Diageo watches over cannabis as gin and tequila sales soar

Wednesday 31st July 2019 05:41 EDT

Drinks giant Diageo stated it was keeping an eye on the North American cannabis industry, as soaring gin and tequila sales helped boost profits. Pretax profit rode by 12 per cent to £4.2bn on the back of sales that were nearly 6 per cent higher at £12.9bn, triggering plans to return £4.5bn to shareholders over the next three years.

The best-performing spirits in the firm's cabinet were gin and tequila. Led by its brand Tanqueray, gin sales were up 23 per cent, while tequila grey by 37 per cent thanks to the surging popularity of its Don Julio label. A whisky tie-up with Game of Thrones that spawned White Walker by Johnnie Walker helped boost scotch, which accounts for a quarter of the company's net sales, by 6 per cent. Diageo has so far shied away from the strategy taken by rivals such as the US drinks firm Constelllation Brands, which bought 40 per cent of the world's largest cannabis firm Canopy Growth to secure a foothold in the fast-growing industry.

However, Diageo chief executive, Ivan Menezes said the company could not rule out following suit, depending on how the market develops for cannabis, which is legal in Canada and some US states. "On cannabis we're just tracking it, it's at a very early stage. We're looking at the sector, it's nascent and we just want to understand the consumer behaviour." He added that Diageo's business did not appear to have been affected by the legalisation of cannabis in parts of the US, tallying with research suggesting drinkers have not switched in large numbers to smoking marjiuana.

Menezes also said Diageo had no need to follow in the footsteps of multinational beer companies by shelling out for a craft brewery. He said, "The ultimate craft brewer is Guinness." His company has spent £150mn on a new Johnnie Walker visitor centre in Edinburgh, which it plans to open in time for the scotch brand's 200th anniversary next year. They, however, have been slightly overshadowed by the threat of strike action across its Scottish operations.

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