How Much Does Alcoholic Beverages Giant Diageo Spend On Marketing Activities Each Year?

+20.47%
Upside
149
Market
179
Trefis
DEO: Diageo logo
DEO
Diageo

Diageo (NYSE: DEO) expenses are largely driven by cost of sales, which account for about 50% of the company’s total expenses. Over recent years, Diageo’s total expenses have been rising, whereas, revenues have seen some volatility. This has led to a rise in total expenses as % of revenue in FY 2019 (after a drop in FY 2018). However, Trefis estimates a marginal drop in total expenses as % of revenue from 75.4% in FY 2018 to 75% FY 2019. To understand the trend in all major expense items and what is driving the change, view the Trefis interactive dashboard – How Does Diageo Spend Its Money?

Total expenses

  • Total expenses as a % of revenue decreased from 77.5% in 2017 to 73% in 2018, followed by an increase to 75.4% in FY 2019, driven by higher commodity costs and increased marketing investment.
  • The metric is expected to drop marginally to 75% in FY 2020, driven by faster growth in revenues and productivity savings from cost efficiencies.
Relevant Articles
  1. Does Diageo Stock Have More Room For Growth?
  2. Up 16% In A Month, Will Diageo Stock See Higher Levels?
  3. Should You Buy Diageo Stock At $175?
  4. What’s Happening With Diageo Stock?
  5. Should You Buy, Sell, Or Hold Diageo Stock Around $175?
  6. What’s Next For Diageo Stock After A 10% Fall In A Month?

Breakdown of Diageo’s Total Expenses

Cost of Sales

  • Cost of sales, which accounts for 50% of Diageo’s total expenses, has remained flat in FY 2019, however, as a % of revenue it has increased, mainly due to a fall in revenues, exacerbated by a marginal rise in commodity costs.
  • However, the metric is expected to drop a little from 37.8% in FY 2019 to 37.6% in FY 2020 despite inflationary pressure, mainly driven by higher growth in revenues in the near term.

Marketing Expense

  • Marketing expense as a % of revenue has been increasing in recent years, from 14.9% in FY2017 to 15.9% in FY2019.
  • The trend is expected to continue in the near term with the metric expected to rise to 16.2% in FY 2020, led by increased marketing spending especially for US Spirits.

Other Operating Expense

  • Other operating expense as % of revenue has been decreasing steadily from 16.7% in FY 2017 to 14.9% in 2019.
  • The trend is expected to continue with the metric expected to drop further to 14.5% in FY 2020, led by productivity benefits from cost efficiencies.

Net Finance Charges

Other Non-Operating Expense

  • The company has been earning non-operating income (instead of incurring expenses) over the last few years, mainly comprising of income from associates and joint ventures.
  • This income is expected to continue in the near term, as non-operating expenses are set to be very low.

Effective Tax Rate

  • Effective tax rate decreased in FY 2018 due to tax credits received, but it increased to 21.2% in FY 2019.
  • The metric is expected to remain around the current level going forward, as well.

 

What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs

For CFOs and Finance Teams | Product, R&D, and Marketing Teams

More Trefis Data

Like our charts? Explore example interactive dashboards and create your own.