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Chief Executive’s and Chairman’s statements

Creating a positive impact and emerging stronger

Performance highlights

Volume

Equivalent Units (EU)

Year 2021 2020
Volume 238.4m 217.0m

Reported movement 9.9%

Organic movement 11.2%

 

Net sales1

Year 2021 2020
Volume 12733 11752

Reported movement 8.3%

Organic movement 16.0%

Operating profit

Year 2021 2020
Profit 3731 2137

Reported movement 74.6%

Organic movement 17.7%

Net cash from operating activities

Year 2021 2020
Volume 3654 2320

2021 increase of £1,334m

2021 free cash flow2 £3,037m

Earnings per share (eps)

Year 2021 2020
EPS 113.8 60.1

Reported movement 89.4%

eps before exceptional items movement2 7.4%

Total recommended dividend per share3

Year 2021 2020
Dividend 72.55 69.88

4%

 


1 Net sales are sales less excise duties
2 See definitions and reconciliation of non-GAAP measures to GAAP measures on pages 74-83 of the Annual Report
3 Includes recommended final dividend of 44.59p

Unless otherwise stated in this document, percentage movements refer to organic movements which are non-GAAP measures. For a definition of organic movement and reconciliation of non-GAAP measures to GAAP measures, see pages 74-83 of the Annual Report. Share refers to value share. Percentage figures presented are reflective of a year-on-year comparison, namely 2020-2021, unless otherwise specified.

Positive drinking

 

Year 2021 2020
Volume 210,443 376,102

 

Number of people educated on the dangers of underage drinking through a Diageo supported education programme

Health and safety

 

Year 2021 2020
Volume 1.03 0.60

Lost-time accident frequency rate4

 

Water efficiency5

 

Year 2021 2020
Volume 4.30 4.66

Carbon emissions

(1,000 tonnes CO2e)

Year 2021 2020
Volume 481 507

 

 

4 Per 1,000 full-time employees
5 Data for the year ended 30 June 2020 has been restated where relevant in accordance with Diageo’s environmental reporting methodologies

∆ Within PricewaterhouseCoopers LLP’s (PwC) independent limited assurance scope. For further detail and the reporting methodologies, see our ESG Reporting Index.

 

Connecting purpose to performance

Building a company that will prosper over the long term

We are a global company built on and sustained through innovation, creating new products, categories and experiences for consumers.

We are the stewards of iconic, purpose-led brands created by entrepreneurs like John and Alexander Walker, Elizabeth Cumming, Charles Tanqueray, Arthur Guinness and many more that have followed in their footsteps. Today, we stand on their shoulders and act with the same entrepreneurial spirit and determination.

 

Connecting purpose to performance (PDF 419KB)

 

Our brands

With over 200 brands sold in more than 180 countries, our portfolio offers something for every taste and celebration

We own Johnnie Walker and Smirnoff, two of the world’s four largest international spirits brands by retail sales value¹

Our premium brands

  • 1 IWSR, 2020

People and brands are at the very heart of Diageo. To develop, launch and grow a brand requires creativity, determination and belief. Arthur Guinness had belief – signing a 9,000-year lease on the St. James’s Gate Brewery in Dublin. Alexander Walker, John’s son, was determined that their whiskies would be carried by every ship’s captain, ‘from the four corners of Scotland to the four corners of the world’. Today, our people share these attributes, combining their entrepreneurial flair and award-winning creativity, with deep understanding of consumer insights and the latest data to nurture and build our brands.

Discover our portfolio

Diageo's brand portfolio

Investment proposition

Positioned to win

Diageo is a global leader in the premium and above spirits segment – which is growing globally and gaining share.1

And with Guinness at the heart of our portfolio, the majority of our beer business is positioned in the premium, flavourful beer segments, which are growing fastest.2

In an attractive industry

Total beverage alcohol (TBA) has a strong record of value growth over the last 10 years, with international spirits growing faster than TBA.3 Premiumisation has been a consistent trend with the highest price tiers growing at more than double the spirits category growth rate between 2015 and 2020.4 And our Reserve portfolio of exceptional brands, which is focussed on capturing the global luxury opportunity, grew 36% this year.

With a leading footprint and brand portfolio

Diageo owns over 200 brands sold in more than 180 countries. Combined with the breadth and depth of our portfolio across attractive categories and price points, we have both exposure to some of the greatest consumer growth opportunities, and some resilience to global trading volatility.

