Annual Report 2024
Diageo is a global leader in Total Beverage Alcohol (TBA) and one of the
world’s most successful brand builders. Our ambition is to create one of
the best performing, most trusted and respected, consumer products
companies in the world.
Strategic report: Our business
2
Instantly recognisable brands
2
Our business today
4
Market overview and investment case
6
Chair’s statement
8
Chief Executive’s statement
10
Business model
12
Our Growth Ambition
14
Our strategic enablers
15
Strategic report: Our performance
24
Our performance
24
Summary financial review
28
Business review
32
Group financial review
45
’Spirit of Progress’
48
Promote positive drinking
51
Doing business the right way
53
Our people and culture
55
Health and safety
57
Champion inclusion and diversity
59
Pioneer grain-to-glass sustainability
61
Our ESG reporting approach
74
Our principal risks and risk management
77
Viability statement
86
Governance report
87
Letter from the Chair of the Board of
Directors
88
Governance at a glance
90
Board of Directors
92
Executive Committee
94
Corporate governance report
96
Audit Committee report
111
Nomination Committee report
118
Directors’ remuneration report
122
Directors’ report
Financial statements
152
Additional information
226
Unaudited financial information
227
Cautionary statement
237
Non-financial reporting boundaries
and methodologies
238
Independent Limited Assurance
Report to the Directors of Diageo plc
on selected information
258
Other additional information
262
Visit diageo.com for more information.
Cover: Don Julio, Blanco.
Scan the QR code to read about our
Don Julio case study.
Fiscal 24 financial performance
Volume
(equivalent units)
Net sales(2)
Operating profit
EU230.5m
$20,269m
$6,001m
(2023: EU243.4m)
(2023: $20,555m)
(2023: $5,547m)
Reported movement
(5) % â
Reported movement
(1) % â
Reported movement
8 % á
Organic movement(1)
(4) % â
Organic movement(1)
(1) % â
Organic movement(1)
(5) % â
Net cash from operating
activities
Earnings per share (eps)
Total recommended dividend
per share(3)
$4,105m
173.2c
103.48c
(2023: $3,636m)
(2023: 196.3c)
(2023: 98.55c)
2024 free cash flow(1)
$2,609m
Reported movement
(12) % â
Increase
5 % á
2023 free cash flow(1)
$2,235m
Eps before exceptional items
movement(1)
(9) % â
Visit diageo.com for more information.
Fiscal 24 non-financial performance
Positive drinking
Inclusion and diversity
Water efficiency -
across the company
Greenhouse gas
emissions
2.2mΔ
44%Δ
(15.6)%
(23.8)%
(2023: 1.9m)
(2023: 44%)
(2023: (12.3)%)
(2023: (14.7)%)
Number of people educated
on the dangers of underage
drinking through a Diageo
supported education
programme
Percentage of female leaders
globally
Percentage change in water
efficiency compared to fiscal
20 baseline
Percentage change in total direct
and indirect greenhouse gas
emissions (market/net based)
compared to fiscal 20 baseline
46%Δ
(2023: 43%)
Percentage of ethnically diverse
leaders globally
(1)
See definitions and reconciliation of non-GAAP measures to GAAP measures on pages 227-235.
(2)
Net sales are sales less excise duties.
(3)
Includes recommended final dividend of 62.98c.
△
Within PricewaterhouseCoopers LLP’s (PwC’s) independent limited assurance scope – see pages 258-261 of this Annual Report. For Reporting boundaries and methodologies,
see pages 238-257.
Unless otherwise stated in this document, percentage movements refer to organic movements. For a definition of organic movement and reconciliation of all non-GAAP measures to GAAP
measures, see pages 227-235. Share refers to value share. Percentage figures presented are reflective of a year-on-year comparison, namely 2023-2024, unless otherwise specified.
Starting 1 July 2023, in line with reporting requirements, the functional currency of Diageo plc changed from sterling to US dollar which is applied prospectively. Diageo also decided to
change its presentation currency to US dollar with effect from 1 July 2023, applied retrospectively, as it believes that this change will provide better alignment of the reporting of performance
with its business exposures. Please see more information on page 166 under Accounting information and policies.
PERFORM ANCE HIGHLIGHTS
Diageo Annual Report 2024
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148
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Whether you’re heading out…
Smirnoff Spicy Tamarind
won a Double Gold Medal
at the San Francisco World
Spirits Competition in April
In Europe, Guinness 0.0
net sales and volume
more than doubled in
fiscal 24 and it is now
available on draught
in more than 1,500
outlets in Ireland
Casamigos got consumers in the summer spirit with its
terrace takeover on-trade activations in Great Britain
In April, Tanqueray No. TEN
announced a season of
bartender residencies
across the globe to
showcase exceptional
cocktails
our brands help consumers...
INSTA NTLY RECOGNISABLE BRANDS
2
Diageo Annual Report 2024
or hosting at home...
Ketel One vodka and Mr Black
combine to make the ultimate
Espresso Martini cocktail
Gordon’s Premium Pink
partnership with British media
personality Maya Jama, centred
on bringing friends together
We welcomed summer 2024
in style with the launch of the
limited edition Cîroc Limonata,
available in North America
and across Europe
This fiscal, we launched
Diageo's first alcohol-free
dark spirit, Captain Morgan
Spiced Gold 0.0%
...Celebrate life,
every day, everywhere
Diageo Annual Report 2024
3
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Diageo has a portfolio of
iconic brands
With over 200 brands and sales in nearly
180 countries, our portfolio brings together
some of the most iconic brands from around
the globe that consumers have enjoyed
for generations.
Our consumer insights, strong sense of purpose and pursuit of
financial excellence underpin our passion to continue to be one
of the best brand builders in the world and create value for our
stakeholders. We are proud custodians of 13 billion-dollar brands
including Johnnie Walker, Smirnoff, Guinness, Don Julio, Crown
Royal, Baileys and Tanqueray.
We have built number one global positions in scotch,
vodka, tequila, Canadian whisky, liqueurs and gin.(1)
Consumers are choosing to drink better, not more, and our
advantaged portfolio, positioned towards fast-growing categories,
allows the consumer to premiumise through our extensive price
ladder as well as attracting the recruitment of new, legal purchase
age and above (LPA+) consumers.
Many of our much-loved and established brands have a unique
heritage, but we do not stand still. Diageo's ambition is to create
one of the best performing, most trusted and respected consumer
products companies in the world. We move at pace to unleash the
power of our brands and portfolio to lead and shape consumer
trends, and we execute decisively with operational excellence.
Alongside our brands, Diageo's entrepreneurial, talented and
diverse workforce of more than 30,000 people globally are
our biggest asset. Led by a highly experienced Executive
Committee, Diageo aims to help our consumers celebrate life,
every day, everywhere, and capture the next phase of growth in
the TBA industry.
Our global footprint drives resilient growth
Share of reported net sales by region(2)(3)
(%)
(1)
IWSR, 2023.
(2)
The above map is intended to illustrate general geographic regions where Diageo has a presence and/or in which its products are sold. It is not intended to imply that Diageo
has a presence in and/or that its products are sold in every country or territory within a geographic region.
(3)
Based on reported net sales for the year ended 30 June 2024. Does not include corporate net sales of $123 million (2022–$104 million).
OUR BUSINESS TODAY
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Diageo Annual Report 2024
North America
39%
Latin America and Caribbean
9%
Africa
9%
Asia Pacific
19%
Europe
24%
Diageo is well positioned to win in TBA
Advantaged portfolio: reach and scale
Diageo reported net sales
(by category, fiscal 24)
Categories
Geographies
Price tiers
Scotch, 24%
Beer, 16%
Tequila, 11%
Vodka, 9%
Other, 9%
Canadian
whisky, 6%
Rum, 5%
Liqueurs, 5%
Gin, 5%
IMFL whisky⁽¹⁾, 4%
Ready to drink, 4%
US whiskey, 2%
Our portfolio gives consumers choice across price tiers
Diageo reported net sales
Our scotch portfolio price ladder provides consumer choice within our largest category(2)
(by price tier, fiscal 24)
($)
Luxury
Ultra-premium
Super-premium
Premium
Standard
Value
4%
5%
16%
37%
30%
8%
(1)
Indian-Made Foreign Liquor (IMFL) whisky.
(2)
Diageo’s portfolio is diversified across price tiers as shown in the bar chart. The visuals are an example within Diageo’s scotch portfolio of this diversified footprint.
Diageo Annual Report 2024
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Value
Under $15
Standard
$15–$25
Premium
$25–$40
Super-premium
$40–$100
Ultra-premium
Up to $250
Luxury
$250+
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Diageo’s competitive advantages in an attractive industry
Strong and resilient
market dynamics…
Total Beverage Alcohol (TBA) is a highly
attractive and exciting consumer category.
TBA is resilient and growing; and the spirits
category is growing even faster. TBA has
grown at 4.4% CAGR in the 10 years through
to 2023, and international spirits has grown
at 5.1% over the same period.(1)
1
Consumers are choosing spirits
Diageo sees a long-term trend of consumers
choosing to switch to spirits from beer and wine.
Spirits growth is supported by favourable population
demographics, the increasing size of the middle
class in key markets globally and strong
premiumisation trends. These are expected to
continue into the future.
2
People are drinking better, not more
Spirits' long-term value growth is also driven by
premiumisation as consumers want to drink better,
not more. In the last 10 years, premium and above
spirits grew from 26% of category value to almost
35%. The super-premium plus price-tier has grown in
value more than two times faster than other price
tiers in the category. This price tier gained 700 basis
points of share of international spirits retail sales value
(RSV) since 2013.(1)
3
Long runway for growth
In 2021, we set out our ambition to grow TBA share
by 50% from 4% to 6% by 2030. With 4.5% value
share of TBA(1) currently, we have significant
headroom for sustainable long-term growth.
(1)
IWSR, 2023.
(2)
Diageo consumption data.
aligned to our
competitive advantages:
Leading world-class brands
• We have a proven track record in developing powerful
global brands. For example, Johnnie Walker’s RSV has
increased over 400% since 2002.(2)
• Diageo brands have driven around 17% of total
absolute dollar growth in the international spirits
category since 2018.(1)
• Our strategic M&A activities and reputation for active
portfolio management position Diageo for sustainable
long-term growth.
Advantaged geographic footprint
• Our geographic footprint gives us access to consumers
in the world’s largest markets, such as the United States,
as well as the vibrant markets of India and China.
• Diageo’s geographic diversification supports resilient
performance through global volatility.
Broad portfolio across price points
• Our advantaged portfolio enables trading up and down
our extensive price ladder; whether our consumers are
looking for a Smirnoff and soda or a Don Julio 1942 on
the rocks, Diageo's portfolio offers consumer choice.
• Our diverse and balanced portfolio enables us to respond
quickly to emerging and growing category trends.
Diverse and talented workforce
• Our Executive Committee combines home-grown talent
with externally recruited leaders who bring invaluable
market experience, a wealth of functional expertise and
fresh perspectives.
• Our talented management team and broader workforce
enable us to respond flexibly and quickly to current and
future challenges.
• Our global employee survey, Your Voice, remains above
external benchmarks with 81% engagement levels and
89% expressing pride in working for Diageo.
M A RK ET OVERVIEW AND INVESTMENT CASE
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Diageo Annual Report 2024
...positioning us to
drive:
Continued discipline of growth
algorithm
• Driving long-term sustainable growth is our priority, and we
believe our growth algorithm continues to support this,
through winning quality market share.
• Price and mix, driven by long-term premiumisation and
enabled by Revenue Growth Management, remain a
consistent and core part of our top-line growth.
• Since fiscal 18, we have generated annual savings of
approximately $500 million through productivity savings,
efficiencies and disciplined cost control and utilising our
scale to fuel our investments.
• We take the benefits of growth, productivity and operating
leverage to reinvest smartly in brand building to drive
quality market share – firmly balancing short-term share
gains, while building for long-term sustainable growth.
A disciplined approach to capital
allocation
• We prioritise organic investment for long-term growth:
maturing stock (increased from $5.3 billion in fiscal 18 to
$7.8 billion in fiscal 24) and capex (increased from
$0.8-0.9 billion per annum fiscal 18-21 to $1.4-1.5 billion per
annum fiscal 22-24, driven by capacity increases).
• Active and disciplined portfolio management ($2.8 billion
invested in acquisitions and $1.6 billion generated from
disposals since fiscal 18).
• We have grown our dividend year on year for 25 years
(dating back to fiscal 2000).
• Through fiscal 23, circa £25 billion has been returned to
shareholders in dividends and share buybacks over the
preceding 10 years.
• We also returned $1 billion of excess capital, via share
buybacks, during fiscal 24.
A robust strategy and clear ambition
that will....
Build towards the next phase of our ambition to achieve TBA
share of 6% by 2030. Our strategy to unleash the power of
our brands and portfolio includes:
• Sustaining the momentum in our global brands of
Guinness, Johnnie Walker and Don Julio while driving
regional growth opportunities like Crown Royal in North
America and accelerating malt whiskey in Asia Pacific.
• Leading and shaping key consumer trends, including tapping
into the convenience, moderation and with food occasions
to recruit new consumers into new occasions at scale.
• Continuing to focus on operational excellence, including
strengthening our route-to-market and evolving our
approach to A&P efficiency, while driving accelerated
productivity and allocating resources with discipline.
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G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
CHA IR’S STA TEMENT
Institute for Training and Research, aimed at raising awareness about
the consequences of drink driving on individuals and communities.
WSOTR is available in digital and classroom formats and is now live
in 24 countries, and in fiscal 24, we reached more than one million
people through WSOTR and other drink driving programmes. We have
now reached more than 2 million people since fiscal 20. To embed
the message of moderation in culture in APAC we have partnered with
K-Pop star SUHO to produce a new song and music video, 'Savour
every moment'. This is the first time that responsible drinking
messaging is conveyed through K-Pop.
We are steadfast in our focus on water by improving water efficiency
at our own sites, investing in water replenishment and collective action.
For example, we are committed to replenishing more water than we
use in our tequila operations in Mexico by 2026, and mobilising
collective action to improve water security. We are partnering with the
State of Jalisco and local municipality in Ocotlán, and in fiscal 24 we
enabled large scale water reuse for local farmers, replenishing over
470,000 cubic metres of water.
We continue to take significant action to create a sustainable low
carbon future, and limit the damaging effects of climate change. We
are partnering with governments and institutions in key geographies
on our decarbonisation pathway. In the US, we were proud that the
Department of Energy selected Diageo as part of the Industrial
Demonstrations Program fund to support the installation of heat
batteries at our Shelbyville and Plainfield sites, with the goal of building
a model that can be replicated..
