Reporting centre
Annual Report 2019

Annual Report Snapshot 2019

Introduction

Watch a brief introduction from Ivan and Javier. You can download their full statements above.

Annual Report Snapshot 2019

Performance Highlights

Volume

Equivalent Units (EU)

Year 2019 2018
Volume 245.9m 240.4m

2.3% Reported movement

2.3% Organic movement

 

Net salesi

 

Year 2019 2018
Net sales 12867 12163

5.8% Reported movement

6.1% Organic movement

Operating profit

 

Year 2019 2018
Volume 4042 3691

9.5% Reported movement

9.0% Organic movement

 

Net cash from operating activities

 

Year 2019 2018
Volume 3248 3084

2019 increase of £164m

2019 free cash flowii £2,608m

Earnings per share (eps)

 

Year 2019 2018
EPS 130.7 121.7

Reported movement 7.4%

Eps before exceptional items movementii 10.3%

Total recommended dividend per shareiii

 

Year 2019 2018
Dividend 68.57 65.3

5%

 

 

i Net sales are sales less excise duties. 
ii See definitions and reconciliations on pages 60-65.
iii Includes recommended final dividend of 42.5p.

Positive drinkingi

 

Year 2019
Volume 66.02

 

66.02m people reached with moderation messages from our brands

Health and safety

 

Year 2019 2018
Volume 0.98  1.00

Lost-time accident frequency ii

Water efficiency iii

 

Year 2019 2018
Voume 4.64 4.94

 

 

 

i We launched a new Positive Drinking strategy last year and 2019 is the first year we have reported against this 2025 target.
ii Per 1,000 full-time employees.
iii Data for the year ended 30 June 2018 has been restated where relevant in accordance with Diageo's environmental reporting methodologies.
Within PwC's independent limited assurance scope. For further detail and the reporting methodologies, see our Sustainability & Responsibility Performance Addendum 2019.

 

Volume

EU 49.4m

Equivalent units

Net sales

£ 4,460m

Operating profit

£ 1,948m

Share of net sales

34.9%

Share of volume

20.1%

 

Total Diageo Net sales excludes corporate net sales of £53 million.

Total Diageo Operating profit excludes exceptional operating charges of £74 million (2018 – £128 million) and net corporate operating costs of £189 million (2018 – £158 million).

The above diagram is intended to illustrate general geographic regions of the world in which Diageo has a presence and/or in which its products are sold, and is not intended to imply that Diageo has a presence in and/or that its products are sold in every country within a geographical region.

Volume

EU 45.4m

Equivalent units

Net sales

£ 2,939m

Operating profit

£ 1,014m

Share of net sales

22.9%

Share of volume

18.4%

 

Total Diageo Net sales excludes corporate net sales of £53 million.

Total Diageo Operating profit excludes exceptional operating charges of £74 million (2018 – £128 million) and net corporate operating costs of £189 million (2018 – £158 million).

The above diagram is intended to illustrate general geographic regions of the world in which Diageo has a presence and/or in which its products are sold, and is not intended to imply that Diageo has a presence in and/or that its products are sold in every country within a geographical region.

Volume

EU 33.6m

Equivalent units

Net sales

£ 1,597m

Operating profit

£275m

Share of net sales

12.4%

Share of volume

13.7%

 

Total Diageo Net sales excludes corporate net sales of £53 million.

Total Diageo Operating profit excludes exceptional operating charges of £74 million (2018 – £128 million) and net corporate operating costs of £189 million (2018 – £158 million).

The above diagram is intended to illustrate general geographic regions of the world in which Diageo has a presence and/or in which its products are sold, and is not intended to imply that Diageo has a presence in and/or that its products are sold in every country within a geographical region.

Volume

EU22.4m

Equivalent units

Net sales

£ 1,130m

Operating profit

£ 365m

Share of net sales

8.8%

Share of volume

9.1%

 

Total Diageo Net sales excludes corporate net sales of £53 million.

Total Diageo Operating profit excludes exceptional operating charges of £74 million (2018 – £128 million) and net corporate operating costs of £189 million (2018 – £158 million).

The above diagram is intended to illustrate general geographic regions of the world in which Diageo has a presence and/or in which its products are sold, and is not intended to imply that Diageo has a presence in and/or that its products are sold in every country within a geographical region.

Volume

EU 95.1m

Equivalent units

Net sales

£ 2,688m

Operating profit

£ 703m

Share of net sales

21%

Share of volume

38.7%

 

Total Diageo Net sales excludes corporate net sales of £53 million.

Total Diageo Operating profit excludes exceptional operating charges of £74 million (2018 – £128 million) and net corporate operating costs of £189 million (2018 – £158 million).

The above diagram is intended to illustrate general geographic regions of the world in which Diageo has a presence and/or in which its products are sold, and is not intended to imply that Diageo has a presence in and/or that its products are sold in every country within a geographical region.

