The world’s biggest spirits company, whose brands include Johnnie Walker scotch whisky, Smirnoff vodka, Tanqueray gin, Captain Morgan rum and Guinness stout, reported a 47% drop in full year operating profits, its preferred measure, to £2.1bn.
Shares of the company, the eighth highest in Footsie, fell by 5.5% in the news.
The closure of bars and restaurants in reaction to the pandemic and the entry of foreigners, and therefore sales of duty-free products, have led to a decrease in sales and profits in almost all geographical areas.
Sales in Asia fell by 16%, Latin America and the Caribbean by 20%, Africa by 16% and Europe and Turkey by 13%.
In North America alone, Diageo’s largest individual geographic market, sales increased and the company enjoyed a 4% increase.
Ivan Menezes, the chief executive, said there were three reasons why North America had bucked the trend.
He told Sky News: “Here’s the big difference: in North America, 80% of consumers, pre-COVID, at home, only 20% of the company is outside. So, it’s a factor.
“The time is that spirits grow faster than beer and wine, and even during the COVID break period, we see spirits gain [market share] through wine and beer.”
“The third trend that remains positive is for other people to drink products at higher prices. Tequila is working very well in North America. Don Julio, Casamigos is developing rapidly.
“Put everything in combination and North America, our largest and most successful market, is very resilient.”
Mr Menezes stated that these points were provided elsewhere.
He added: “COVID has impacted socialising especially outside the home. In Europe, half of our business is consumed out of the home – in bars, and pubs and restaurants and festivals – and so in these last few months we took a significant reduction there.”
Among the main casualties, in terms of specific brands, appears to have been Guinness.
The stout’s sales were down by 16% during the year as it is heavily dependent on the on-trade in Europe although, in recent weeks, it is understood to have been gaining market share.
Africa, where 60% of sales are in beer, had also been problematic for that reason.
Menezes said that unrest in express markets such as India and South Africa, which had banned the sale of alcohol at the close, was absolutely unsolved.
Like many big international drinks companies recently, Diageo has also written down the value of some of its assets, taking a £1.3bn hit in India, Nigeria, Ethiopia and South Korea.
The measure follows the resolution through Heineken, the world’s second-largest brewery, at asset price through 550 million euros on Monday and last week’s resolution through AB InBev, the world’s largest brewery, at the price of some of its assets. $2.5 billion.
Despite the difficult advertising conditions, Menezes said that Diageo had continued to innovate, presenting as an example the recent advent of the Sicilian versions of lemon and Mediterranean orange of Gordon gin.
The company reduced its marketing spending by 10%, however, Mr Menezes insisted that this had been done in a very real way.
He added: “Much of our marketing is aimed at experimental occasions: festivals, tastings and concerts. This kind of thing we’ve reduced but, at the same time, we’ve been in consumption” at home.”
An example of this, he said, “Johnnie Walker Kitchen Sink Drinks.”
As a component of the campaign, visitors are encouraged to touch Johnnie Walker’s waiters to tell them what’s in their fridge or freezer. The waiters then advise on cocktails that can be prepared with those ingredients.
Menezes added: “The preference for quality cocktails in the bar is superior, so we have been rotating our marketing and social commitment around those home opportunities, while some of our outdoor markets, for apparent reasons, have shrunk.”
He said other successful promotions had been to take advantage of the expansion of homemade pastries by encouraging consumers to use Bailey’s Irish cream in their recipes.
Unlike other giant companies, which have tried to keep their money by passing their dividends, Diageo has actually increased the full annual payment by 2%.
Mr Menezes explained: “This is a company with smart liquidity and we generate a positive flow of money. The dividend resolution [reflects] that we rely on the long term and that we are making an investment in the company.
“This is a company that is measured in months and quarters, but in years and decades. We have a long-term vision and are confident that the company will return to resilient growth.”
There is no further evidence of this in the long run than the fact that this year Diageo celebrates the 200th anniversary of Johnnie Walker.
Four new versions of the whisky, including a limited edition of the exclusive Johnnie Walker Blue Label, are being released in October to mark the occasion.
Whisky fans will also be relieved to learn that the company is moving forward with its plan to reopen two long-closed distilleries: Port Ellen on Islay Island and Brora on the east coast of Sutherland.
He announced plans in 2017 to reopen the sites, either closed for more than 30 years, this year in reaction to the growing demand for Scotch whisky.
Asked if those plans had been blown off-course, Mr Menezes said: “No, no, we’re committed to getting them up and running.
“Construction stopped for a few months, including our Johnnie Walker Experience Centre at Princes Street in Edinburgh, so it’s a bit delayed, but we’re very committed to keeping our investments in Scotland and Scotch whisky.
“We see whisky as being a very attractive category for the long term and so those investments will continue.”
Even investors scalded by today’s share price reverse will drink to that.