An effective route to consumer

We need to have the right product in the right place at the right time in order to win with consumers. We have invested in transformational digital and data capabilities that deliver consistent ways of working and enable teams to bring a customer-first mindset to every interaction. Our tools, such as Trax, EDGE365 and Diageo One, give us deeper insights that improve the quality of our customer service and enhance our productivity. We are also building our e-commerce and direct-to-consumer capabilities, which further expand our sales reach to consumers.

In combination with the strength of our on-trade customer relationships, which are enhanced through programmes such as Diageo Reserve World ClassTM and Diageo Bar Academy, we have an effective route to our consumers that we continue to work to improve.

Financial strength and a culture of efficiency

A culture of efficiency and effectiveness is embedded across Diageo. We continue to deliver progress on productivity, creating savings that fuel investments across our business. We continuously challenge ourselves to simplify and automate more of our processes and systems, enabling faster and better decision-making.

Highly engaged people

Our people make the difference. This year, 89% of respondents to our Your Voice survey told us they are proud to work for Diageo and 81% would recommend Diageo as a great place to work.5

And a commitment to shaping a more sustainable future

It is fundamental to our Performance Ambition that we do business in the right way, which is why our ‘Society 2030: Spirit of Progress’ action plan is an integrated part of our strategic priorities. We strongly believe there are commercial benefits to our actions across a full range of ESG issues. These are not just about meeting regulatory requirements and stakeholder expectations, but are fundamental to attracting and retaining the best talent, building deep consumer loyalty, creating new partnerships, and increasing innovation, efficiency and resilience across our operations.

  • 1 IWSR, 2020 – retail sales value (RSV) CAGR 2010-2020
  • 2 Global Data, 2019
  • 3, 4 IWSR, 2020
  • 5 85% of our global employees completed the survey

Market dynamics

An attractive industry with a runway for growth

Tanqueray Sevilla Orange

Drinking occasions and practices vary depending on local culture and traditions. We believe that drinking in a responsible way can be part of a balanced lifestyle in many societies around the world.

Our markets are shaped by long-term consumer, economic, cultural and social trends, and the regulatory environment. Premium total beverage alcohol has remained resilient during Covid-19 and the long-term trends for our industry remain attractive.

  • Consumers want to ‘drink better’
  • Consumers are increasingly choosing spirits
  • An emerging middle class who can afford international-style spirits
  • Consumers are changing how they socialise
  • Consumers are changing how they buy
  • A complex regulatory environment
  • Consumers expect businesses to act responsibly
  • Retail sales value of global alcohol market¹

    £728 billion
  • Equivalent units of alcohol sold²

    5 billion
  • New legal purchase age consumers expected to enter the market by 2031³

    600 million
  • 1,2 IWSR, 2020
  • 3 World Bank, 2021

Find more out about our e-commerce strategy and our super premium and luxury portfolio in China.

You can read more about our market dynamics in the PDF download below.

Business model

Creating a truly sustainable business for the long term

We deliver our strategic priorities through a business model that leverages global and local expertise, has the consumer at its heart and puts our responsibilities to our stakeholders front and centre.

Through our ‘Society 2030: Spirit of Progress’ 10-year action plan, we want to help create a more inclusive and sustainable world, creating a positive impact in our company, with our communities and for our society.

Our business activities
 

  • Consumer insights

    We continually evolve our data tools to understand consumers’ attitudes and motivations. We convert this information into insights which enable us to respond with agility to our consumers’ interests and preferences.

  • Sourcing

    From smallholder farmers in Africa to multinational companies, we work with our suppliers to procure high-quality raw materials and services. Where it is practicable, we source locally.

  • Marketing

    We invest in world-class marketing to responsibly build vibrant brands that resonate with our consumers. We have a rigorous global Marketing Code and belong to the Global Alliance for Responsible Media, working with peers to push for further consumer and brand safeguards.

  • Innovation

    Using our deep understanding of trends and consumer socialising occasions, we focus on driving sustainable innovation that provides new products and experiences for consumers, whether they choose to drink alcohol or not.

  • Distilling and brewing

    We distil, brew, bottle and distribute our spirits and beer brands through a globally co-ordinated supply operation, working to the highest quality and manufacturing standards. Where it makes sense, we produce locally.