Employee engagement
Our people and inclusive culture are critical to Diageo’s success.
This year, Karen Blackett took over accountability as the designated
Non-Executive Director for workforce engagement. All Non-Executive
Directors participated in the programme engaging with colleagues from
all regions, functions, and organisational levels. The Board values the
openness of conversations and insights on positive aspects of Diageo’s
culture, as well as areas for improvement. Diageo’s culture continues
to be a source of pride and competitive advantage, with high quality
accessible leadership. This was reflected in the engagement results
seen in our global employee survey, Your Voice, which remain in the
top quartile and above external benchmarks with 81% engagement
levels and 89% expressing pride in working for Diageo.
Board changes
We have announced further changes to the Board this year, and I am
pleased that we have continued to attract high calibre of talent with
deep experience across beverage, consumer and regulated industries.
As we announced in March 2024, I plan to retire in February 2025
from the Diageo Board in my ninth year. My colleague and current
Non-Executive Director Sir John Manzoni has been appointed as my
successor. John joined the Diageo Board in October 2020, having
been Chief Executive of the UK Civil Service. He is currently Chair of
FTSE-listed multinational energy business SSE plc and a non-executive
director of engineering and technology company KBR, Inc. He was
previously a non-executive director of the multinational drinks business
SAB Miller plc for 11 years. John brings a wealth of experience both
from within the beverage alcohol world and from his extensive private
and public sector experience. I look forward to working with him,
fellow Board members and my Diageo colleagues to ensure a
smooth transition.
Statement on Section 172 of the Companies Act 2006
Section 172 of the Companies Act 2006
requires the Directors to promote the success
of the company for the benefit of the
members as a whole, having regard to the
interests of stakeholders in their decision-
making. In making decisions, the
Directors consider what is most likely to
promote the success of the company for its
shareholders in the long-term, as well as
the interests of the group’s stakeholders.
The Directors understand the importance of
taking into account the views of stakeholders
and the impact of the company’s activities on
local communities, the environment, including
climate change, and the group’s reputation.
Read more about how stakeholders were taken into
account in decision-making on pages 100-104.
Diageo Annual Report 2024
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Nik Jhangiani, currently Chief Financial Officer (CFO) at Coca-Cola
Europacific Partners plc, the world’s largest Coca-Cola bottler, will
succeed Lavanya Chandrashekar as Diageo’s CFO on 1 September
2024 and we look forward to welcoming him to the Board. Nik has
more than 30 years of finance experience gained in roles in the UK,
Europe, India, Africa and the US, including 20 years in various CFO
roles, and has spent most of his career in the consumer and beverage
industries. I am confident that his record of success as a CFO in
multiple relevant markets will further strengthen our long-term track
record of delivering sustainable returns for our shareholders.
After three years as CFO, the Board wishes to thank Lavanya warmly
for her strong contributions to Diageo over the past six years. She has
been instrumental in framing our long-term ambitions, driving a culture
of operational excellence throughout her tenure and embedding a
culture of everyday efficiency which has already delivered highly
significant productivity savings across our business. We wish Lavanya
well for the future as she returns to the US.
Julie Brown, CFO and Executive Director of GSK plc since May 2023,
will be appointed as a Non-Executive Director, effective 5 August
2024, and on appointment will succeed Alan Stewart as Chair of the
Audit Committee. Julie brings many years of experience in financial,
commercial and strategic roles in international companies operating in
highly regulated industries. She is strongly committed to enabling
diversity in business and to creating sustainable, long-term value for
stakeholders. Julie previously served as Chief Operating and Financial
Officer and Executive Director, Burberry Group plc. Julie has also
served as Group CFO of Smith & Nephew plc and previously worked
for 25 years at AstraZeneca plc in various finance, commercial and
strategic roles including as regional and country president and latterly
as Interim Group CFO.
On behalf of the Board, I would like to thank Alan who has been a
Director since 2014 and Chair of the Audit Committee since 2017.
He has served Diageo with great distinction, and we have benefitted
greatly from his expertise and strategic input. We wish him the very
best for the future.
Summary
At Diageo, we speak of 'standing on the shoulders of giants' and
honouring the founders on whose legacies this fantastic company is
built. Some years have undoubtedly been challenging, but I am proud
to have been part of the company’s journey and to have worked
alongside such talented, dedicated, and entrepreneurial colleagues
and leaders: the giants of today. They will carry this business forward,
live our purpose of celebrating life, every day, everywhere, and create
value for our stakeholders. I am particularly proud of the great strides
we have made on the inclusion and diversity agenda, and the diverse
leadership now in place on the Board and our Executive Committee. I
would like to express my deepest thanks to colleagues past and
present. As I pass the baton to John, I remain as excited about the
future growth potential of Diageo as I was when I joined the Diageo
Board in July 2016. I look forward to watching the company and its
people thrive under John’s stewardship.
Javier Ferrán
Chair
8
Diageo Annual Report 2024
“It has been a true privilege to lead Diageo’s
Board. I look forward to working with John, the
Board and all my Diageo colleagues to ensure
a smooth transition over the coming months.”
Long-term view of the business
Fiscal 24 has been a year of challenge and change for Diageo as we
navigated global economic and sectoral volatility, set new priorities,
and appointed Directors to our Board.
Despite the global economic and political headwinds we face,
the Total Beverage Alcohol (TBA) industry remains an attractive and
exciting sector. TBA has grown at a 4.4% compound annual growth
rate (CAGR) over the past decade, and international spirits has grown
at 5.1% as measured by IWSR(1) over the same period, while premium
beer where Guinness competes has also grown ahead of TBA.
We are confident in the long term trend of sector premiumisation and
we believe that it will continue, supported by demographic trends,
rising incomes in developing markets and spirits continuing to take
share from beer and wine. Diageo’s advantaged portfolio is balanced
across geographies and price tiers, and in 2021, we set out our
ambition to increase our share of TBA to 6% by 2030. This year, we set
strategic priorities that will drive future performance and position
Diageo to capture the next phase of growth: we plan to drive growth
in our largest categories, lead and shape consumer trends and
occasions, and raise the bar on execution.
As this report sets out, we are executing decisively against our growth
ambition across our advantaged footprint, reinvesting behind our
business and actively managing our portfolio through disciplined
acquisitions and disposals.
(1) IWSR, 2023.
Recommended final
dividend per share
Total dividend per share(1)
62.98c
5% to 103.48c
2023: 59.98c
2023: 98.55c
Total shareholder return
(1 year)
Total shareholder return
(10 year)
(24)%
6%
2023: (2)%
2023: 9%
(1)
Includes recommended final dividend of 62.98c
Fiscal 24 performance
In fiscal 24, organic net sales were down 0.6%, with positive price/mix
performance mostly mitigating a decline in volume. Excluding our
Latin America and Caribbean region (LAC), the business grew organic
net sales by 1.8%. Organic operating margin declined by 130bps,
primarily driven by LAC. Organic operating profit declined 4.8%, as a
result of the organic net sales decline, primarily due to LAC and North
America. The decline was also driven by an increase in investments in
strategic capabilities, including in digital and strengthening route-to-
market, primarily in the United States (US), and in marketing.
We generated free cash flow of $2.6 billion. Strong working capital
management and lower tax payments more than offset the combined
impact of the decline in operating profit, higher interest payments and
increased investment in capex. Pre-exceptional earnings per share
declined mainly due to lower operating profit and higher finance
charges. We increased our dividend by 5%, reflecting our continued
confidence in the long-term potential of the business and our
commitment to a progressive dividend policy. Despite the 12-month
Total Shareholder Return (TSR) of -24% for fiscal 24, the ten-year TSR
remains solid at 6%.
Investing for the future
Diageo remains committed to delivering value for shareholders.
Investing capital in maturing inventory and related production
capacity is key to delivering long-term sustainable growth. Our total
maturing inventories have increased more than 42% over the past
five years, resulting in $7.8 billion of total aged inventory by the end
of fiscal 24, up $0.5 billion compared to the prior year. Scotch is our
largest category, accounting for 24% of group net sales and comprising
the majority of the value of our maturing inventories, which may be
held for periods ranging from a minimum of three years to, in some
cases, more than 70 years.
‘Spirit of Progress’: refreshing our approach to ESG
We are now nearly five years on from the launch of 'Spirit of Progress’,
our action plan on Environmental, Social and Governance (ESG)
issues. We have reflected on our progress to date, what we have
learned so far and refreshed our focus for the critical years ahead.
We have simplified and prioritised the goals that form our 'Spirit of
Progress' plan. This has allowed us to prioritise the areas that are most
material to our business including reducing the harmful use of alcohol,
combating water stress and the impact of climate change. We are
also accelerating our work advocating for responsible alcohol
consumption and water replenishment activities in the communities
in which we operate.
I am encouraged by the progress we have made this year on our
positive drinking agenda. We have long championed awareness on
the risks of drink driving, including collaborating with law enforcement
and local authorities. In 2021, we launched the Wrong Side of the
Road (WSOTR) digital learning resource with the United Nations
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
CHIEF EXECUTIVE’S STATEMENT
In NAM, our strategic priorities remain clear. We will unlock growth by
driving our largest brands in our largest categories of whisk(e)y and
tequila, recruiting into new occasions with innovation and raising the
bar on execution. Crown Royal Blackberry launched this year and has
been a great success, especially in recruiting new consumers to
whiskey. In tequila, Don Julio saw increased momentum in the second
half as it grew 15 times faster than the total US spirits industry, with the
growth led by Don Julio Reposado where we increased investment
and expanded distribution. Guinness was the fastest-growing imported
beer in the on-trade, bolstered by the new “Lovely Day” campaign
with long time brand fan Jason Momoa. For spirits, we have made the
biggest change in our route-to-market for a decade. Working with our
distributors, we are putting more 'feet on the street' to target
categories, regions and locations with the highest growth potential. In
the US, we finished the year winning or maintaining TBA market share
for brands covering 90% of our US net sales.
In Europe, we delivered resilient growth, mainly driven by another
year of strong momentum and double-digit growth for Guinness,
helped in part by Guinness 0.0 for which net sales and volume more
than doubled in the year. We achieved market share growth in most
European markets, despite lower consumer confidence.
In Asia Pacific, we grew organic net sales, volume and operating
margin in challenging macroeconomic conditions while increasing
investment in the region. Growth was driven by Chinese white spirits,
and strong performance in India with continued premiumisation and
double-digit growth in scotch and other whisky. Tequila also continues
to gain momentum.
In Africa, beer was the key driver of performance. Despite a tough
macroeconomic backdrop, we delivered organic net sales growth of
12% driven by price increases partially offset by volume declines.
These regional highlights bring to life the resilience and strength of our
diversified global footprint.
Strengthening our operating model in key markets
As well as transforming our US route-to-market, we are also
transforming our operating model in key regions where we see growth
opportunities. We are expanding our organisational structure in Dubai
to solidify our leadership in premium spirits in the Middle East and
North Africa. We transformed our business model in the vibrant
Nigerian market and entered a long-term partnership with a
distributions specialist which will allow us to increase distribution of
Guinness – another example of Diageo’s proven asset light model for
the brand. We also announced that Diageo has acquired the
distribution rights of all remaining brands currently distributed by our
joint venture, Moët Hennessy Diageo France. This followed our
previous update in March 2024, where we outlined our phased
approach to transforming our distribution model in France by creating
our own in-market company.
Performance in our largest categories
It has been another strong year for Guinness with the brand delivering
15% organic net sales growth, double-digit growth for seven
consecutive halves. We held or gained share in our top three markets
for Guinness (Great Britain, Ireland and US) and we continued to
expand the brand's consumer base. Guinness 0.0, our alcohol-free
offering, now accounts for nearly 3% of our Guinness volume globally.
My ambition to take tequila around the world just as Diageo did with
Johnnie Walker remains. It is a fun and versatile category and Diageo
was an early entrant. Tequila remains the fastest-growing scale spirits
category and we have maintained our global tequila leadership by
value. You can read a case study on our tequila roll out on page 18.
Diageo remains the world leader in scotch, our largest category. While our
scotch organic net sales performance was heavily impacted by LAC
inventory reductions, momentum with consumers continued in fiscal 24.
We gained category share of scotch in 9 out of 10 of our largest measured
scotch markets. Johnnie Walker is living up to its “Keep Walking” mantra,
driving over half of our scotch organic net sales and continues to be the
number one international spirits brand in value in calendar year 2023 as
measured by IWSR.
Doing business the right way: ‘Spirit of Progress’
This fiscal, I initiated a review of our ESG strategy and as a result,
we have simplified and prioritised the commitments that form our
'Spirit of Progress' plan. We are prioritising the areas that have the
most significant impact on our commercial performance and our
advocacy efforts, including the harmful use of alcohol, water stress,
carbon and our role in the communities in which we operate. We’re
not only doing the right thing for our people, consumers and
communities, but also for our business in the long term.
Our people and leadership
During my first year as CEO, I have taken great pride in the resilience
and talent of our teams, including our Executive Committee who bring
together decades of experience in the industry, along with a breadth
of market and functional expertise. I have spent time with our teams
around the world including in Ireland, US, Scotland, Kenya and Brazil.
I have seen first-hand the commitment, dedication, and resolve of
Diageo’s people. I would like to thank every single person in our
organisation for their hard work this year.
I would particularly like to thank our outgoing Chief Financial Officer
(CFO) Lavanya Chandrashekar, who has been a trusted colleague
and partner to me, both when we worked together in North America,
and more recently during my first year as Chief Executive. On behalf of
all Diageo colleagues, I wish her much future success as she returns to
the US. I am delighted that Nik Jhangiani will succeed Lavanya as
CFO; he has more than 30 years of finance experience gained in roles
in the UK, Europe, India, Africa and the US, including 20 years as
CFO; and has spent most of his career in the consumer and beverage
industries including 20 years within the Coca-Cola system. His proven
track-record and international mindset mean he will be a strong
addition to our leadership team.
Outlook
The consumer and macroeconomic environment and continues to be
challenging with the conditions we saw towards the end of fiscal 24
persisting into fiscal 25, yet I continue to be confident in Diageo’s
future.
Diageo possesses iconic and enduring brands from Guinness to
Tanqueray to Johnnie Walker, all with unmatched heritage, but with
absolute relevance for today’s consumer. Our success has never come
about by standing still, it has been achieved by blending those great
names with the most passionate teams, the best brand building, and
a commitment to excellence. As the consumer and the operating
environment continues to evolve, we will keep adapting to emerging
tastes, new social occasions and consumer passions. We will unlock
growth to create one of the best performing, most trusted and
respected consumer products in the world.
