Diageo enjoys cocktail of rising sales and profit

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A bartender takes a bottle of Johnnie Walker whisky at Barmaglot bar in Almaty, Kazakhstan June 22, 2017. REUTERS/Shamil Zhumatov/

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LONDON, Jan 27 (Reuters Breakingviews) - Spirits company Diageo (DGE.L) is flying high. The Johnnie Walker maker reported net sales of 8 billion pounds with organic growth of 20% in the six months to December compared to 2020. Despite rising input costs globally, the 85 billion pound group increased its operating margin 131 basis points organically to 34.5% by hiking prices up more than the cost of producing its drinks rose.

That’s partly due to costs for products like whiskey, which can take over a decade to make, being smoothed out over years. Additionally, it’s because of what Diageo calls “drinking better”, or whacking up prices for posher drinks. Its reserve segment, which includes extra pricey versions of tequila Don Julio, now represents 27% of the total portfolio by revenue and grew 31% in the six month period. That, combined with a gradual shift from beer and wine into spirits, makes Chief Executive Ivan Menezes’ aim to increase Diageo’s booze market share to 6% look achievable read more . (By Dasha Afanasieva)

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(The author is a Reuters Breakingviews columnist. The opinions expressed are their own.)

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Editing by Neil Unmack and Karen Kwok

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