Annual Report Snapshot 2019

Business overview

We have a broad portfolio across categories and price points. Our portfolio and geographic reach position us to deliver sustainable performance and create value for our shareholders.

The consumer is at the heart of our business. Using our proven marketing and innovation skills, we aim to build and sustain strong brands that play a positive role in society.

Our organisation is structured in a market-based model. This means we have greater agility and can better apply our strategy in individual countries to meet the diverse needs of our consumers and customers. It also enables us to quickly identify and shape consumer trends to support growth.

We use our local and global market expertise to identify and deliver against the most valuable growth opportunities. Our global supply capabilities enable us to manufacture and distribute our brands efficiently and effectively. Where it makes sense to do so, we source and produce locally.

We are passionate about our role in society and the responsibility we have to our stakeholders, communities and the environment.

We make

We are the makers of premium spirits and beer, committed to the highest quality and standards.

We innovate

Led by consumer insights, we unlock new opportunities to recruit and re-recruit consumers to our brands. We innovate with new offerings that meet changing consumer demands.

We market

We invest in world-class marketing to responsibly build aspirational brands that resonate with our consumers.

We sell

We extend our sales reach through leading activations and advocacy to ensure our brands are part of consumer celebrations around the world.

Everywhere we operate, we aim to do so in a responsible and sustainable way. Our broad portfolio means we can access different consumer occasions with our brands, across price points.

In developed markets, we support premiumisation through our premium core and reserve brands. In emerging markets, we aim to grow participation in international premium spirits. To support this, we selectively participate in attractive mainstream spirits segments. This means consumers can access our brands at affordable price points and we can shape responsible drinking trends by introducing consumers to branded products.

Beer is our second largest category after scotch and our global beer business is led by our premium brand, Guinness. Guinness is available in approximately 130 countries. We use a variety of routes to the consumer, depending on the most efficient model for each market. In Africa, we have a large beer business with a broad portfolio that reaches across price points.

Our focus on consumers, the balance of creative flair and data-led insight in our marketing and our track record for innovation, combined with our financial discipline and everyday efficiency, all support our goal to be a reliable compounder of growth. We aim to combine these to deliver a virtuous circle of consistent top-line performance, margin expansion and increased investment in our brands and business.

Like all consumer sectors, the total beverage alcohol industry faces possible disruption, ranging from changes in consumer trends and regulation through to economic volatility and tariff changes. Our broad and diverse global portfolio provides a natural hedge to any volatility we may encounter. Our extensive consumer knowledge, gained through our local presence and use of data-driven insights, gives us a strong position from which to grow.

The global alcohol market: broad based, growing and profitable1

1Diageo estimates, Euromonitor, IWSR, internal analysis.

Key trends

We believe that drinking in a responsible way is part of a balanced lifestyle in many societies around the world. Drinking occasions and practices vary hugely depending on local culture, traditions and customs. They are constantly evolving, but long-term trends are positive for the industry – with sustained premiumisation, a growing preference for spirits and population growth all playing a part.

Consumers choosing to drink ‘better’

Consumers are ‘drinking better, not more.’ People are looking for products that stand out for their superior quality, authenticity and taste.

In developed markets, in response to sustained premiumisation of spirits, our premium-and-above brands are growing fastest. Our Reserve portfolio of brands capitalises on this premiumisation trend and recent launches, such as our new Villa Ascenti gin, strengthen our position.

In emerging markets, rising prosperity is enabling consumers to trade up to our international spirits brands. Meanwhile, our mainstream spirits brands, like Royal Challenge whisky in India, offer safe, affordable products to consumers in markets where informal alcohol – which is estimated to account for around 25% of global alcohol sales despite the associated health risks and loss of tax revenue – is widespread.

Growing preference for spirits

Consumers who drink alcohol are moving into spirits and away from beer and wine; as well as from illicit alcohol across Africa. This is a long-term trend – spirits are now 53% of total beverage alcohol by volume, up from 48% ten years ago. Gin is an example of a category benefiting from switching, starting in Europe and now accelerating in markets like Australia, South Africa and Brazil. In Brazil, consumer spend on the gin category has grown over 100% a year in the last five years and we have driven growth through the Tanqueray brand. Growth via the on-trade has been the key driver, ensuring a perfect serve with ice and tonic in premium occasions through our Copa Glass programme, supported by investments in marketing and ensuring availability in the right places. This has brought new consumers into the brand and into spirits – 20% of consumers are new to spirits; 50% coming from beer.

Drinking occasions and the route to the consumer are changing

In developed markets, consumers are shifting away from late-night occasions towards food-related and more informal occasions.