Debra Crew
Chief Executive
Diageo Annual Report 2024
11
10
Diageo Annual Report 2024
Fiscal 24 was challenging for Diageo and for the broader industry,
with the unwinding and normalisation following the Covid-19 super-cycle
and the ongoing macroeconomic and geopolitical backdrop. Total
Beverage Alcohol (TBA) however remains a highly attractive sector,
which will deliver sustainable long-term growth and generate
shareholder value.
Diageo is a resilient business, and in fiscal 24 we have taken decisive
actions to improve our near-term execution, including addressing the
inventory issues in our Latin America and Caribbean (LAC) region.
We are strengthening our consumer insights, and by the end of calendar
year 2024 we will have rolled out our proprietary Consumer Choice
Framework across markets covering a significant portion of our net
sales. This will give us a much deeper understanding of consumer
motivations and occasions. We are redeploying our resources where
we have the best opportunities to grow and we have stepped up our
route-to-market capabilities, including in the United States (US), our
largest market. We have also delivered a record year of productivity
savings, nearly $700 million, over-delivering on our three-year
productivity goal by $200 million.
Percentage of Diageo
total net sales value
gaining/holding share
in measured markets(1)
75%+
gaining/holding
share
(1)
Source: Internal estimates, incorporating AC Nielson, Association of Canadian Distillers,
Dichter & Neira, Frontline, Intage, IRI, ISCAM, NAMBCA, State Monopolies, TRAC, IPSOS and
other third party providers. All analysis of data has been applied with a tolerance of +/-3bps
Reported volume
movement
Organic net sales
movement
(5)%
(1)%
2023: (7)%
2023: 7%
Organic volume movement
Reported operating profit
movement
(4)%
8%
2023: (1)%
2023: (6)%
Reported net sales
movement
Organic operating profit
movement
(1)%
(5)%
2023: 0%
2023: 7%
Resilient performance in a challenging
environment
After three years of extraordinary topline growth, with 14.5% CAGR
from fiscal 21 to fiscal 23, this fiscal, group organic net sales declined
0.6%. The main driver was materially weaker performance in LAC,
which makes up 8% of Diageo’s organic net sales value. Excluding
LAC, organic net sales grew 1.8%, driven by good growth in Africa,
Asia Pacific, and Europe, partially offset by a decline in North America
(NAM). NAM performance reflects a cautious consumer environment
and the impact of lapping inventory replenishment in the prior year.
I’m pleased that in this challenging environment we ended the fiscal
gaining or holding share in over 75% of our net sales value in measured
markets including the US. We are also holding or gaining share in
most of our measured billion-dollar brands globally.
Organic operating profit declined 4.8% and our organic operating
margin declined by 130bps, both primarily driven by LAC. Excluding
LAC, organic operating margin declined by 56bps and gross margin
grew 17bps, driven by price increases and productivity which offset the
impact of cost inflation.
Regional performance
In LAC, following our update to investors in November 2023, we have
worked with wholesale and customer partners to manage inventories
and ended fiscal 24 with more appropriate levels for the consumer
environment. We implemented five targeted actions to improve
inventory visibility: expanding our access to sellout data; incentivising
sellout data reporting; incentivising independent stock counts;
investing in commercial planning; and piloting digital case tracking,
initially with two customers in Mexico. In Brazil, our largest LAC market,
the category improved in the second half and we gained share.
Inventory levels have dramatically reduced in Mexico to more
appropriate levels, but we see persistent challenges in a highly
competitive environment and have initiated a review to improve
performance. We know the importance of staying vigilant and
continue to work diligently to keep improving visibility into the
distribution channels with the aim to deliver better insights earlier. I
believe we have the necessary processes, data visibility, leadership,
incentives and sellout culture across the region to more closely align
future performance with consumer demand.
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
4. We transport
5. We sell to customers
6. We market to
consumers
7. We help consumers
celebrate
We move our products to where
they need to be in the world;
be that from a local distillery in
market or, for example,
shipping scotch.
We grow by working closely with
our customers. Our global and
local sales teams use our data,
digital tools and insights to
extend our sales reach, improve
our execution and help generate
value for us and for our
customers. When our customers
grow, we grow too.
We invest in world-class
marketing to build vibrant
brands that resonate with our
consumers. To do this
responsibly, we have our
rigorous Diageo Marketing Code
which guides everything we do.
We continually evolve our
data tools to understand
consumers’ attitudes and
motivations. We convert this
information into insights which
enable us to respond with
agility to our consumers’ interests
and preferences.
Creating value
Our business model allows us
to create value across four
main areas:
Financial – for our investors
Human – for our people, suppliers,
customers and consumers
Social – for our communities
Natural – for our environment
Diageo Annual Report 2024
13
A business built for the
long term
We deliver our strategic priorities through a business model that leverages global and local expertise,
has the consumer at its heart, and puts our responsibilities to our stakeholders front and centre.
What we do
1. We source
2. We innovate
3. We make
From smallholder farmers in Africa
and Mexico, to multinational
companies, we work with our
suppliers to procure high-quality
raw materials and services,
with environmental sustainability
in mind. Where it is right for
our business, we grow and
source locally.
Using our deep understanding
of consumer trends and
socialising occasions, we focus
on driving sustainable innovation
that provides new products and
experiences for consumers;
be that a non-alcoholic option
or an offering that suits
convenience or the on-trade.
We distil, brew and bottle our
spirits and beer brands through
a globally co-ordinated supply
operation, working to the highest
quality and manufacturing
standards. We prioritise using
local production where it is right
for our business.
BUSINESS M ODEL
12
Diageo Annual Report 2024
We help build thriving
communities by making lasting
contributions where we live,
work, source and sell.
We aim to maximise long-term
investor returns through
consistent, sustainable growth
and a disciplined approach to
capital allocation.
We advocate for laws or
regulatory change where we
think there is a positive impact
on our business and a benefit for
our key stakeholders.
We are passionate about the role
our brands play in celebrations
globally. We are committed to
promoting moderation and
reducing alcohol misuse.
We work closely with customers
to build sustainable ways of
working that help grow their
businesses through great insight
and execution.
We partner with suppliers to
ensure long-term, mutually
beneficial relationships.
Respect for human rights is
embedded throughout our
global value chain.
Working in the interest of our
stakeholders
People
We want our people to be the
best they can be. We offer a
diverse and inclusive workplace
with opportunities for
development and progression.
People
Consumers
Customers
Suppliers
Communities
Investors
Governments
and regulators
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
EP
CT
CVC
EG
Our Growth
Ambition
In previous years, we were led by our well-established Performance
Ambition, a strategy which delivered strong results. As we navigate the
next phase in our journey, we have continued to evolve our strategy,
which centres on strong consumer and customer insights. As previewed at
our Capital Markets Event in November 2023 and the Consumer Analyst
Group of New York (CAGNY) investor conference in February 2024,
we have sharpened our strategy in order for us to achieve quality share
of TBA of 6% by 2030 and generate value for our shareholders.
Our Growth Ambition is our evolved strategy to win in fiscal 25 and
beyond and to deliver the next phase of sustainable growth.
Through the Growth Ambition we will continue to focus on delivering
on four key strategic outcomes that are now embedded in the
business: providing efficient growth; delivering consistent value
creation; building credibility and trust; and ensuring that our people
and high-performing teams are fully engaged.
P U R P O S E
Celebrating life, every day, everywhere
A M B I T I O N
To create one of the best performing, most trusted and respected,
consumer products companies in the world
S T R A T E G Y
Unleash the power of our brands and portfolio to lead and shape
consumer trends executed with operational excellence
B R A N D S A N D
P O R T F O L I O
C O N S U M E R
T R E N D S
O P E R A T I O N A L
E X C E L L E N C E
Whisk(e)y and tequila
Winning local portfolio
Guinness growth
Premiumisation
Recruitment
New occasions
Evolve brand building muscle
Commercial excellence
Everyday efficiency
E N A B L E R S
Building a more
Digital Diageo
Diverse and engaged talent
with a focus on culture
’Spirit of Progress’ and doing business
the right way from grain-to-glass
O U T C O M E S
Achieve quality TBA share of 6% by 2030
Efficient growth
Consistent value creation
Credibility and trust
Engaged people
Consistently grow organic net
sales, grow operating profit,
deliver strong free cash flow
Top-tier total shareholder
returns, increase return on
invested capital
Trusted by stakeholders for
doing business the right way,
from grain-to-glass
High-performing and
engaged teams, continuous
learning, inclusive culture
OUR GROWTH AMBITION
14
Diageo Annual Report 2024
STRATEGY
Unleash the power of our
brands and portfolio…
• To become the global leader in whisk(e)y
and tequila.
• To win with local portfolios rooted in
local culture.
• To ensure we continue to drive growth
in Guinness, including 0.0.
to lead and shape
consumer trends…
• Premiumise the industry.
• Recruit new consumers from across TBA.
• Enter into new occasions.
executed with
operational excellence
• Evolving our brand building muscle
through smarter A&P.
• Delivering commercial excellence across
all our channels.
• Accelerating productivity via Revenue
Growth Management and supply agility.
Read more on page 16.
Read more on page 18.
Read more on page 20.
ENABLERS
Building a more
Digital Diageo
We are upweighting investment to fund a
holistic, prioritised programme of
digitisation, underpinned by transformation
of data, analytics and systems.
Diverse and engaged talent
with a focus on culture
We continue to develop our talent,
ensuring they embody our evolved
values and behaviours.
’Spirit of Progress’ and doing
business the right way from
grain-to-glass
This continues to underpin everything that
we do. We have refreshed our flagship
’Spirit of Progress‘ programme to maximise
the impact of its next phase of delivery.
Read more on page 22.
Read more on page 23.
Read more on page 23.
OUR STRATEGIC ENABLERS
Diageo Annual Report 2024
15
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Unleash the power
of our brands and portfolio
Our outstanding brands and broad portfolio remain
a competitive advantage
Our strategy focuses on three areas:
1. Maintaining our undisputed number one value position in the
whisk(e)y and tequila categories(1), maximising the large growth
opportunities they provide, while leveraging our heritage.
2. Winning with consumer-first local portfolios: markets must unleash
the power of our portfolio by building strong brands with local
relevance, informed by deep consumer insight.
3. Continue Guinness breakout growth with our asset light model
and innovation.
Examples of progress in fiscal 24:
• Johnnie Walker demonstrated its ability to continue to win across
the price ladder. Johnnie Walker Blonde drove total trademark
share gains following its launch across Asia Pacific (APAC) and LAC.
At the luxury end of the portfolio, Johnnie Walker Blue Label gained
share through the Xordinaire and Umami innovations(1).
• Godawan Single Malt, crafted with quality and sustainability at its
core in the Alwar distillery, Rajasthan, was the most awarded Indian
single malt in 2023-2024.
• We have seen continued double-digit growth of Don Julio tequila
in the United States, with momentum building internationally as we
shape the global expansion of the category.
• Guinness is the number one selling beer in Great Britain by value in
the second half of the fiscal.(2)
Teaming up with the world’s
biggest sporting events
The power of sport knows no geographic limits –
it is truly global. At Diageo, we are using sport to
lift our brands, partnering with iconic sporting
occasions giving us incomparable visibility
across the globe.
Shaping the future of Guinness with sport
Whilst Guinness has been the official partner of the Six Nations Rugby
Championship since 2019, in 2024 the tournament helped it reach
new heights. During this year's Six Nations, sales of pints of Guinness
in stadiums were up 15% compared with 2022, while there was a
26% increase in pints of Guinness 0.0 sold in stadiums compared
with 2023.
This year, Guinness also tapped into new areas at the Championship,
kicking off its official partnership with the Guinness Women’s Six
Nations and increasing the amount of Guinness 0.0 beer taps,
driving awareness and consumption of the non-alcoholic choice.
This expanded partnership is a key pillar in delivering against our
strategy of making Guinness more relevant to more people, on more
occasions, more of the time.
New English Premier League partnership
In June, Guinness announced that from August it would be the official
beer of the English Premier League. Premier League games are
broadcast into 900 million homes in 189 countries, heightening the
brand's relevancy and visibility even further. The four-year agreement
will also see Guinness 0.0 named as the official non-alcoholic beer of
the Premier League.
Taking our brands to new heights at the Super
Bowl
Diageo’s NFL platform is another example of how our iconic brands
can work with similarly iconic sporting events to deliver great results.
Over the last five years, Diageo has built official partnerships with
20 different NFL teams, enabling advertising and profiling of our
brands in stadiums and beyond. In the 2023 season alone, Diageo
brands used over 70 hours of digital signage at NFL stadiums and
over 71,000 samples were distributed across NFL league and team
partner events.
Great brand and sports partnerships also allow for fantastic creativity
to help build awareness and excitement. Nowhere was that creativity
more evident than on Super Bowl Sunday in February. In the week
leading up to the Super Bowl, Don Julio took over the STRAT Hotel in
Las Vegas – using a projection to turn the hotel tower into a 1,149 ft tall
bottle of Don Julio 1942.
Winning in India with Royal Challenge
One of the world’s most popular and watched annual sporting events
is the Indian Premier League Cricket (IPL). While many brands sponsor
teams, Royal Challengers Bangalore (RCB), one of the founder members
of the IPL, and named after renowned Indian whisky brand Royal
Challenge, is owned by United Spirits Limited, part of Diageo plc.
This ownership gives Royal Challenge whisky unprecedented visibility
in one of the largest whisky markets in the world. One of the greatest
success stories this year has been via the Women’s Premier League,
with the RCB women's team winning the title in March.
The global reach and attraction of sport is undeniable. We will continue
to invest to showcase our iconic brands at events that excite and
matter to consumers across the globe.
(1)
IWSR, 2023.
(2)
Nielsen/CGA, 52 weeks to 18 May 2024.
OUR STRA TEGIC ENABLERS continued
STRATEGY
16
Diageo Annual Report 2024
Diageo Annual Report 2024
17
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
To lead and shape
consumer trends
Consumers remain at the centre of everything we do
We are focused on anticipating and responding to shifts in consumer
trends, enabled by capabilities and tools which we are constantly
evolving. Shaping and leading consumer trends enables us to:
1. Premiumise: We want to drive and lead the ongoing trend of
premiumisation in our industry, and we continue to develop our
brand building capabilities to do this. The nuances of premiumisation
vary by market, so we ensure our brands hit the relevant local
premium cues; for example being relevant in popular culture or
in appropriate experiential spaces.
2. Recruit: We continue to recruit new consumers into and from across
TBA. With circa 550 million new legal purchase age consumers
forecast to enter the TBA market by 2033(1), we will respond with
agility to the emerging trends that resonate with these new cohorts,
keeping our brands relevant. At the same time, we will keep winning
in the right occasions to recruit from beer and wine.
