By Scott Wright

DRINKS giant Diageo has hailed the performance of luxury whisky brand Johnnie Walker and its wider Scotch portfolio as it reported a big rise in first-half profits, powered by the reopening of the on-trade in the key markets of Europe and North America.

Scotland’s biggest Scotch whisky distiller booked a 22.5 per cent rise in reported operating profit to £2.7 billion for the six months ended December 31, ahead of forecasts. It sent shares up 91p, or 2.5%, to 3735.5p.

The company reported net sales of £8 billion for the first half, 15.8% ahead of the corresponding period last year, as it flagged the resilience of consumer demand in the off-trade, as well as the continuing recovery of the bar, restaurant, hotel and nightclub sector.

It declared its ambition to grow its overall share of the total alcohol beverage market across the world by 50% to 6% by 2030.

Diageo said its growth had been broad-based across “most” product categories and geographic regions – despite ongoing challenges in global supply chains, which are causing shortages of dry goods, such as glass and cardboard, and higher shipping costs.

Scotch whisky sales increased by 27% and drove around one-third of the company’s growth over the period, with sales of Johnnie Walker outperforming the category as a whole, expanding by 31%. The company highlighted “particularly strong growth of Johnnie Walker Black Label and super deluxe variants”.

Chief executive Ivan Menezes told reporters: “In the half, what you see is double-digit growth across all regions… good breadth across categories and momentum across the categories. Scotch has been a terrific acceleration. We grew 27%. Within that, Johnnie Walker is up 31%.”

Mr Menezes said the half had seen a strong performance by whisky in India, where “Johnnie Walker is having a phenomenal year”. Diageo said sales grew by 12% across the board in India, with Scotch growing even faster. Mr Menezes said there are signs of a shift by drinkers to imported, “better quality” whisky brands in the Indian market.

Asked about the effects of global supply chain disruption, Mr Menezes praised colleagues for gaining market share and achieving volume growth of 9% in the face of major challenges, which he said was an“extraordinary job”. He said: “We have been able to deliver this growth working through those challenges, and we expect them to continue for the next few quarters. But we are very focused and we have got good strategic relationships with our key suppliers and the shipping lines to be able to fulfil the market demand. There is no question that it is more of a challenge.”

Diageo said that it continues to benefit from the trend towards “premiumisation”, which has accelerated across the drinks industry as people have spent more money on products to drink at home while the on-trade has been closed or faced with restrictions.

Mr Menezes said: “Our higher-priced brands are growing faster, and it is shifting the mix of Diageo to even more premium spirits, which we think is very healthy and where the consumer trends are going. We are gaining or holding market share in 85% of the world.”

Asked if this trend was at risk of rising inflation, Mr Menezes expressed the view that the current trends would continue, noting that people would continue to see spirits as an affordable treat that still accounted for a small part of their overall expenditure. Spirits continue to take market share from beer and wine, he added.

“People are willing to spend a little more for a better product,” Mr Menezes said.

Diageo said the period had seen Guinness “come back strongly” with the re-opening of the on-trade.

The company is investing in a new Guinness experience in Chicago, one of several long-term projects currently on the slates, which also include a new carbon-neutral distillery in China.

Last summer it opened the doors at its new Johnnie Walker whisky destination on Edinburgh’s Princes Street. The eight-floor attraction is the centrepiece of a £185m investment that the company is making to boost its whisky tourism offer, which includes the development of facilities at distilleries such as Glenkinchie, Clynelish, Cardhu and Caol Ila.

Meanwhile, responding to a question concerning the lifting of Plan B restrictions in England, Mr Menezes said the experience of the period before Omicron showed “consumers are really waiting to get outside the home to socialise, whether it is sporting events or bars or restaurants and clubs”.

Diageo announced an interim dividend of 29.36p per share, up 5% on the interim dividend the year before, and paid out a further £500m in its £4.5bn programme to return capital to shareholders.

It expects to complete the buyback in 2023.