Our market insight enables us to innovate existing brands, anticipate new consumer occasions and create the brands of tomorrow. In response to the growing early-evening occasion, we recently launched Smirnoff Infusions in the United Kingdom and United States. It is a new zero-sugar spirits-based drink infusing Smirnoff vodka with real fruit essences, designed to be served in a wine glass with soda and ice. Perfect for long summer evenings, it has an ABV of 23%, with the recommended serve containing 87 calories.

Our focus on route to consumer means we are well placed to seize new innovation opportunities. Our partnership with HBO, for which we have created ‘White Walker by Johnnie Walker’, has recruited new consumers to our iconic Johnnie Walker Scotch brand and to the category, with social media and e-commerce playing a part (see more on page 17). Technology and e-commerce are also changing the route to market. They are shifting the retail landscape, our interactions with on-trade and off-trade customers and the way we interact with consumers. Through our use of data we are constantly evolving our approach to each market and delivering multi-channel customer strategies (see more on page 18).

The global economy

Political instability and changes in economic variables continue to have an impact across the global economy. We cannot change the environment in which we operate, but our global scale helps provide a natural hedge to changing variables. Our market-based model gives us the flexibility to identify and respond quickly to local dynamics. Our broad portfolio of brands means consumers can trade up or down depending on the economic environment.

Macro-economic trends are key considerations for our risk planning, outlined on pages 20-23. Understanding the long-term dynamics of our markets means we can anticipate, innovate and respond to key trends and unlock growth by drawing on the strength of our diverse portfolio and acting with agility.

Safeguarding our future by earning trust and respect

The expectations for businesses to be transparent, open and clear about their purpose have arguably never been greater. That is why earning trust and respect continue to be at the heart of our performance ambition. Stakeholders are increasingly challenging all businesses to show how they make a positive impact and the United Nations’ Sustainable Development Goals provide a framework for businesses to demonstrate their contribution to society.

Earning trust and respect is particularly important for our industry. While the majority of people who choose to enjoy alcohol do so moderately and responsibly, we know the misuse of alcohol can harm individuals and those around them. This can also have adverse impacts on our industry’s reputation and our long-term operating environment. As a global leader in premium alcohol, we are committed to promoting positive drinking, so that our brands and our business have a sustainable future.

As the stewards of brands which have been part of communities around the world for centuries, we understand the importance of long-term thinking and of earning the trust and respect of those around us. Our future success depends on us continuing to promote positive drinking, fostering inclusive economic growth and reducing our environmental impacts, while making sure we do business with integrity and respect for human rights.

Promoting positive drinking

We want to offer consumers the opportunity to ‘drink better, not more’ – an approach that both supports our social values and aligns with our commercial interests as a business making premium drinks. That means we are committed to promoting moderation, while campaigning to reduce harmful drinking and improving laws and industry standards. Our Positive Drinking strategy, described on pages 45-46, includes ambitious targets for areas in which we can have the greatest impact in reducing harm: drink driving, underage drinking and excessive drinking. Through our work, we support the World Health Organization’s (WHO) goal of reducing harmful drinking by 10%.

Acting responsibly in a regulated marketplace

The beverage alcohol industry is highly regulated and that regulation varies widely between countries and jurisdictions. We comply with all laws and regulations, wherever we operate, as a minimum requirement. But we also advocate laws and industry standards, including minimum legal purchase age laws and maximum blood-alcohol concentration driving limits, in countries where these are not already in place. Such measures, as well as protecting individuals and communities, help ensure a sustainable market in which our products can be enjoyed responsibly. At the same time, we advocate against measures that are not based on evidence or which could have unintended consequences, such as pushing consumers toward illicit alcohol, which can be a risk to public health.

Promoting inclusivity and human rights

‘We value each other.’ This statement is one of our five core values and it has never been more relevant. Consumers, employees and many other stakeholders expect businesses to respect human rights and create an inclusive culture. Within our business, this is reflected in a strong policy framework and a strategic commitment to inclusion and diversity, including gender balance and health and safety (see more on pages 58-59). And it extends across our value chain: to our suppliers, distributors and consumers, through our human rights framework and our community programmes designed to empower women, help people develop their skills, and increase access to water, sanitation and hygiene (see more on pages 48-51). This commitment strengthens our supply chain, builds our employer brand and gives us the resilience we need to continue to perform in the future.

Climate change, water stress and a responsible environmental strategy

Any business that relies on agricultural raw materials and water has both a responsibility to the environment around it and an exposure to environmental risks. Our environmental strategy, described in more detail on pages 52-57, is critical to our long-term success. Our programmes reduce carbon emissions and water use throughout our value chain. They also address waste and packaging, including plastic, and the use of more sustainable packaging materials. The linked phenomena of climate change and water stress are particularly material to our business and to the communities around us. With the oversight of our Climate Change Working Group, we are integrating the management of climate-related issues into our business.

