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Diageo at CAGNY

February 2012

Making a strong business stronger

Paul Walsh
CEO

2. 3 . 16% ROIC.Diageo  World‟s leading premium drinks company – outstanding brands and global reach  c40% of our business in the wealth creating. emerging markets of the world  Enhancing our position through world class marketing  Consistently leading the industry in innovation  29% operating margin.2x net debt: EBITDA Year ended 30 June 2011.

4 .Accelerating value creation Faster organic net sales growth Strong platform + Expansion in faster growing markets + Sharper focus Aim: 6% CAGR in the medium term Organic operating margin improvement Aim: The first 200bpts by year ending 2014 EPS growth Maximising cash and returns Aim: Double digit growth in core* eps * Excluding foreign exchange and exceptional items.

Diageo is well positioned for growth Outstanding brand portfolio Superior route-tomarket Scale & Agility Industry leading marketing skills Worldclass innovation Industry leading sales capabilities 5 .

Outstanding brand portfolio 6 .

Unparalleled breadth and depth Vodka Scotch Whiskey Gin Tequila Rum Cordials Ultra Premium Super Premium Premium Popular / Value 7 .

Broadening our brand range through acquisitions Ketel One Zacapa Mey İçki ShuiJingFang 8 .

Broadening our brand range through innovation Premiumising our brands Emerging middle class consumers The female opportunity Unlocking growth in developed markets 9 .

Industry leading marketing skills Strategic alliances Multi-cultural expertise Pioneering digital Luxury 10 .

11 .

Renewed customer focus at a market level is driving top line growth Ease of shop Cocktails on tap Brand activation Portfolio programs Luxury activation Off premise 12 On premise .

Superior routes to market  Leadership in US Spirits  #1 International spirits company in Asia Pacific and Latin America  Leading beer and spirits company in Africa 13 .

14 .Enhancing our presence in the wealth creating markets  c40% of our business is now in the emerging markets  18% NSV and 23% OP growth with increased investment* Marketing up 20%* Investment in inmarket organisations up 15%* * 6 months ended 31 December 2011.

The operating model review gave us:  Differentiated strategies by market  Focus on global and local  Prioritising commercial success  Standards of compliance and reputation are non-negotiable 15 .

North America driving efficient growth  North America is an attractive growth market for beverage alcohol: Per capita spirits consumption is increasing Consumers trading up Resilience of spirits growth Growth in wine and discovery beer  Diageo is well positioned for growth Focus on spirits. wine and discovery beer Unique relationships with our customers Scale and excellence in innovation and marketing  Our new operating model has strengthened our focus  We are accelerating top line growth. sustaining margin expansion and increasing returns 16 .

effective investment and roll out of marketing and innovation  Focus on accelerating the growth of super premium brands  Able to fund incremental marketing and drive operating margin expansion 17 .One integrated Western Europe market  A consumer and customer focused agenda  Winning customer partnerships  Rapid.

Supply goals: Enhancing margin and enabling growth  Competitive advantage in cost will deliver gross margin expansion through Asset rationalisation Advantaged sourcing  Competitive advantage in service will help accelerate top line growth through Collaborating more closely with customers Accelerating the rate of product innovation 18 .

5 billion  7% increase in interim dividend 6 months ended 31 December 2011.8%* of net sales  7% net sales growth with strong price/mix  Gross margin up 70 bpts*  Operating profit growth of 9% with 60 bpts operating margin expansion*  Free cash flow of £0. * Organic.A strong start  Marketing up 10% to 15. 19 .

A great company is a good global and local citizen 20 .

21 .

Questions .

£m 432 118 129 2011 Reported.884 Organic movement.936 1. Zacapa and the acquisition of an additional equity stake in Quanxing. Adjustment is also made to exclude directly attributable transaction costs incurred in the 12 months ended 30 June 2011 of £15 million. £m Net sales Marketing spend Operating profit before exceptional items 9. £m (221) (2) 18 Acquisitions** and disposals.Reconciliation to GAAP measures – Year ended 30 June 2010 Reported. offset by the favourable transaction exchange rate movements in the US dollar and the Euro.751 Exchange*. the Euro and some African currencies. In the 12 months ended 30 June 2011 acquisition represent the performance of Serengeti Breweries in Tanzania. £m (55) 3 (14) Organic movement. % 5 8 5 *The exchange adjustments for net sales and marketing spend are primarily the retranslation of prior period reported results at current period exchange rates and are principally in respect of the weakening of the Venezuelan bolivar.538 2. **The impacts of acquisitions and disposals are excluded from the organic movement percentages. Disposals in the 12 months ended 30 June 2011 were the disposals completed under the reorganisation of the group‟s US wines operations and the disposal of the Gilbeys wholesale wine business in Ireland. netted against acquisition costs of £9 million incurred in the 12 months period ended 30 June 2010 primarily in respect of the acquisition of Mey Icki.419 2. The exchange adjustment for operating profit was largely attributable to the weaker Venezuelan bolivar. 23 .780 1. £m 9.