  • Selling

    We grow by working closely with our customers. Our global and local sales teams use our data, digital tools and insights to extend our sales reach, improve our execution and help generate value for us and for our customers. When our customers grow, we grow too.

Find out more about our business model and the value we create for our stakeholders in the PDF download below.

  • 27,650

    people

  • 200+

    brands

  • 180+

    countries

  • 138

    sites

Stakeholder engagement

Ensuring a continuous dialogue

Engaging with stakeholders in Kenya

We aim to maintain open and positive dialogue with all our stakeholders, considering their key interests and communicating with them on a regular basis. This dialogue helps us build trust and respect and make choices as a business that help shape the role we play in society.

The strength of our stakeholder relationships has never been more important than during Covid-19. We continue to be committed to actively supporting our people, our industry and our communities.

Learn more about how we engage with our stakeholders in the PDF downloads below.

Strategic priorities

Delivering our Performance Ambition

Our strategic priorities support the achievement of our ambition to be one of the best performing, most trusted and respected consumer products companies in the world. Through them, we deliver the strategic outcomes against which we measure our performance.

Our strategic priorities

Our six inter-related and mutually reinforcing priorities drive our company forward.
Read more below and in our Case Studies.

Sustain quality growth

Creating sustainable and consistent quality growth is at the heart of our ambition to be ‘one of the best performing’. It means delivering consistent net sales and margin growth as well as top-tier shareholder returns.

Creating sustained, quality growth is not new to us. Brands such as Guinness, Tanqueray and Baileys show how the right approach to quality, brand building, innovation and investing for the long term can build lasting value. 

Embed everyday efficiency

Everyday efficiency creates the fuel that allows us to invest smartly and sustain quality growth. At its heart, everyday efficiency is a mindset and a culture, which everyone in Diageo is encouraged to bring to life in their daily work.

We are focussed on ensuring our resources are deployed where they are most effective. This means using technology and data analytics to make better, faster decisions and work in a more agile way.

It also means simplifying our business so that we can liberate our teams to better meet the needs of our consumers and customers. At the same time as freeing resources to focus on great performance, everyday efficiency generates savings that we can reinvest smartly.

Invest smartly

We are investing in the future success of our business – but that investment needs to be ‘smart’ to support the delivery of consistent performance and enable sustainable, quality growth.

We focus our investment in areas where we believe it will bring the greatest benefits: our people; advertising and promotional (A&P) spend; technology, data and e-commerce; capital expenditure; and mergers and acquisitions (M&A).

Promote positive drinking

We want to change the way the world drinks for the better. That means promoting moderation and continuing to address the harmful use of alcohol by changing attitudes and expanding our programmes that tackle underage drinking, drink driving and binge drinking.

Promoting moderation and addressing the harmful use of alcohol is not only the right thing to do – it is an essential part of our Performance Ambition. Our commercial success depends on us creating a positive impact on society, wherever we live, work, source and sell. And, as a premium drinks company, we want people around the world who choose to drink alcohol to drink better, not more – and to trade up to our higher quality, better-tasting drinks.

Our brands have been part of people’s celebrations for generations. We make them with pride – and they are made to be enjoyed responsibly.

Champion inclusion and diversity

We champion inclusion and diversity across our business: from the way we attract, develop, retain and recruit the very best diverse talent, to the way we source services and progressively portray diversity through our brands. We are determined to remove barriers, while having a positive impact on our partners, suppliers and communities.

We want to have world-leading employment policies and practices that foster inclusion. At the same time, we aim to use our influence, creative skills and media spend to help shape a more tolerant society.

An inclusive and diverse culture has always been central to our purpose of ‘Celebrating life, every day, everywhere’. As well as being the right thing to do, having the best and most diverse talent drives innovation and commercial performance.

Pioneer-grain-to-glass-sustainability

We have always understood that for our business to be sustainable, it needs to create enduring value – for us and for those around us. Our ‘Society 2030: Spirit of Progress’ ambitions take us further than ever in our drive to preserve water for life, accelerate to a low carbon world, and become sustainable by design.

‘Society 2030: Spirit of Progress’ is our 10-year action plan for contributing to the achievement of the UN Sustainable Development Goals (SDGs). It sets out how we will build on our track record, pioneer new approaches, and work with others to make a difference in the critical period to 2030, while giving our business a platform for sustained and responsible quality growth.