Our Water Blueprint defines our approach to water stewardship and prioritises our actions in areas we have defined as water-stressed, as illustrated on page 53. Along with improving water efficiency, we are replenishing the water used in water-stressed areas, supporting catchment area management to benefit all water users, and helping farmers improve water management in agriculture.

We aim to maintain open and positive dialogue with all our stakeholders. This helps us make choices as a business and shape the role that we can and should play in society.

Our mission, values and purpose help guide these relationships across the globe, supported by our local market-based model

Suppliers

We rely on resilient, thriving supply chains for the raw materials we use to make our brands. Together with our suppliers, we work hard to improve our collective impact, from our environmental footprint to supporting small holder farmers.

Government and Regulators

We focus on evidence-based engagement to build trust and reputation with governments and regulators and to ensure we have an effective network of stakeholders on public policy matters. We promote moderation and advocate industry standards.

Customers

Our customers are business partners and experts in the products they buy and sell, as well as the experiences they deliver. We work with both the on- and off-trade to ensure a mutually beneficial relationship that delivers the best outcome for our consumers.

Consumers

Our brands are made with pride and made to be enjoyed responsibly – we want people to drink better, not more. In our interactions with consumers, we use our marketing expertise to promote positive drinking.

Shareholders

Through regular financial reporting and events such as our Annual General Meeting and Capital Markets Day events we ensure an ongoing conversation with shareholders. Our Board’s role is to ensure we create sustainable long-term value for shareholders in a manner which contributes positively to wider society.

Communities

Investing in sustainable growth means supporting and empowering the communities where we live, work, source and sell. By ensuring we make a positive contribution, we can help build thriving communities and strengthen our business.

Employees

We aim to create a trusting, respectful and inclusive culture. We want our people to be proud of their work, empowered to succeed, and to know that their safety and other human rights are respected.

Annual Report Snapshot 2019

In Society

We are proud to be the stewards of some of the most iconic brands in the world, built over generations by people who understood the importance of creating value for the long term, not just the present. We too have a responsibility to think about the future – and we are determined to build a business that continues to make a positive impact on the issues that matter most to our stakeholders and to wider society.

In 2015 we set ourselves ambitious targets for 2020 and have since set additional targets for renewable electricity and plastic packaging. We achieved our 2020 targets to promote positive drinking ahead of schedule, so last year we launched a more ambitious strategy which we report on for the first time this year. Our environmental programmes have achieved a cumulative reduction of 44.7% in our greenhouse gas emissions and we have improved our water efficiency by 43.8% (baseline 2007). We delivered on our original 2020 target for 30% of leadership positions to be held by women back in 2017, then stretched the target to 35% − a figure we exceeded this year.

Our brands have been part of people’s celebrations for generations. We make them with pride, and we want them to be enjoyed responsibly. That means our goal is for people to ‘drink better, not more’ – an approach that both supports our social values, and aligns with our commercial interests as a business making premium drinks. We are committed to promoting moderation, tackling misuse, and improving laws and standards, while respecting the fact that many people choose not to drink alcohol at all.

We achieved our 2020 targets to promote positive drinking ahead of schedule. So last year we launched a more ambitious strategy that will reach millions more people with our core aims of encouraging moderation and tackling alcohol misuse.

Targets for 2025

Progress to date

Download the positive drinking section here.

Positive drinking case studies

Supporting the communities where we live, work, source and sell allows us to strengthen our business while increasing our positive social impact. We aim to promote inclusive growth by embedding and advancing human rights throughout our business, fostering sustainable and inclusive value chains, and delivering programmes that enhance skills and opportunities, and empower women. We supported more than 72,000 farmers in Africa and increased the percentage of agricultural materials sourced locally in Africa to 82%, exceeding our 80% target. We invested £12.6 million or 0.3% of operating profit in community initiatives.  

We are a business which relies on the careful stewardship of natural resources for our long-term success. From the fields in which our raw materials are grown, to the water and energy we use to make our brands, we depend on resources that we share with the communities around us – just as we also share the impacts that result from these resources becoming constrained. We have seen progress against most of our targets, for example we have achieved a cumulative reduction of 44.7% in our greenhouse gas emissions and we have improved our water efficiency by 43.8%. We have made slower progress in some areas, notably the quality of wastewater we discharge and our efforts to reduce the overall weight of our packaging. They will continue to be a focus beyond 2020 and in the next two to three years we plan to address them through a range of solutions, including further investments in wastewater treatment.

We remain committed to our 2020 targets and have also started work to define our ambition and targets for environmental sustainability beyond 2020, which we will share during the course of the next financial year.

Download the environment section here.

Environment case studies

Annual Report Snapshot 2019

Downloads

Annual Report 2019

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Sustainability & Responsibility Performance Addendum 2019

Sustainability & Responsibility Performance Addendum 2019

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