3. Win in new occasions: We will enter into new occasions to drive
the growth of our categories. The landscape of socialising is ever
evolving, from the growth of the early evening occasion in some
markets to the desire for increased options to moderate in others.
We will ensure our portfolio continues to evolve as consumer
occasions do the same.
Examples of progress in fiscal 24:
• Our luxury malts are playing a key part in the premiumisation
of scotch. Fiscal 24 saw the announcement of the Mortlach and
Philippe Starck partnership, generating attention and momentum
in key markets ready for product launches in fiscal 25.
• Convenience is an increasingly important category for consumers
entering TBA. Fiscal 24 saw Smirnoff SMASH Tea and Captain
Morgan Sliced execute fast launches and distribution ramp-ups
in North America, resulting in both products winning share in
the category.
• The global growth of Guinness 0.0 has supported increased
consumer desire for moderation options and enables us to offer
more in a wider set of occasions. This, alongside our 0.0 spirits
brands which constitute three of the five largest 0.0 brands globally,
gives us a strong portfolio to capitalise on this trend.(2)
OUR STRA TEGIC ENABLERS continued
STRATEGY
Diageo Annual Report 2024
19
18
Diageo Annual Report 2024
Taking tequila around the world
Our global rollout of tequila continued at
pace in fiscal 24, underpinned by strong
commercial execution.
Early bets on tequila are paying off
Diageo’s portfolio is positioned towards fast-growing categories
and tequila is the fastest growing spirits category (+9% RSV
2022-2023). Diageo was among the early entrants into the space
and continues to be the global leader in tequila with around a
quarter of value share.(2)
In NAM, our tequila portfolio grew US spirits share, driven by
Don Julio, which increased momentum in the second half,
growing 15 times faster than the total US spirits industry and gaining
category share of tequila and spirits.(3) Spearheading this growth
was Don Julio Reposado, where we increased investment and
expanded distribution to capitalise on the increasing popularity of
aged tequila, as consumers rapidly become more knowledgeable
about the category.
We drove almost 12% organic net sales growth in markets outside
NAM and LAC, leading to substantial market share gains across
Europe, APAC and Global Travel. Don Julio was the number one
selling tequila at London Heathrow Airport throughout most of the
fiscal and is now available in nearly 60 countries. Casamigos is now
in 33 countries and continues to recruit across Europe. This summer,
we have plans for over one million consumers to sample the
Casa Paloma in Great Britain. Increased investment in these brands
to support their global rollout is amplified by our excellent marketing
and brand building at scale, for example, Don Julio at the Oscars
and the Super Bowl.
In APAC, we have tapped into the demand for luxury products,
positioning Don Julio 1942 as our flagship. It has entered the most
aspirational on-trade venues, allowing us to deliver high-quality
activations, in partnership with influencers.
The Paloma
This fiscal year, we identified the Paloma cocktail as a vehicle to
recruit consumers into the tequila category. Our consumer insights
showed the Paloma was emerging as the cocktail of choice for
bartenders and brand ambassadors, particularly in Southern Europe.
The Paloma is a grapefruit-based, refreshing and visually appealing
premium aperitif: a big glass, vibrant colour, and lots of flavour.
The Paloma is also an accessible way for consumers to discover
tequila: it is light, easy to make, and fits beautifully into various
occasions whether consumers are at home, in a bar, or enjoying
it with food.
(1)
World Bank.
(2)
IWSR, 2023.
(3)
Nielsen/NABCA, 2024
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Executed with
operational excellence
Our evolved operational excellence agenda is focused on
brand building, commercial excellence and productivity
• We are evolving our brand building muscle to upgrade the
effectiveness and efficiency of our Advertising and Promotion (A&P)
to ensure we invest behind the right brands, in the right places and
through the right channels.
• We continue to upgrade our commercial capabilities with customers
and consumers, building best-in-class execution partnerships, digital
merchandising and sales processes. The on-trade is also a critical
channel for brand building and exceptional experiences and we
have increased focus.
• We will continue to deliver against our productivity agenda,
sharpening our resource allocation to drive efficiency. Through our
Revenue Growth Management (RGM) capabilities and supply chain
excellence by investing in digitisation, incremental margin
enhancement and supply network design opportunities.
Examples of progress in fiscal 24:
• In NAM, we improved our digital media efficiencies and
effectiveness by applying enhanced technology to geographical
sales data and digital bidding algorithms. By combining our data
and consumer understanding, we have evolved our media targeting
strategies by showing consumers brand-relevant media at key
moments across hyper-targeted locations. This is now scaled across
our US brand portfolio.
• The Crown Royal Blackberry launch was an example of commercial
execution excellence and resulted in consumer recruitment into
whiskey and share gains for the trademark. We partnered with
our customers to deliver standout point of sale experiences.
• We continued to strengthen our RGM capabilities, which are key to
driving sustainable growth across volume, price and mix. We made
strategic price increases and targeted A&P investments holding our
overall A&P flat for the year.
• Smirnoff marketing teams in over 40 markets used the Diageo
Virtual Studio to take global assets for the 'We Do We' campaign
and delivered over 2,000 localised digital assets, saving nearly
$15 million. In Great Britain, we increased marketing investment
for Guinness by 14%, smartly managed pricing corridors, and drove
volume growth of 18%.
Fiscal 24 saw a record delivery
of nearly $700 million in
productivity benefits unlocked
Our culture of everyday efficiency is firmly embedded into the
business. We have delivered strong productivity benefits year on
year. At the end of fiscal 24, we completed a three-year period over
which we delivered $1.7 billion of productivity benefits, significantly
exceeding the original commitment of $1.5 billion made at the
beginning of fiscal 22. Fiscal 24 was our third consecutive year of
productivity and price offsetting the absolute impact of cost of
goods inflation.
In fiscal 24, we delivered record productivity savings of nearly $700
million across cost of goods, marketing and overhead spend. The
productivity on cost of goods was across the end-to-end supply chain.
We renegotiated contracts on key materials such as glass, labels and
grain neutral spirits and drove savings in logistics by further optimising
warehousing capacity and container fill rate, and renegotiating key
ocean freight contracts. Across our manufacturing sites, we reduced
waste and drove savings via labour optimisation and robotics
automation. In addition, we started to see benefits from our five-year
supply chain agility programme, announced at the end of fiscal 22.
Looking ahead, we have committed to significantly step up our
productivity target to $2 billion over the next three years (fiscal 25-27).
This will be enabled by the acceleration in annual savings across
cost of goods, marketing and overheads and from our supply
agility programme.
$1.7 billion productivity savings, exceeding
commitment of $1.5 billion three-year target
(total productivity savings, $m)
OUR STRA TEGIC ENABLERS continued
STRATEGY
20
Diageo Annual Report 2024
490
515
505
535
695
FY20
FY21
FY22
FY23
FY24
$1.7billion
Diageo Annual Report 2024
21
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Our strategy is
underpinned by
three enablers
We are focused on transforming three of our
enablers: Digital, Talent and ESG
We are upweighting investment to fund a holistic, prioritised
programme of digitisation (i) to facilitate marketing transformation
and re-invent brand building; (ii) to transform commercial execution
and step-change our sales partnering; (iii) to unlock the next wave
of productivity savings. This is underpinned by the transformation of
data, analytics and systems.
We continue to invest in talent transformation, ensuring our people
embody our evolved values and behaviours. We are developing
capabilities to ensure our talent is upskilled in areas that are key
to our strategy.
We are also implementing our evolved ESG approach for the
next phase of delivery of our ‘Spirit of Progress‘ programme,
which focuses on maximising impact while protecting our licence
to operate and grow.
Examples of progress in fiscal 24:
• Building a more Digital Diageo with 'What’s your Cocktail?',
a generative AI platform to enable consumers to pair cocktails
with food.
• We have committed to creating an environment in which
everyone at Diageo can thrive, feel engaged and valued for
their contributions.
• Driving triple wins with the Baileys Minis paper-based bottle trial.
1
Building a more
Digital Diageo
'What's Your Cocktail?' An AI platform
pairing cocktails with food
In May, we launched 'What’s Your Cocktail?', a generative AI-driven
digital platform to recommend cocktail pairings with individual food
preferences. The platform helps consumers demystify cocktails by
asking the desired atmosphere of their event and favourite food
flavours to ensure the perfect serve for every occasion.
Whilst the platform is consumer-first, we are also benefiting by
gathering millions of first-party consumer data points, which helps
give our consumers exactly what they want.
Digital planning tool delivering productivity
wins in supply chain
This year we implemented a new Advanced Planning Tool (OMP)
across our tequila asset base. It monitors our end-to-end supply
chain and gives us the ability to smoothly plan for and respond
to volatile changes in product demand.
For example, this fiscal we have seen accelerated demand for
Don Julio Reposado. The OMP tool enabled us to quickly run
scenarios, look into end-to-end demand and balance our inventory
and capacity, allowing us to communicate more quickly and
effectively with customers and our suppliers to fulfil that demand.
OUR STRA TEGIC ENABLERS continued
ENABLERS
22
Diageo Annual Report 2024
2
Diverse and engaged talent
with a focus on culture
3
’Spirit of Progress’ and
doing business the right
way from grain-to-glass
Diversity
40% of our Board and 46% of our leadership population,
including our Executive Committee, are from an ethnically diverse
background. We are proud to have reached our 45% ethnicity
leadership representation ambition ahead of 2030.
Engaged talent
In the global employee survey, Your Voice, our results for the fiscal
remained above external benchmarks with 81% engagement levels
and 89% pride in working for Diageo.
Culture
To unleash greater speed and agility in our business, we are
focusing strongly on culture and embedding four dial-up behaviours:
external curiosity, efficient collaboration, experimentation and
learning, and acting decisively.
Baileys Minis paper-based bottle trial
In May, at the Time Out Festival in Barcelona, we launched a trial
of a new innovation, the Baileys Minis paper-based bottle.
We know our consumers are increasingly looking for sustainable
packaging alternatives, whilst also expecting premium quality and
design from our brands. These bottles are a step in our journey
towards a more sustainable business.
The Baileys Minis paper-based bottles are made with a dry
moulded fibre bottle which is 90% paper, with a thin plastic liner
and a foil seal.
The development work behind these bottles is the result of strong
collaboration across our Diageo teams worldwide, along with the
help of valued external partners. This is further evidence of our
dedication to progressing towards our ambition to accelerate to
a low-carbon world.
Diageo Annual Report 2024
23
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Monitoring performance and progress
Reported measures
Net sales growth
(%)
Operating profit growth
(%)
Basic earnings per share
(cents)
(1.4)
0.2
19.3
16.1
(10.8)
2024
2023
2022
2021
2020
8.2
(5.9)
17.1
84.9
(47.8)
2024
2023
2022
2021
2020
173.2
196.3
184.6
153.8
76.2
2024
2023
2022
2021
2020
Definition
Sales growth after deducting excise duties.
Operating profit growth, including
exceptional operating items.
Profit attributable to equity shareholders of the
parent company, divided by the weighted
average number of shares in issue.
Non-GAAP measures
Organic net sales growth
(%)(1)
Organic operating profit growth
(%)(1)
Earnings per share before
exceptional items (cents)(1)
(0.6)%
(4.8)%
179.6
(0.6)
6.5
21.4
16.0
(8.4)
2024
2023
2022
2021
2020
(4.8)
7.0
26.3
17.7
(14.4)
2024
2023
2022
2021
2020
179.6
196.5
201.9
158.8
137.7
2024
2023
2022
2021
2020
Definition
Sales growth after deducting excise duties,
excluding the impact of exchange rate
movements, hyperinflation adjustment and
acquisitions and disposals.
Organic operating profit growth is calculated on
a constant currency basis, excluding the impact
of exceptional items, certain fair value
remeasurement, hyperinflation adjustment and
acquisitions and disposals.
Profit before exceptional items attributable
to equity shareholders of the parent
company, divided by the weighted average
number of shares in issue.
Why we measure
This measure reflects our delivery of efficient growth
and consistent value creation. Organic net sales
growth is the result of the choices we make
between categories and market participation,
and reflects Diageo's ability to build brand equity,
increase prices and grow market share.
The movement in operating profit measures
our delivery of efficient growth and consistent
value creation. Consistent operating profit
growth is a business imperative, driven by
investment choices, our focus on driving out
costs across the business and improving mix.
Earnings per share reflects the profitability of
the business and how effectively we finance
our balance sheet. Eps measures our
delivery of efficient growth in the year and
consistent value creation over time.
Performance
Reported net sales declined 1.4% due to an
unfavourable foreign exchange impact, organic
net sales decline and a negative impact from
acquisitions and disposals, partially offset by
hyperinflation adjustments. Organic net sales
declined 0.6%. Positive price/mix of 2.9pps was more
than offset by a 3.5% decline in volume, primarily
driven by materially weaker performance in LAC,
driven by fast-changing consumer sentiment and
elevated inventory levels. A weaker consumer
environment and the impact of lapping inventory
replenishment in the prior year in North America also
contributed to the decline. Excluding LAC, organic net
sales grew 1.8%.
Reported operating profit grew 8.2%, primarily
driven by the benefit from exceptional
operating items, partially offset by a decrease
in organic operating profit.
Organic operating profit declined 4.8% as a
result of the organic net sales decline, primarily
due to a $302 million operating profit decline
in LAC and a $142 million operating profit
decline in North America. The decline was also
driven by an increase in investments in
strategic capabilities, including in digital and
strengthening route-to-market, primarily in the
US, and in marketing.
Basic eps decreased 23.1 cents, mainly
driven by lower organic operating profit,
higher finance charges and exceptional
items, partially offset by lower tax and the
impact of share buybacks.
Basic eps before exceptional items
decreased 16.9 cents.
More detail on page 29.
More detail on page 29.
More detail on page 30.
(1)
Organic net sales growth, organic operating profit growth, earnings per share before exceptional items, free cash flow and return on average invested capital are non-GAAP measures.
See definitions and reconciliation of non-GAAP measures to GAAP measures on pages 227-235.
(2)
For reward purposes this measure is further adjusted for the impact of exchange rates, hyperinflation adjustment and other factors not controlled by management, to ensure focus on our
underlying performance drivers.
OUR PERFORMA NCE
24
Diageo Annual Report 2024
Reported measures
Net cash from operating activities
($ million)
Return on closing invested capital
(%)
Remuneration
4,105
3,636
5,213
4,932
2,921
2024
2023
2022
2021
2020
34.5
38.3
38.3
32.3
17.8
2024
2023
2022
2021
2020
Some KPIs are used as a measure in
the incentive plan for the remuneration
of executives. See our Directors’
remuneration report from page 122
for more detail.