Our long-term success depends on the people and planet around us. Poverty, inequality, climate change, water stress, biodiversity loss and other challenges threaten the environment and the prosperity of communities. We must make sure that our stakeholders and society at large all thrive as a result of our business. Our commercial performance and effective stewardship of the environment go hand in hand, because sustainability is critical to the efficiency and effectiveness of our operations and our ability to maintain trust and respect.

‘Society 2030: Spirit of Progress’

We are committed to building a more sustainable, responsible, and inclusive business and society

To lead our business through the next decade, we have set 25 ambitious goals which are aligned to the United Nations’ Sustainable Development Goals. The issues facing society are complex and connected and we are focussed on the impact we can have throughout our value chain across communities, suppliers, our partners, customers and consumers. From our people to our brands and the way we promote our category, we will leverage the full breadth and reach of our business to shape market-leading policies and practices.
 

Read more about our ‘Society 2030: Spirit of Progress’ plan below, as well as how we are putting it into action in our Case Studies.

  • We want to change the way the world drinks for the better.

    We will do this by celebrating moderation and continuing to address the harmful use of alcohol, expanding our programmes that tackle underage drinking, drink driving and binge drinking.

  • We believe the most inclusive and diverse culture makes for a better business and a better world.

    We will champion inclusion and diversity across our business, with our partners and communities, to celebrate diversity and help shape a tolerant society.

  • We are committed to preserving the natural resources on which we all depend.

    We will work in partnership to tackle climate change, water stress and biodiversity loss, and help create a more sustainable world.

  • Water is the basis of life and our most precious resource.

    By 2030, every drink we make will use 30% less water than today and by 2026 we will replenish more water than we use in all our water-stressed areas.

  • We all have a responsibility to restore the natural world on which life depends.

    We will do our bit by eliminating waste from our value chain, collaborating with farmers to regenerate landscapes, and creating innovative solutions to grow sustainably.

  • The planet needs significant science-based action to create a sustainable low-carbon future.

    We will decarbonise our own operations by 2030 and work with our suppliers to halve theirs, too.

  • We believe doing business the right way contributes to a fair and just society.

    We will create an environment where all our people feel they are treated fairly and with respect. We will act with integrity, to ensure we are doing business in the right way, meeting external expectations and our own standards.

Learn more about our ‘Society 2030: Spirit of Progress’ plan and targets.

Doing the right thing, in the right way, is the foundation of our business. Learn more about our human rights approach and health and safety strategy in the PDF download below.

Performing against our 2030 targets

Our targets underpin our ‘Society 2030: Spirit of Progress’ action plan

Our action plan to help create a more inclusive and sustainable world is supported by a comprehensive set of goals that help us drive, measure and report transparently on our progress.

In 2015, we set a range of environmental and social goals for 2020 and in November 2020 we set additional goals in areas including renewable electricity and plastic packaging.

Spirit of Progress: Society 2030 logo

Our ESG reporting approach

The non-financial reporting space is evolving quickly

We are committed to continual evaluation and improvement of our approach and to actively tracking emerging ESG frameworks and good practice. Our ESG reporting suite aims to provide comprehensive and comparable disclosures for a broad range of stakeholders.

As well as publishing our integrated Annual Report and ESG Reporting Index at the year-end, we also submit non-financial information to benchmarking and index organisations throughout the year.

In our ESG Reporting Index we give additional disclosures in line with the GRI Standards index and the UNGC advanced reporting criteria index, plus our response to the Sustainability Accounting Standards Board (SASB).

Relevant policies and standards

 

Focus area Read more
Promote positive drinking
Champion inclusion and diversity
Our people
Pioneer grain-to-glass sustainability
Human rights
Health and safety
Anti-bribery and corruption

Responding to climate risk

Committed to combatting climate change

We have a longstanding commitment to combatting climate change and the related issue of water stress. Since 2008, we have been working to decarbonise our value chain, implementing adaptation measures and acting as champions for water stewardship around the world.

This focus forms a key part of our strategic priorities, which support the achievement of our ambition to be one of the best performing, most trusted and respected consumer products companies in the world.

We welcome the Task Force on Climate-related Financial Disclosures

(TCFD) as an important step in increasing stakeholders’ and companies’ focus on climate change. We have incorporated the TCFD framework into our reporting and are accelerating efforts to mitigate climate change risks and identify opportunities for transitioning quickly to a low carbon future.

Responding to climate risk (PDF 1.1MB)

Downloads

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Annual Report 2021

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ESG Reporting Index

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