£m Organic movement. Adjustment is also made to exclude directly attributable transaction costs incurred in the six months ended 31 December 2011 of £39 million. The exchange adjustment for operating profit was largely attributable to the weaker African currencies and the adverse transaction exchange rate movements in the US dollar. Zacapa and the acquisition of an additional equity stake in Quanxing. % 5. Disposals in the six months ended 31 December 2011 were the disposals completed under the reorganisation of the group‟s US wines operations and the disposal of the Gilbeys wholesale wine business in Ireland.727 (42) (4) (30) 115 10 16 364 77 153 5.Reconciliation to GAAP measures – 6 months ended 31 December 2010 Reported.866 7 10 9 *The exchange adjustments for net sales and marketing spend are primarily the retranslation of prior period reported results at current period exchange rates and are principally in respect of the weakening of some African currencies and the weaker US dollar. £m Acquisitions** and disposals. 24 . In the six months ended 31 December 2011 acquisitions represent the Mey Icki business in Turkey and Serengeti Breweries in Tanzania. £m Organic movement. £m Net sales Marketing spend Operating profit before exceptional items Exchange*.320 813 1. netted against acquisition costs of £6 million incurred in the six months period ended 31 December 2010 primarily in respect of the acquisition of Mey Icki. £m 2011 Reported. **The impacts of acquisitions and disposals are excluded from the organic movement percentages. offset by the appreciation of the Euro.757 896 1.

distribution.  legal and regulatory developments. however. and systems change programmes. acquisitions and disposals.Cautionary statement concerning forward-looking statements This presentation contains „forward-looking‟ statements. outcomes of litigation.  increased competitive product and pricing pressures and unanticipated actions by competitors that could impact Diageo‟s market share. the completion of Diageo's strategic transactions and restructuring programmes.  changes in consumer preferences and tastes. In particular. labour. or the impact of a product recall or product liability claim on Diageo‟s profitability or reputation. including factors that are outside Diageo's control. Diageo does not undertake to update forward-looking statements to reflect any changes in Diageo's expectations with regard thereto or any changes in events.  changes in the cost or supply of raw materials. All oral and written forward-looking statements made on or after the date of this presentation and attributable to Diageo are expressly qualified in their entirety by the above factors and the „Risk factors‟ contained in Diageo‟s Annual Report on Form 20-F for the year ended 30 June 2011 as filed with the US Securities and Exchange Commission (SEC). margins. the effects of business combinations. manufacturing or licence agreements (or related rights) and licenses on favourable terms when they expire. © Diageo plc 2012. forward-looking statements include all statements that express forecasts. general economic conditions and all statements on the slide “outlook statements”. outlook and projections with respect to future matters. growth rates. customs and other regulatory authorities) directed at the drinks and spirits industry generally or at Diageo in particular. failure of customer. thalidomide litigation or any similar proceedings.  changes in political or economic conditions in countries and markets in which Diageo operates. the impact of interest or exchange rates. anticipated tax rates. or which others own and license to Diageo for use. the availability or cost of financing to Diageo. plans.  disruption to production facilities or business service centres. By their nature. existing or future. importation. including significant interest rate and foreign currency exchange rate fluctuations and changes in the cost of capital. or contamination. anticipated cost savings or synergies. promotional and innovation expenditure by Diageo and its competitors. changes in tax law. labeling. expectations. packaging. All readers. These factors include. distribution. and the ability to derive expected benefits from such programmes. investment or currency restrictions.  developments in the Colombian litigation. which may reduce or eliminate Diageo‟s access to or increase the cost of financing or which may affect Diageo‟s financial results and movements to the value of Diageo‟s pensions funds. consumption or advertising. including changes in levels of consumer spending. Korean customs dispute.  developments in any litigation or other similar proceedings (including with tax. anticipated deficit reductions in relation to pension schemes. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements.  levels of marketing. existing or future. product liability. including changes in regulations regarding production. counterfeiting or other circumstances which could harm the integrity or sales of Diageo‟s brands. The information in this presentation does not constitute an offer to sell or an invitation to buy shares in Diageo plc or an invitation or inducement to engage in any other investment activities.  the effects of Diageo‟s strategic focus on premium drinks. expected cash payments. overall market trends. should take note of these disclosures. but are not limited to:  global and regional economic downturns. demographic trends or perception about health related issues. acquisitions or disposals.  renewal of supply. including trends in results of operations. restructuring programmes. health regulations and the laws governing labour and pensions.  termination of existing distribution or licence manufacturing rights on agency brands. All rights reserved. energy and/or water. This document includes names of Diageo's products. supplier and financial counterparties or imposition of import. increase expenses and hinder growth potential. rates or requirements (including with respect to the impact of excise tax increases) or accounting standards. forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. partnerships. The reader should. Any forward-looking statements made by or on behalf of Diageo speak only as of the date they are made.  technological developments that may affect the distribution of products or impede Diageo‟s ability to protect its intellectual property rights.  Diageo‟s ability to complete existing or future business combinations. and  changes in financial and equity markets. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. . conditions or circumstances on which any such statement is based. wherever located. consult any additional disclosures that Diageo may make in any documents which it publishes and/or files with the SEC. which constitute trademarks or trade names which Diageo owns. and the ability to realise expected synergies and/or costs savings. and changes in environmental laws.