KPI: Key Performance Indicator
Definition
Net cash from operating activities comprises the net
cash flow from operating activities as disclosed on
the face of the consolidated statement of cash flows.
Profit for the year divided by net assets at
the end of the financial year.
Non-GAAP measures
Free cash flow
($ million)(1),(2)
Return on average invested capital (ROIC)
(%)
Total shareholder return (TSR)
(%)
2,609
15.8%
(24)%
2,609
2,235
3,779
4,106
2,059
2024
2023
2022
2021
2020
15.8
18.4
19.8
16.1
14.3
2024
2023
2022
2021
2020
(24)
(2)
4
32
(19)
2024
2023
2022
2021
2020
Definition
Free cash flow comprises the net cash flow from
operating activities aggregated with the net cash
expenditure paid for property, plant and
equipment, and computer software. Definition of
free cash flow has been redefined, see more
details on page 31.
Profit before finance charges and exceptional items
attributable to equity shareholders divided by average
invested capital. Invested capital comprises net assets
excluding net post-employment benefit assets/
liabilities, net borrowings and non-controlling interests.
Definition of return on average capital employed has
been redefined, see more details on page 31.
Percentage growth in the value of a Diageo
share (assuming all dividends and capital
distributions are re-invested).
Why we measure
Free cash flow is a key indicator of the financial
management of the business. Free cash flow
reflects the delivery of efficient growth and
consistent value creation as it measures the
cash generated by the business to fund
payments to our shareholders and future growth.
ROIC is used by management to assess the return
obtained from the group’s asset base. Over time,
ROIC reflects consistent value creation, as the returns
Diageo generates from its asset base are both
reinvested in the business and used to generate
returns for investors through dividends and return
of capital programmes.
Diageo’s Directors have a fiduciary
responsibility to maximise long-term value
for shareholders. TSR measures consistent
value creation as it reflects the returns
Diageo has delivered to investors in the year
and over time. We also monitor our relative
TSR performance against our peers.
Performance
Net cash from operating activities was $4,105
million, an increase of $469 million compared
to fiscal 23. Free cash flow grew by $374
million to $2,609 million.
Free cash flow growth was driven by strong
working capital management and the positive
impact of lapping one-off cash tax payments
in the prior year. These favourable factors
more than offset the negative impacts of lower
operating profit and increased interest
payments, attributable to the current higher
interest rate environment. The increase in
capital expenditure (capex) demonstrates our
commitment to investing in the business for
long-term sustainable growth.
ROIC decreased 255bps, mainly driven by lower
operating profit, increased capex, maturing stock
investment and continued portfolio optimisation
through acquisitions and disposals. The decline
was slightly offset by lower tax.
TSR was down 24% over the past 12
months driven by the lower year-on-year
share price.
More detail on page 31.
More detail on page 31.
Diageo Annual Report 2024
25
R
K
R
K
R
R
R
R
K
K
K
K
K
R
K
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Non-financial performance
Positive drinking
Employee Engagement Index
Inclusion and diversity
81%
Number of people
educated on the
dangers of
underage drinking
through a Diageo
supported
education
programme
2.2m
(2023: 1.9m)
Total to date:
5.9m(1)
81%
84%
82%
81%
2024
2023
2022
2021
2020
Percentage of
female leaders
globally
44%
(2023: 44%)
Percentage of
ethnically diverse
leaders globally
46%
(2023: 43%)
Definition
Number of people educated on the
dangers of underage drinking through a
Diageo supported education programme.
Measured through our Your Voice survey;
includes metrics for employee satisfaction,
advocacy and pride.(3)
The percentage of women and the percentage of
ethnically diverse individuals who are in Diageo
leadership roles.
Why we measure
We want to change the way the world drinks
for the better by promoting moderation
and addressing the harmful use of alcohol.
We build credibility and trust by transparently
reporting the total number of people
educated on the dangers of underage
drinking. This figure also demonstrates our
commitment to engaging people on the
dangers of harmful alcohol use.
Employee Engagement releases the full potential
of our people and our business, and it’s a key
enabler to our performance. The survey allows
us to measure the extent to which employees
believe we are living our values and is a measure
of our culture. Reflecting on the results of our
employee engagement level and taking action
where needed each year helps us build credibility
and trust with our people.
Nurturing an inclusive and diverse culture drives
commercial performance and is the right thing to
do. Transparently reporting the gender and ethnic
diversity of our leadership cohort reflects our
commitment to consistent value creation through
our diverse workforce, building credibility and trust
with our stakeholders and engaging with our
people on inclusion and diversity.
Performance
We delivered a significant increase in our
reach, particularly for the LAC region.
Globally, we educated 2.2m young people
about the dangers of underage drinking.
This year 89% of our people completed our Your
Voice survey. 81% were identified as engaged.
89% declared themselves proud to work for
Diageo, 81% would recommend Diageo as a
great place to work and 74% were extremely
satisfied with Diageo as a place to work.
This year, 44% of our leadership roles were held
by women, the same percentage as last year,
and 46% of our leaders were ethnically diverse,
compared with 43% last year.
More detail on page 51.
More detail on page 55.
More detail on page 59.
(1)
The baseline year for our ‘Spirit of Progress’ goals is 2020 unless otherwise stated. For our target to educate 10 million young people, parents and teachers on the dangers of underage
drinking the baseline year is 2018.
(2)
Because of the Covid-19 pandemic, in 2020 we did not run a full Your Voice survey. Instead we used a pulse survey tool to listen to employees’ feedback and learn from their
experiences of working during the pandemic. We therefore do not have a comparable employee engagement metric for 2020.
(3)
In 2021, we updated the way we measure employee engagement in our Your Voice survey to bring it in line with standard practice.
OUR PERFORMA NCE continued
26
Diageo Annual Report 2024
N/A(2)
Non-financial performance
Water efficiency(4)
Scope 1 and 2 greenhouse gas
emissions(4)
Change vs baseline year
Change vs baseline year
(15.6) %
(23.8) %
(15.6)%
(12.3)%
(12.3)%
(8.8)%
—%
2024
2023
2022
2021
2020
(23.8)%
(14.7)%
(9.8)%
(5.3)%
—%
2024
2023
2022
2021
2020
Definition
Percentage change in water efficiency across the
company compared to fiscal 20 baseline. Refer to
page 249 for how this metric is measured.
Percentage change in total direct and indirect
greenhouse gas emissions (market/net based)
compared to fiscal 20 baseline.
Why we measure
Our water efficiency programme is critical to
helping us to address water security, particularly in
water-stressed areas. In addition to preserving our
licence to operate, minimising water use within our
own operations underpins our commitment to
delivering long-term value by future-proofing our
business against the impacts of a changing
climate. It also helps to ensure this precious
resource can continue to be shared with the
communities we live and work amongst.
Mitigating our impact on climate change is a
business imperative. Reporting in detail on our
efforts to reduce Scope 1 and 2 greenhouse gas
emissions, even when it is challenging to do so,
demonstrates our commitment to reducing our
contribution to global warming and helps build
credibility and trust. This is an important area for
our business and external stakeholders, supporting
our commitment to consistent value creation by
future-proofing our business.
Performance
This year, our water efficiency across the company
improved in total by 15.6% since our fiscal 20
baseline. The main drivers contributing to the
strong performance in fiscal 24 were the
continuous improvement initiatives in the water
recovery plants at our East Africa sites and the
optimisation of the reverse osmosis plant at our
Cameronbridge site.
Our Scope 1 and 2 greenhouse gas emissions
reduced in total by 23.8% from our fiscal 20
baseline. The main drivers contributing to the
lower emissions are the increased use of on-site
bioenergy (biomass, biogas and biofuel)
across Africa, scotch and tequila markets and
additional renewable electricity use, particularly
in North America.
More detail on page 67.
More detail on page 69.
(4)
In accordance with Diageo’s environmental reporting methodologies and, where relevant, WRI/WBCSD GHG Protocol; data for 2019, the baseline year 2020 and for the intervening
period up to the end of last financial year has been restated where relevant.
Diageo Annual Report 2024
27
R
R
R
R
K
K
K
K
K
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Chief Financial Officer’s introduction
'After three years of strong topline growth, the
industry, as well as Diageo’s financial performance,
was challenged in fiscal 24. This was driven by the
uncertain global consumer environment across
many of our markets. Organic net sales were down
0.6% driven by a volume decline and primarily
attributable to weak performance in LAC, which
was impacted by weaker consumer demand and
higher than expected inventory levels in the first half
of the fiscal year. Organic operating margin
declined 56bps excluding LAC and was driven by
continued investment in the business through
overheads and A&P.'
Reported net sales growth
Net cash from operating
activities
(1)%
$4,105m
Organic net sales growth(1)
Free cash flow(1)
(1)%
$2,609m
Reported operating profit
growth
Return on closing invested
capital
8%
34.5%
Organic operating profit
growth(1)
Return on average invested
capital(1)
(5)%
15.8%
Basic earnings per share
Total shareholder return
173.2c
(24)%
Earnings per share before
exceptional items(1)
179.6c
(1)
Organic net sales growth, organic operating profit growth, earnings per share before
exceptional items, free cash flow and return on average invested capital are non-
GAAP measures. See definitions and reconciliation of non-GAAP measures to GAAP
measures on pages 227-235.
In these times of an uncertain consumer environment, we have
focused on what we can control to continue to invest in our future.
We have focused on driving productivity, smart price mix and cash.
I’m pleased to say we have increased our annual productivity
and delivered nearly $700 million in savings in fiscal 24 with the
highest-ever contribution from cost of goods and supply initiatives.
And with this, we have comfortably exceeded the delivery of our
three-year commitment of $1.5 billion of productivity having delivered
$1.7 billion. The supply chain agility programme which was set up
at the beginning of fiscal 22 has also contributed to this year’s
productivity and is expected to continue to deliver incremental
savings over the coming years even as we continue to invest in
the business, including in overheads and in A&P.
We have also continued our disciplined conversion of profit into
cash and delivered free cash flow of $2.6 billion. We have driven
this by significantly stepping up our capabilities in managing both
accounts payable and inventory with more discipline.
We remain a progressive dividend payer, increasing our dividend
5% in fiscal 24 as well as completing a new share buyback
programme up to $1 billion. Our leverage ratio was 3.0x as of 30
June 2024, and we remain committed to our leverage ratio and
our disciplined approach to capital allocation.
Our brands and portfolio, as well as our ability to lead and shape
consumer trends, operational excellence and talented workforce
give me confidence that we can navigate temporary volatility and
uncertainty, while continuing to drive sustainable long-term growth
and deliver shareholder value. With this being my last full fiscal year
at Diageo, I am proud of our accomplishments over the last few
years. I am confident that Diageo will build on its foundation and
remains on track to be one of the best performing, most trusted and
respected consumer products companies in the world.
SUM M A RY FINANCIAL REVIEW
28
Diageo Annual Report 2024
Net sales ($ million)
Reported net sales declined 1.4% due to an unfavourable foreign
exchange impact, organic net sales decline and a negative impact
from acquisitions and disposals, partially offset by hyperinflation
adjustments.Organic net sales declined 0.6%. Positive price/mix of
2.9pps was more than offset by a 3.5% decline in volume, primarily
driven by materially weaker performance in LAC, driven by fast-
changing consumer sentiment and elevated inventory levels. A
weaker consumer environment and the impact of lapping inventory
replenishment in the prior year in North America also contributed to
the decline. Excluding LAC, organic net sales grew 1.8%.
Reported net sales declined 1.4%
Organic net sales declined 0.6%
Organic movement
20,555
(424)
(68)
335
(717)
588
20,269
2023
re-presented⁽¹⁾
Exchange⁽²⁾
Acquisitions and disposals
Hyperinflation⁽³⁾
Volume
Price/mix
2024
(1)
See pages 166-167 for an explanation under Accounting information and policies.
(2)
Exchange rate movements reflect the adjustment to recalculate the reported results as
if they had been generated at the prior period weighted average exchange rates.
(3)
See pages 167 and 228-230 for details on hyperinflation adjustments.
Operating profit ($ million)
Reported operating profit grew 8.2%, primarily driven by the benefit
from exceptional operating items, partially offset by a decrease in
organic operating profit.
Organic operating profit declined 4.8% as a result of the organic net
sales decline, primarily due to a $302 million operating profit decline
in LAC and a $142 million operating profit decline in North America.
The decline was also driven by an increase in investments in strategic
capabilities, including in digital and strengthening route-to-market,
primarily in the US, and in marketing.
Reported operating profit grew 8.2%
Organic operating profit declined 4.8%
5,547
822
(8)
(43)
(14)
1
(304)
6,001
2023
re-presented⁽¹⁾
Exceptional operating
items⁽²⁾
Exchange
Acquisitions and
disposals
FVR⁽³⁾
Hyperinflation⁽⁴⁾
Organic movement
2024
(1)
See pages 166-167 for an explanation under Accounting information and policies.
(2)
For further details on exceptional items see pages 45 and 172-173.
(3)
Fair value remeasurements. For further details see page 45.
(4)
See pages 167 and 228-230 for details on hyperinflation adjustments.
Diageo Annual Report 2024
29
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Operating margin (%)
Reported operating margin expanded by 262bps primarily due to the
positive impact of exceptional operating items partially offset by a
decline in organic operating margin.
Organic operating margin declined by 130bps, primarily due to weak
performance in LAC and a cautious consumer environment in the US.
The decline was also driven by continued investment in the business,
primarily in overheads and marketing, partially offset by positive
gross margin. Excluding LAC, organic operating margin declined by
56bps and gross margin grew 17bps, driven by price increases and
productivity which offset the impact of cost inflation.
Reported operating margin expanded by 262bps
Organic operating margin declined by 130bps
Organic movement
27.0%
400bps
56bps
(9)bps
(55)bps
(12)bps
(15)bps
(103)bps
29.6%
2023
re-presented⁽¹⁾
Exceptional
operating
items⁽²⁾
Exchange
Acquisitions and
disposals
Other⁽³⁾
Gross margin
Marketing
Other operating
items
2024
(1)
See pages 166-167 for an explanation under Accounting information and policies.
(2)
For further details on exceptional operating items see pages 45 and 172-173.
(3)
Fair value remeasurements and hyperinflation adjustments. For further details on fair value remeasurements see page 45. See pages 167 and 228-230 for details on hyperinflation
adjustments.
Basic earnings per share (cents)
Basic eps decreased 23.1 cents, mainly driven by lower organic
operating profit, higher finance charges and exceptional items,
partially offset by lower tax and the impact of share buybacks.
