chief executive Angus McPherson said the boom in “at-home consumption” was a key trend that had taken hold since the global pandemic emerged. Picture: Jerad Williams

Office workers stuck at home due to COVID-19 are increasingly ­celebrating the end of the work day with a refreshing gin and tonic or bursting into the kitchen to whip up doughnuts and cakes infused with Baileys Irish Cream, mitigating some of the sales lost at shuttered pubs, bars and restaurants.

Diageo Australia chief executive Angus McPherson said the boom in “at-home consumption” was a key trend that had taken hold since the global pandemic emerged, with consumers also reaching for trusted brands, which bolstered earnings for the international drinks giant.

With improved sales in leading brands across a range of spirits segments, including Australia’s Bundaberg Rum, Captain Morgan, Smirnoff, Johnnie Walker, J&B and Baileys Irish Cream, as well as Guinness and Kilkenny beers, Diageo Australia improved its revenue and profits.

“Trusted brands are big and they are strong. So whether it be in whisky with Johnnie Walker or Smirnoff in vodka as an example, they are big and global and they have a really strong consistent consumer fan base,’’ Mr McPherson told The Australian.

“It is not in doubt that consumers, I think across all categories but definitely in spirits, during COVID, headed towards those tried and trusted brands and those that have been around for a long time. The brands that resonate.”

This showed in Diageo Australia’s most recent results for fiscal 2020, which showed revenue at $589.465m, up from $569.895m in 2019, with net profit surging more than 27 per cent to $31.1m.

Mr McPherson, who previously was the head of Treasury Wine Estates’ Australian and US operations, said across the beverages sector there had been a drop in sales as licensed venues were closed, but within the spirits category there had been growth, helped by a pivot to consumption in the home.

“In the last rolling 12 months, from a value perspective, spirits have accounted for 55 per cent of the value growth, but from a value perspective we (spirits) only have a 35 per cent share.

“So, I think things like the gin revolution has really brought a lot of people back into the spirits category, the diversity of it, and there is a bit of a resurgence across the spirits category across Australia.”

This had been especially the case as the COVID-19 pandemic emerged in March, and workers at home looked to rule off the end of the day with a tipple.

“I think there is a real space at the end of the day during COVID, with so many people working from home, they are looking for a ritual to separate the work day to start the evening at home.

“And the one thing about spirits is that you can just pour yourself one drink and then keep the bottle.

“Just make yourself that cocktail at the end of the day, which is as simple as a gin and tonic or a rum and coke.

“It is just a really nice way to separate that work day at home.’’

Mr McPherson said there was one brand within his portfolio showing high growth rates through COVID, and that was Baileys, which he believes was bolstered by another trend — home cooking.

“Baileys has been quite phenomenal during COVID. It is not just a trend we are seeing in Australia but also other markets around the world and again you look at these COVID trends of a treat at the end of the day (and) you see the growth of baking (TV) shows and Baileys has really played into that.

“It is flying. There is a baking phenomenon out there — people are baking bread, creating treats.”

Turning to the key licensed ­venues, restaurants and bars channel, Mr McPherson said Diageo Australia was currently trading at least 30 to 35 per cent down in the on-premise trade.

“As long as they (venues) have restrictions around one person per square metre et cetera it is going to be challenging, not for spirits but for publicans and on premise venues to get back to where they were previously.”