Basic eps before exceptional items decreased 16.9 cents.
Basic eps decreased 11.8% from 196.3 cents to 173.2
cents
Basic eps before exceptional items(1) decreased 8.6%
from 196.5 cents to 179.6 cents
196.3
(6.2)
(0.3)
(1.4)
(13.4)
(1.3)
(8.4)
4.9
3.0
0.6
(0.6)
173.2
2023
re-
presented⁽²⁾
Exceptional
items after
tax⁽³⁾
Exchange on
operating
profit
Acquisitions
and
disposals⁽⁴⁾
Organic
operating
profit
Associates
and joint
ventures
Finance
charges⁽⁵⁾
Tax⁽⁶⁾
Share
buyback⁽⁴⁾
Non-
controlling
interests
FVR⁽⁷⁾
2024
(1)
See pages 227-235 for an explanation of the calculation and use of non-GAAP measures.
(2) See pages 166-167 for an explanation under Accounting information and policies.
(3) For further details on exceptional items see pages 45 and 172-173.
(4) Includes finance charges net of tax.
(5) Excludes finance charges related to acquisitions, disposals, share buybacks and includes finance charges related to hyperinflation adjustments.
(6) Excludes tax related to acquisitions, disposals and share buybacks.
(7) Fair value remeasurements. For further details see page 45.
SUM M A RY FINANCIAL REVIEW continued
30
Diageo Annual Report 2024
Net cash from operating activities and free
cash flow(1) ($ million)
Net cash from operating activities was $4,105 million, an increase of
$469 million compared to fiscal 23. Free cash flow grew by $374
million to $2,609 million. Free cash flow growth was driven by strong
working capital management and the positive impact of lapping one-
off cash tax payments in the prior year. These favourable factors
more than offset the negative impacts of lower operating profit and
increased interest payments, attributable to the current higher interest
rate environment. The increase in capital expenditure (capex)
demonstrates our commitment to investing in the business for long-
term sustainable growth.
Generated $4,105 million net cash from operating
activities(2) and $2,609 million free cash flow.
3,636
(1,401)
2,235
(8)
(339)
646
(95)
344
(196)
22
2,609
1,496
4,105
2023 Net cash
from operating
activities re-
presented⁽³⁾
2023 Capex
represented⁽³⁾
2023 Free
cash flow re-
presented⁽³⁾
Exchange⁽⁴⁾
Operating
profit⁽⁵⁾
Working
capital⁽⁶⁾
Capex
Tax
Interest
Other⁽⁷⁾
2024 Free
cash flow
2024 Capex
2024 Net
cash from
operating
activities
(1)
Definition of free cash flow has been redefined, see more details on page 232.
(2)
Net cash from operating activities excludes net capex (2024 – $(1,496) million; 2023 – $(1,401) million).
(3)
See pages 166-167 for an explanation under Accounting information and policies.
(4)
Exchange on operating profit before exceptional items.
(5)
Operating profit excludes exchange, depreciation and amortisation, post-employment charges of $11 million and other non-cash items.
(6)
Working capital movement includes maturing inventory.
(7)
Other items include dividends received from associates and joint ventures and other investments and post-employment payments.
Return on average invested capital (%)(1)(2)
ROIC decreased 255bps, mainly driven by lower operating profit,
increased capex, maturing stock investment and continued portfolio
optimisation through acquisitions and disposals. The decline was
slightly offset by lower tax.
ROIC decreased 255bps
18.4%
(17)bps
(26)bps
(106)bps
(24)bps
20bps
(101)bps
(1)bps
15.8%
2023
Exchange
Acquisitions and
disposals
Organic operating
profit
Associates and joint
ventures
Tax
Working capital
Other
2024
(1)
ROIC calculation excludes exceptional operating items from operating profit. For further details on ROIC see pages 233-234.
(2)
Definition of return on average invested capital has been redefined, see more details on pages 233-234.
Diageo Annual Report 2024
31
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Our global reach
Our regional profile maximises the opportunity for growth in our sector. Where our products are sold
each market is accountable for its own performance and driving growth.
% share of reported net sales by region(1)(2)
(1)
The above map is intended to illustrate general geographic regions where Diageo has a presence and/or in which its products are sold. It is not intended to imply that Diageo has a
presence in and/or that its products are sold in every country or territory within a geographic region.
(2)
Based on reported net sales for the year ended 30 June 2024. Does not include corporate net sales of $123 million (2023 – $104 million).
Fiscal 24
North America
Europe
Asia Pacific
Latin America
and Caribbean
Africa
Volume (EU million )
50.1
51.3
74.9
22.1
32.1
Reported net sales(1) ($ million)
7,908
4,804
3,817
1,839
1,778
Reported operating profit(2) ($ million)
3,039
1,257
1,438
502
131
Operating profit before exceptional items(3) ($ million)
3,236
1,379
1,063
502
131
Water efficiency, percentage change compared to fiscal 20 baseline
2 %
(12) %
(38) %
4 %
(25) %
Percentage change in total direct and indirect greenhouse gas emissions
(market/net based) compared to fiscal 20 baseline
(32) %
18 %
(75) %
(59) %
(43) %
Average number of employees(4)
3,144
10,524
8,763
4,437
3,499
(1)
Excluding corporate net sales of $123 million (2023 – $104 million).
(2)
Excluding net corporate operating costs of $366 million (2023 – $(397) million).
(3)
Excluding exceptional operating charges of $56 million (2023 – $(766) million) and net corporate operating costs of $366 million (2023 – $(397) million).
(4) Employees have been allocated to the region where they live.
BUSINESS REVIEW
32
Diageo Annual Report 2024
North America
39%
Latin America and Caribbean
9%
Asia Pacific
19%
Europe
24%
US Spirits
Diageo Beer Company (DBC) USA
Canada
Other
(principally
Travel Retail)
Brazil
Mexico
CCA (Central America and Caribbean)
Andean
South LAC
Other (principally
Travel Retail)
East Africa
Africa Regional Markets (ARM)
Nigeria
South Africa
Other (principally
Travel Retail)
Africa
9%
India
Greater China
Australia
South East Asia
North Asia
Other (principally
Travel Retail Asia
and Middle East)
Great Britain
Southern Europe
Northern Europe
Ireland
Türkiye
Eastern Europe
Other (principally Travel Retail)
Production facilities
The company owns manufacturing production facilities across the globe, including distilleries, breweries, packaging plants, maturation warehouses,
cooperages, and distribution warehouses. Diageo’s brands are also produced at plants owned and operated by third parties and joint ventures
at several locations around the world. We believe that our facilities are in good condition and working order. We have adequate capacity to meet
our current needs, and, in the beer and spirit categories, we have undertaken activities to increase our production capacity to address our
anticipated future demand.
The major facilities owned by Diageo with locations, principal activities, and products are presented in the table below as at 30 June 2024.
Location
Principal activities
Products
United Kingdom
distilling, bottling, warehousing, coopering
beer, scotch, gin, vodka, rum, ready to drink, non-alcoholic
Ireland
distilling, brewing, bottling, warehousing
beer, liqueur, Irish whiskey, non-alcoholic
Italy
distilling, bottling, warehousing
vodka, rum, ready to drink, non-alcoholic
Türkiye
distilling, bottling, warehousing
raki, vodka, gin, liqueur, wine
North America
distilling, bottling, warehousing
vodka, gin, rum, Canadian whisky, US whiskey, ready to drink
Brazil
distilling, bottling, warehousing
cachaça, vodka, ready to drink
Mexico
distilling, bottling, warehousing
tequila
East Africa
distilling, brewing, bottling, warehousing
beer, rum, vodka, gin, whisky, brandy, liqueur, ready to drink,
bottled in East Africa (scotch)
Nigeria
distilling, brewing, bottling, warehousing
beer, rum, vodka, gin, ready to drink
South Africa
distilling, bottling, warehousing
rum, vodka, gin
ARM
distilling, brewing, bottling, warehousing
beer, vodka, gin, ready to drink
India
distilling, bottling, warehousing
rum, vodka, Indian whisky, gin, brandy, bottled in India (scotch)
Australia
distilling, bottling, warehousing
rum, vodka, gin, ready to drink
Greater China
distilling, warehousing
Chinese whisky, Chinese white spirits
For more details about our capital investments please see page 262.
Our route to consumer
We have five different route to consumer models across our business.
Most of the regions employ four of the five high level models defined
below; however, how each model operates in certain countries will
vary, as will the percentage of net sales delivered through the
respective models in each market.
Wholesalers and Distributors
Diageo sells to a wholesaler or distributor who also sells a range of
other brands and categories directly to end outlets where consumers
can purchase our brands. Where required, this model may include a
government control board (or similar), such as in certain states in the
US and provinces and territories in Canada.
Modern Trade
Diageo sells directly to a customer who owns and manages retail
outlets, who then in turn sells to consumers via their outlets.
eMarketplace
Diageo sells to a third-party digital marketplace customer where that
customer sells to B2B customers and consumers.
Direct to Consumer
Diageo sells directly to consumers, predominantly through portals such
as Thebar.com, which is a growing route to consumer model for our
business. It allows for direct interface with our consumers rather than
through third-party sites as in the eMarketplace model above.
Direct to Store
Diageo sells and delivers directly to end outlets rather than via a
central purchasing customer as in the Modern Trade model above.
This model is less common than the other models. For example,
it is used in Ireland for beer distribution.
Diageo Annual Report 2024
33
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Markets and categories:
Key brands(6):
Organic volume
movement
%
Reported volume
movement
%
Organic net sales
movement
%
Reported net sales
movement
%
Organic volume
movement(7)
%
Organic net sales
movement
%
Reported net sales
movement
%
North America(4)
(4)
(4)
(3)
(2)
Crown Royal
—
(1)
(1)
Don Julio
19
11
11
US Spirits(4)
(5)
(4)
(3)
(3)
Casamigos(8)
(16)
(21)
(22)
DBC USA(5)
1
1
3
3
Smirnoff
(5)
(2)
(2)
Canada
(5)
(4)
(2)
(3)
Johnnie Walker
(7)
(10)
(10)
Captain Morgan
(10)
(6)
(6)
Spirits(4)
(5)
(5)
(4)
(4)
Guinness
3
6
6
Beer
3
3
5
5
Ketel One(9)
(4)
(5)
(5)
Ready to drink
(8)
(8)
(3)
(3)
Baileys
(2)
—
—
Bulleit whiskey(10)
6
12
12
Buchanan's
8
3
3
(1)
See pages 166-167 for an explanation under Accounting information and policies.
(2)
Fair value remeasurements. For further details see page 45.
(3)
For further details on exceptional operating items see pages 45 and 172-173.
(4)
Reported volume movement includes impacts from acquisitions and/or disposals. For
further details see page 227-235.
(5)
Certain spirits-based ready to drink products in certain states are distributed through
DBC USA and those net sales are captured within DBC USA.
(6)
Spirits brands excluding cocktails, which includes ready to drink, ready- to-serve and
non-alcoholic variants.
(7)
Organic equals reported volume movement.
(8)
Casamigos trademark includes both tequila and mezcal.
(9)
Ketel One includes Ketel One vodka and Ketel One Botanicals.
(10) Bulleit whiskey excludes Bulleit Crafted Cocktails.
Regional performance:
• North America (NAM) net sales performance was negatively
impacted by a cautious US consumer environment while share
performance improved consistently through the year driven by
focused execution.
• Diageo NAM performance was impacted by US Spirits due to a
cautious consumer environment, retailer inventory adjustments and
the lapping of inventory replenishment in the prior year. Against this
backdrop, Diageo held share of US TBA in fiscal 24 and delivered
share gains in the second half compared to the first half, supported
by innovation, focused investment, primarily in Don Julio and Crown
Royal, and improved execution.
• Reported net sales declined 2%, due to weaker organic net sales
performance.
• Organic net sales declined 3%, due to lower sales in US Spirits and
Canada, partially offset by growth in Diageo Beer Company (DBC
USA).
• Price/mix grew 2pps and was more than offset by a 4% decline in
volume.
• US Spirits net sales declined 3%, driven by a volume decline of 5%.
Depletion growth was approximately one percentage point ahead of
shipment growth, with some variations across brands. Overall inventory
levels at distributors at the end of fiscal 24 remained in line with historical
levels.
• DBC USA net sales grew 3%, reflecting strong growth in Guinness,
Smirnoff flavoured malt beverages, and the launch of Captain
Morgan Sliced Apple.
• Organic operating margin declined 79bps, primarily due to an
increase in overhead costs in support of strategic initiatives and
marketing investments, partially offset by improvements in gross
margin. Gross margin improvement was driven by productivity
savings which more than offset an adverse impact from mix and
inflation.
• Marketing investment declined 1%, but increased as a percentage of
net sales. Investment was focused in Don Julio and other key brands,
while maintaining focus on marketing efficiencies.
US Spirits highlights(1):
• Tequila net sales declined 5%, largely due to a 22% decline in
Casamigos attributable to lower consumer demand and the impact
of lapping inventory replenishments in the prior year following supply
shortages. As a result, Casamigos depletions were ahead of
shipments with a 9% decline. Don Julio net sales increased 12%,
despite lapping the impact of inventory replenishments in the prior
year. Supported by strong execution, depletions grew 21%,
significantly ahead of shipments, and was led primarily by Don Julio
Reposado. Diageo's tequila portfolio grew share of the spirits industry
in fiscal 24, with acceleration in the second half, led by Don Julio.
• Crown Royal whisky net sales declined 1%, primarily due to Crown
Royal Deluxe and Crown Royal Peach, mostly offset by the successful
launch of Crown Royal Blackberry. Crown Royal held share for the
full year and gained share of the spirits industry in the second half of
the fiscal year.
• Vodka net sales declined 8%, reflecting weakness in the category.
Cîroc net sales declined 28%, partially offset by the launch of Cîroc
Limonata, which recruited consumers and gained category share.
Smirnoff net sales declined 3%, primarily driven by Smirnoff No.21.
While Ketel One net sales declined 5%, primarily driven by Ketel One
Botanicals, Ketel One grew share of the vodka category supported
by our 'Made to Cocktail' campaign.
• Johnnie Walker net sales declined 10%, due to continued
normalisation of demand for luxury variant Johnnie Walker Blue
Label and lower demand for Johnnie Walker Red Label. The
trademark continues to outperform the scotch category and held
share of the spirits industry, driven by strong performance in Johnnie
Walker Black Label.
• Captain Morgan net sales declined 6%, primarily due to Captain
Morgan Original Spiced as consumers shifted into other spirits categories.
Captain Morgan lost both category and spirits industry share.
• Bulleit whiskey net sales increased 12%, significantly ahead of
depletions growth as inventory levels continue to normalise. Bulleit
held share of the spirits industry.
• Buchanan's net sales increased 3%, primarily driven by continued
momentum in Buchanan’s Pineapple which recruited new consumers.
Buchanan's trademark gained share of the spirits industry.
• Spirits-based cocktails(2) net sales increased 15%, driven by the
successful launches of the Cocktail Collection and Smirnoff Smash,
which both gained share of category and the spirits industry. The
Cocktail Collection consists of Ketel One Espresso Martini, Ketel One
Cosmopolitan, Astral Margarita and Tanqueray Negroni.
(1)
Spirits brands and categories excluding cocktails, which includes ready to drink, ready-
to-serve and non-alcoholic variants, except where noted.
(2)
Spirits-based cocktails includes ready to serve and ready to drink variants.
Diageo Annual Report 2024
35
North
America
North America is the largest market for Diageo and represents over one-third of
our net sales. We have a well-positioned portfolio of brands that leans into
premiumisation and high-growth categories such as whiskey and tequila.
Our strategy is focused on accelerating sustainable growth through data-led
insights, targeted investment, and excellence in innovation and our route to market.
Reported net sales by market (%)
ò US Spirits
ò Diageo Beer Company USA
ò Canada
ò Other (principally Travel Retail)
Reported net sales by category (%)
ò Spirits
ò Beer
ò Ready to drink
ò Other
Key financials ($ million): North America
2023
re-presented(1)
Exchange
Acquisitions
and
disposals
Organic
movement
Other(2)
2024
Reported
movement
%
Net sales
8,109
3
2
(206)
—
7,908
(2)
Marketing
1,631
1
5
(10)
—
1,627
—
Operating profit before exceptional items
3,222
160
(10)
(142)
6
3,236
—
Exceptional operating items(3)
(118)
(197)
Operating profit
3,104
3,039
(2)
BUSINESS REVIEW continued
34
Diageo Annual Report 2024
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Europe
Europe is a diverse region with a trend-leading on-trade channel and tourism hotspots,
all of which offer a strong platform for the development of our premium brands.
It is also home to Diageo's biggest beer business and a stronghold for Guinness.
We hold a leadership position across major categories and markets, and have
been able to achieve share gains and resilient net sales growth in the last fiscal.
Reported net sales by market (%)
ò Great Britain
ò Southern Europe
ò Northern Europe
ò Ireland
ò Türkiye
ò Eastern Europe
ò Other (principally Travel Retail)
Reported net sales by category (%)
ò Spirits
ò Beer
ò Ready to drink
ò Other
Key financials ($ million): Europe
2023
re-presented(2)
Exchange
Reclassification
Acquisitions
and
disposals
Organic
movement
Other(3)
Hyperinflation(1)
2024
Reported
movement
%
Net sales
4,303
(3)
62
26
124
—
292
4,804
12
Marketing
765
18
1
22
34
—
33
873
14
Operating profit before exceptional items
1,312
24
47
3
(15)
(3)
11
1,379
5
Exceptional operating items(4)
(12)
(122)
Operating profit
1,300
1,257
(6)
BUSINESS REVIEW continued
36
Diageo Annual Report 2024
Markets and categories:
Key brands(6):
Organic
volume
movement
%
Reported
volume
movement
%
Organic
net sales
movement
%
Reported
net sales
movement
%
Organic
volume
movement(7)
%
Organic
net sales
movement
%
Reported
net sales
movement
%
Europe(5)
(1)
—
3
12
Guinness
11
22
27
Johnnie Walker
5
3
21
Great Britain(5)
(1)
—
5
10
Baileys
5
6
10
Southern Europe(5)
(2)
(8)
(2)
—
Smirnoff
(2)
—
5
Northern Europe(5)
(3)
(2)
(4)
—
Captain Morgan
(5)
(5)
—
Ireland(5)
(2)
(1)
7
11
Gordon's
(9)
(8)
(1)
Türkiye(5)
4
4
31
59
Tanqueray
(8)
(9)
(4)
Eastern Europe(5)
(6)
(5)
(7)
(3)
JεB
(3)
(6)
3
Spirits(5)
(2)
(1)
(1)
9
Beer
8
8
18
23
Ready to drink(5)
(9)
(9)
(5)
(3)
(1)
See pages 167 and 228-230 for details on hyperinflation adjustments.
(2)
See pages 166-167 for an explanation under Accounting information and policies.
(3)
Fair value remeasurements. For further details see page 45.
(4)
For further details on exceptional items see pages 45 and 172-173.
(5)
Reported volume movement includes impacts from acquisitions and/or disposals. For
further details see page 227-235.
(6)
Spirits brands excluding ready to drink and non-alcoholic variants.
(7)
Organic equals reported volume movement except for Johnnie Walker (11)%,
Gordon's (8)% and JεB (2)%.
Regional performance:
• Resilient net sales growth with continued strong momentum in
Guinness.
• Diageo Europe delivered strong performance with market share
growth across most European markets despite persistent cost
inflation and lower consumer confidence.
• Reported net sales grew 12%, primarily driven by a hyperinflation
adjustment(1) related to Türkiye and organic growth.
• Organic net sales grew 3%, driven by double-digit growth in Türkiye
and mid single-digit growth in Great Britain and Ireland, partially
offset by declines, primarily in Northern and Eastern Europe.
Excluding the impact of lapping the sales of inventories from the
previously announced winding down of operations in Russia in fiscal
23, overall organic net sales for the region grew 4%.
• Price/mix grew 4pps, driven by price increases across most markets,
with Guinness growth driving particularly strong price/mix in Great
Britain and Ireland.
• Spirits net sales declined 1%, primarily due to softness in the spirits
category despite improved market share performance through fiscal
24, and the impact of lapping final sales of inventories in Russia.
Strong growth in raki and Baileys was more than offset by declines
in scotch, gin, and rum. Excluding the effect of lapping final sales of
inventories in Russia, spirits organic net sales grew 1%.
• Beer net sales grew 18%, primarily driven by Guinness. Double-digit
volume and price/mix in Guinness were driven by share gains in
Ireland and Great Britain, supported by strong marketing and
innovation. Guinness 0.0 net sales and volume more than doubled
in fiscal 24.
• Organic operating margin declined by 121bps. Strategic price
increases more than offset the impact of cost inflation. Margin
decline reflects increased marketing investment as well as
investments in strategic commercial initiatives. Excluding the impact
of lapping the profit from sales of inventories in Russia in fiscal 23,
operating margin declined by 85bps.
• Marketing investment increased 4%, primarily driven by investment
in tequila, beer and Johnnie Walker.
Market highlights:
• Great Britain net sales grew 5%, primarily driven by strong
performance in Guinness, which gained share in both the on-trade
and off-trade. Share gains were driven by continued recruitment
through strong brand building and new occasions, supported by
Guinness 0.0 and Nitrosurge innovations.
• Southern Europe net sales were 2% lower, mainly due to scotch,
rum and gin, reflecting category decline. This was in spite of the
majority of the markets within Southern Europe gaining share, driven
by the continued momentum in Johnnie Walker.
• Northern Europe net sales declined 4%, due to macroeconomic
pressures impacting higher price point segments in scotch, gin and
vodka. The decline was partially offset by double-digit growth in
Johnnie Walker Red Label, as consumers shifted into the standard
price tier. Market share of spirits declined, primarily driven by ready
to drink (RTD) cocktails as a result of increased competitive activity.
• Ireland net sales grew 7%, primarily driven by double-digit growth in
Guinness. Strong share gains in the on-trade were driven by
effective brand building and the roll-out of Guinness 0.0 draught,
now in more than 1,500 on-trade outlets.
• Eastern Europe net sales declined 7%, primarily driven by lapping
the final sales of inventories in Russia in the first half of the prior year.
Excluding Russia, net sales grew 8% driven by strong performance
in Guinness and scotch.
• Türkiye net sales grew 31% with volume growth of 4%, primarily
reflecting the impact of price increases in response to inflation and
increased excise duties. Net sales growth was mostly driven by
strong performance in raki and Johnnie Walker, with share gains in
whisky.
Diageo Annual Report 2024
37
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Asia
Pacific
In Asia Pacific, our focus is to grow in both developed and emerging markets
across our entire portfolio. We manage our portfolio to meet the increasing
demands of the growing middle class, and aim to inspire our consumers to
drink better, not more.
Reported net sales by market (%)
ò India
ò Greater China
ò Australia
ò South East Asia
ò North Asia
ò Other (principally Travel Retail Asia
and Middle East)
Reported net sales by category (%)
ò Spirits
ò Beer
ò Ready to drink
ò Other
Key financials ($ million): Asia Pacific
2023
re-presented(1)
Exchange
Reclassification
Acquisitions
and
disposals
Organic
movement
2024
Reported
movement
%
Net sales
3,841
(30)
(62)
(96)
164
3,817
(1)
Marketing
655
(11)
(1)
(8)
16
651
(1)
Operating profit before exceptional items
1,104
(29)
(47)
(25)
60
1,063
(4)
Exceptional operating items(2)
(581)
375
Operating profit
523
1,438
175
BUSINESS REVIEW continued
38
Diageo Annual Report 2024
Markets and categories:
Key brands(5):
Organic
volume
movement
%
Reported
volume
movement
%
Organic
net sales
movement
%
Reported
net sales
movement
%
Organic
volume
movement(6)
%
Organic
net sales
movement
%
Reported
net sales
movement
%
Asia Pacific(4)
1
(7)
4
(1)
Johnnie Walker
(4)
1
—
Shui Jing Fang(7)
32
27
23
India(4)
2
(7)
8
3
McDowell's
(2)
4
2
Greater China
14
15
12
8
The Singleton
14
12
10
Australia
(7)
(6)
(8)
(9)
Royal Challenge
11
16
14
South East Asia(4)
(9)
(8)
(8)
(4)
Guinness
(2)
4
2
Travel Retail Asia and Middle East
—
(28)
10
(3)
Black & White
20
24
21
North Asia
(12)
(13)
3
(17)
Smirnoff
1
(1)
(6)
Spirits(4)
1
(7)
6
1
Beer
(2)
(3)
4
2
Ready to drink
(16)
(16)
(14)
(16)
(1)
See pages 166-167 for an explanation under Accounting information and policies.
(2)
For further details on exceptional items see pages 45 and 172-173.
(3)
Organic equals reported volume movement except for Johnnie Walker (10)%, Smirnoff
(1)%, Guinness (3)% and Black & White (19)%.
(4)
Reported volume movement includes impacts from acquisitions and/or disposals. For
further details see pages 227-235.
(5)
Spirits brands excluding ready to drink and non-alcoholic variants.
(6)
Organic equals reported volume movement except for Johnnie Walker (10)%, Smirnoff
(1)%, Guinness (3)% and Black & White (19)%.
(7)
Growth figures represent total Chinese white spirits of which Shui Jing Fang is the
principal brand.
Regional performance:
• Asia Pacific delivered organic net sales, volume and operating
margin growth in challenging macroeconomic conditions whilst
increasing investment in the region.
• Reported net sales declined 1%, driven by the negative impact of
foreign exchange and the disposal of Windsor, which was partially
offset by organic sales growth.
• Organic net sales grew 4%, driven by strong growth of Chinese
white spirits in Greater China, and other whisky and scotch in India,
partially offset by declines in South East Asia and Australia.
• Price/mix grew 4pps, driven by continued premiumisation and
pricing within whisky in India and strong growth in Chinese white
spirits.
• Spirits net sales grew 6%, driven by strong performance in Greater
China and India. Tequila delivered double-digit sales growth, albeit
on a smaller base, with particularly strong growth in Travel Retail
and India, and also grew market share across most of the region.
• Organic operating margin increased by 35bps, driven by positive
mix, attributable to growth of Chinese white spirits in Greater China
and favourable product mix in India.
• Marketing investment grew 2%, with focused investment in Don
Julio across the region supporting the global launch of tequila,
Chinese white spirits in Greater China, and in innovation supporting
the launch of Johnnie Walker Blonde and in Johnnie Walker Blue
Label Xordinaire in Travel Retail.
Market highlights:
• India net sales grew 8%, driven by double-digit growth in other
whisky and scotch, supported by price/mix from continued
premiumisation and price increases, driven primarily by Prestige and
Above business segments. Whisky growth was driven by McDowell’s
and Royal Challenge, and scotch growth was driven by Black &
White and Johnnie Walker Blonde. Black & White was one of the
fastest-growing scotch brands in the market and drove recruitment
into the category.
• Greater China net sales grew 12%, primarily driven by strong growth
in Chinese white spirits, partially offset by a decline in scotch.
Despite the challenging macroeconomic conditions, Chinese white
spirits delivered strong double-digit growth, lapping a double-digit
decline in the prior year and with restocking of inventory in the first
half of the fiscal year. While scotch performance was impacted by
downtrading to lower-priced segments, focused execution and
investment drove an improvement in category share within
international spirits.
• Australia net sales declined 8% primarily due to RTDs, attributable
to increased competitive activity. This also led to the market losing
share in fiscal 24.
• South East Asia net sales declined 8%, reflecting the impact of
lapping double-digit growth in the prior year and a double-digit
decline in Vietnam, most notably in Johnnie Walker. That was
partially offset by the strong performance of The Singleton across
most of the market.
• Travel Retail Asia and Middle East net sales grew 10%, primarily
driven by Johnnie Walker Blue Label Xordinaire and Don Julio 1942.
Tequila delivered strong share growth supported by focused
execution with increased portfolio and brand distribution across the
market.
• North Asia (Korea and Japan) net sales increased by 3%, however
market share declined in the fiscal year, primarily in Korea. Net
sales growth was driven by super-premium-plus scotch, led by
Johnnie Walker Blue Label, which delivered strong double-digit
growth supported by targeted investment, and the launch of
Johnnie Walker Blonde in Korea, which supported recruitment into
whisky.
Diageo Annual Report 2024
39
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Latin America
and Caribbean
In Latin America and Caribbean (LAC), we are aiming to
increase our market share through focused consumer-centric
delivery across core categories including scotch, gin, tequila
and vodka. We do this through targeted marketing investment
in consumer focused occasions where traditionally non-spirit
TBA products have had a strong presence.
Reported net sales by market (%)
ò Brazil
ò Mexico
ò CCA
ò Andean
ò South LAC
ò Other (principally Travel Retail)
Reported net sales by category (%)
ò Spirits
ò Beer
ò Ready to drink
ò Other
Key financials ($ million): Latin America and Caribbean
2023
re-presented(1)
Exchange
Organic
movement
Other (2)
2024
Reported
movement
%
Net sales
2,159
118
(459)
—
1,839
(15)
Marketing
355
21
(70)
—
306
(14)
Operating profit
783
37
(302)
(17)
502
(36)
BUSINESS REVIEW continued
40
Diageo Annual Report 2024
Markets and categories:
Key brands(3):
Organic
volume
movement
%
Reported
volume
movement
%
Organic
net sales
movement
%
Reported
net sales
movement
%
Organic
volume
movement(4)
%
Organic
net sales
movement
%
Reported
net sales
movement
%
Latin America and Caribbean
(16)
(16)
(21)
(15)
Johnnie Walker
(12)
(17)
(12)
Buchanan’s
(18)
(28)
(15)
Brazil
(10)
(10)
(18)
(15)
Don Julio
(28)
(37)
(30)
Mexico
(25)
(25)
(30)
(24)
Old Parr
(15)
(25)
(14)
CCA
(20)
(20)
(25)
(21)
Smirnoff
(15)
(15)
(18)
Andean
(18)
(18)
(17)
19
Black & White
(25)
(30)
(22)
South LAC
(18)
(18)
(9)
(13)
Baileys
(20)
(14)
(9)
White Horse
(2)
(11)
(10)
Spirits
(16)
(16)
(23)
(16)
Beer
3
3
29
33
Ready to drink
—
—
(3)
(1)
(1)
See pages 166-167 for an explanation under Accounting information and policies.
(2)
Fair value remeasurements. For further details see page 45.
(3)
Spirits brands excluding ready to drink and non-alcoholic variants.
(4)
Organic equals reported volume movement.
Regional performance:
• Latin America & Caribbean performance was impacted by a
reduction of elevated inventory to more appropriate levels for the
current consumer environment, which remains challenging.
• Diageo LAC performance was materially weaker driven by fast-
changing consumer sentiment in the prior year which resulted in
elevated inventory levels and subsequent adjustments by
wholesalers and customers in the fiscal year. While the consumer
environment remains challenging in Brazil, Central America and
Caribbean and South LAC, some stabilisation of consumer demand
in the second half of fiscal 24 resulted in share gains. However, a
highly competitive environment and consumer downtrading are
contributing to a persistently challenging environment in Mexico.
• Reported net sales declined 15%, reflecting weaker organic
performance, partially offset by a favourable impact from foreign
exchange.
• Organic net sales declined 21%, driven by soft demand for the
international premium spirits category across the region, reduction
of high levels of inventory to more appropriate levels for current
consumer demand and lapping strong double-digit growth.
• Price/mix declined 6pps, reflecting downtrading and increased
trade investment to manage inventory towards appropriate levels
for the current consumer environment.
• Spirits net sales declined 23%, primarily driven by scotch,
particularly Buchanan’s, Johnnie Walker Black Label and Johnnie
Walker Red Label, as well as a strong double-digit decline in Don
Julio in Mexico.
• Organic operating margin declined by 746 bps, primarily driven by
negative mix, increased trade investment and lower operating
leverage.
• Marketing investment declined 20%, in response to the rapid
deterioration in the consumer environment.
Market highlights:
• Brazil net sales declined 18%, primarily due to a double-digit decline
in scotch. In the second half of fiscal 24, Brazil gained share of spirits
as consumer demand stabilised after a challenging start to the year.
• Mexico net sales declined 30%, primarily driven by strong double-
digit declines in tequila, led by Don Julio and scotch, reflecting the
double-digit decline in spirits consumer demand throughout the
fiscal year. There was downtrading with consumers shifting towards
local spirits and the operating environment remained highly
competitive, particularly in tequila. Market share declined in fiscal
24, particularly in tequila and scotch.
• Central America and Caribbean (CCA) net sales declined 25%,
primarily due to a strong double-digit decline in scotch due to
increased competition from local spirits. In the second half of fiscal
24, the market gained share of spirits, supported by focused
execution.
• Andean (Colombia and Venezuela) net sales declined 17%,
primarily driven by scotch due to weakening consumer demand
which resulted in consumers shifting towards local spirits from
international spirits.
• South LAC (Argentina, Bolivia, Chile, Ecuador, Paraguay, Peru and
Uruguay) net sales declined 9%, driven by scotch. Despite the
challenging environment, the market delivered share gains in the
second half of the fiscal year.
Diageo Annual Report 2024
41
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Africa
In Africa we meet consumers' needs across a broad range of categories and price
points. With a long history of leadership in premium beer, we are increasingly
focused on bringing consumers into spirits categories. We continually improve our
route to market and work with a range of business models: in some territories via
wholly owned businesses, in other countries we partner with well established
African businesses. Our goal is to be the market leader in international spirits in
Sub-Saharan Africa and lead in premium beer in the territories where we participate.
Reported net sales by market (%)
ò East Africa
ò Africa Regional Markets
ò Nigeria
ò South Africa
ò Other (principally
Travel Retail)
Reported net sales by category (%)
ò Spirits
ò Beer
ò Ready to drink
ò Other
Key financials ($ million): Africa
2023
re-presented(1)
Exchange
Reclassification
Acquisitions
and
disposals
Organic
movement
Hyperinflation(2)
2024
Reported
movement
%
Net sales
2,039
(518)
—
—
235
22
1,778
(13)
Marketing
235
(53)
(12)
(1)
35
1
205
(13)
Operating profit before exceptional items
289
(222)
(11)
86
(11)
131
(55)
Exceptional operating items(3)
(55)
—
Operating profit
234
131
(44)
BUSINESS REVIEW continued
42
Diageo Annual Report 2024
Markets and categories
Key brands(5):
Organic
volume
movement
%
Reported
volume
movement
%
Organic
net sales
movement
%
Reported
net sales
movement
%
Organic
volume
movement(6)
%
Organic net
sales
movement
%
Reported net
sales
movement
%
Africa(4)
(6)
(2)
12
(13)
Guinness
(1)
16
(33)
Senator
26
29
15
East Africa
1
1
9
—
Malta Guinness
(3)
44
(22)
Africa Regional Markets(4)
(6)
(2)
6
(26)
Johnnie Walker
(19)
(11)
(19)
Nigeria
(18)
(18)
31
(41)
Tusker
(6)
—
(7)
South Africa
(17)
14
(11)
32
Serengeti
(1)
4
(3)
Smirnoff
(19)
(9)
(22)
Spirits(4)
(16)
(9)
(2)
(4)
Beer(4)
4
4
19
(16)
Ready to drink(4)
2
8
35
(24)
(1)
See pages 166-167 for an explanation under Accounting information and policies.
(2)
See pages 167 and 228-230 for details on hyperinflation adjustments.
(3)
For further details on exceptional operating items see pages 45 and 172-173.
(4)
Reported volume movement includes impacts from acquisitions and/or disposals. For
further details see pages 227-235.
(5)
Spirits brands excluding ready to drink and non-alcoholic variants.
(6)
Organic equals reported volume movement, except for Guinness which remained
flat.
Regional performance:
• Africa delivered robust organic net sales growth despite ongoing
macroeconomic challenges.
• Diageo Africa benefitted from price increases and delivered strong
performance in a challenging macroeconomic environment with
persistent inflationary markets.
• Reported net sales declined 13%, reflecting an unfavourable impact
from foreign exchange, mainly due to a weakening Nigerian naira,
partially offset by organic growth.
• Organic net sales grew 12%, with growth across all markets except
South Africa. Growth was driven by price increases, partially offset
by a 6% volume decline, primarily in spirits.
• Price/mix grew 18pps, mainly due to broad based price increases in
beer and spirits across the region.
• Spirits net sales declined 2%, driven by a volume decline of 16%,
which was partially offset by price increases across the region.
Tequila growth doubled, led by Don Julio, partially offsetting an 11%
decline in Johnnie Walker.
• Beer net sales grew 19%, benefitting from price increases across the
region and volume growth of 4%. Malta Guinness, Guinness and
Senator each delivered double-digit net sales growth.
• Organic operating margin increased by 194bps, as price increases
and productivity savings more than offset cost inflation.
• Marketing investment grew 16%, focused on supporting spirits
premiumisation, Guinness and tequila penetration.
Market highlights:
• East Africa net sales increased 9%, lapping a softer comparator
following price increases. The increase was led by growth in beer,
mainly Senator, which also grew share of TBA in the fiscal year.
RTDs, rum and scotch also contributed to the improvement.
• Africa Regional Markets net sales grew 6%, led by growth in beer,
primarily driven by Malta Guinness and Guinness, supported by
price increases. Growth in beer and RTDs was partially offset by a
decline in spirits, particularly in Johnnie Walker. Strong price/mix
more than offset a volume decline of 6%.
• Nigeria net sales grew 31%, driven by strong price/mix supported
by price increases, partially offset by a decline in volume. The
market lost share in almost all categories.
• South Africa net sales declined 11%, primarily driven by lower
volume of 17%, primarily in Johnnie Walker Black Label and
Smirnoff 1818. Spirits category growth was slower than the beer
category, and Diageo South Africa lost share in spirits. This was
despite growth of the markets' share in the gin and tequila
categories, led by Gordon’s and Don Julio.
Diageo Annual Report 2024
43
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Category and brand review
Key categories
Organic
volume
movement(1)
%
Organic
net sales
movement
%
Reported
net sales
movement
%
Reported
net sales
by category
%
Spirits(2)
(5)
(4)
(2)
78
Scotch
(7)
(10)
(6)
24
Tequila
(4)
(7)
(7)
11
Vodka(3)(4)
(9)
(7)
(6)
9
Canadian whisky(5)
(2)
(1)
(1)
6
Rum(4)
(11)
(6)
(2)
5
Liqueurs
(2)
2
3
5
Gin(4)
(10)
(8)
2
5
IMFL whisky(5)
5
10
2
4
Chinese white spirits(5)
32
27
23
3
US whiskey(5)
(3)
3
3
2
Beer
5
14
3
16
Ready to drink
(7)
(1)
(10)
4
(1)
Organic equals reported volume movement except for spirits (7)%, rum (10)%, gin
(2)%, IMFL whisky (7)%, US whiskey (2)%, and ready to drink (4)%.
(2)
Spirits brands excluding ready to drink and non-alcoholic variants.
(3)
Vodka includes Ketel One Botanical.
(4)
Vodka, rum and gin include IMFL variants.
(5)
See pages 34-35 for details of Canadian whisky, US whiskey and pages 38-39 for
details of IMFL whisky and Chinese white spirits.
Reported volume
by category
Reported net sales
by category
Reported marketing
spend by category
ò Scotch
ò Liqueurs
ò Vodka
ò Gin
ò US whiskey
ò Tequila
ò Canadian
whisky
ò Beer
ò Ready to drink
ò Rum
ò Other
ò IMFL whisky
Key brands(1):
Johnnie Walker
(5)
(6)
(2)
Guinness
5
15
6
Don Julio
7
3
4
Crown Royal
—
(1)
(1)
Smirnoff
(7)
(3)
(3)
Baileys
(1)
1
2
Casamigos(3)
(15)
(20)
(20)
Captain Morgan
(7)
(5)
(4)
Shui Jing Fang(4)
32
27
23
Scotch malts
(9)
(14)
(14)
McDowell's
(2)
3
1
Buchanan’s
(9)
(15)
(7)
Gordon's
(11)
(6)
20
Tanqueray
(11)
(11)
(10)
Ketel One(5)
(5)
(5)
(5)
Bulleit whiskey(6)
6
11
11
Cîroc vodka
(23)
(26)
(26)
Organic
volume
movement(2)
%
Organic
net sales
movement
%
Reported
net sales
movement
%
Old Parr
(13)
(21)
(12)
Yenì Raki
(4)
19
53
Black & White
(11)
(7)
(4)
JεB
(8)
(10)
(5)
Bundaberg
(3)
(7)
(9)
Organic
volume
movement(2)
%
Organic
net sales
movement
%
Reported
net sales
movement
%
(1)
Brands excluding ready to drink, non-alcoholic variants and beer except Guinness.
(2)
Organic equals reported volume movement, except for Guinness 4% and Gordon's 5%.
(3)
Casamigos trademark includes both tequila and mezcal.
(4)
Growth figures represent total Chinese white spirits of which Shui Jing Fang is the
principal brand.
(5)
Ketel One includes Ketel One vodka and Ketel One Botanical.
(6)
Bulleit whiskey excludes Bulleit Crafted Cocktails.
BUSINESS REVIEW continued
44
Diageo Annual Report 2024
Key financials - certain line items
30 June 2023
Exceptional
operating items
(c)
Exchange
(a)
Acquisitions and
disposals
(b)
Organic
movement(2)
Fair value
remeasurement
(d)
Reclassification
Hyperinflation(2)
30 June 2024
Reported
Reported
Re-presented(1)
$ million
$ million
$ million
$ million
$ million
$ million
£ million
$ million
$ million
Sales
28,270
—
(654)
(381)
168
—
—
488
27,891
Excise duties
(7,715)
—
230
313
(297)
—
—
(153)
(7,622)
Net sales
20,555
—
(424)
(68)
(129)
—
—
335
20,269
Cost of sales
(8,289)
23
388
5
25
(16)
—
(207)
(8,071)
Gross profit
12,266
23
(36)
(63)
(104)
(16)
—
128
12,198
Marketing
(3,663)
—
19
(18)
(7)
—
12
(34)
(3,691)
Other operating items
(3,056)
799
9
38
(193)
2
(12)
(93)
(2,506)
Operating profit
5,547
822
(8)
(43)
(304)
(14)
—
1
6,001
Other line items:
Non-operating items
364
(70)
Taxation (e)
(1,163)
(1,294)
(1)
See pages 166-167 for an explanation under Accounting information and policies.
(2) For the definition of organic movement and hyperinflation, see pages 227-235.
(i)
Reported figures in the table above have been extracted from the income statement for the years ended 30 June 2023 and 30 June 2024.
(a) Exchange
The impact of movements in exchange rates on reported figures for
operating profit was principally in respect of the unfavourable
exchange impact of the weakening of the Nigerian naira, the Turkish
lira and the Kenyan shilling, partially offset by the favourable impact of
the Mexican peso and sterling against the US dollar.
The effect of movements in exchange rates and other movements on
profit before exceptional items and taxation for the year ended 30
June 2024 is set out in the table below.
Gains/
(losses)
$ million
Translation impact
(37)
Transaction impact
29
Operating profit before exceptional items
(8)
Net finance charges – translation impact
22
Net finance charges – transaction impact
(24)
Net finance charges(1)
(2)
Associates – translation impact
15
Profit before exceptional items and taxation
5
(1) For more information about Finance income and charges please see page 175.
Year ended
Year ended
30 June 2024
30 June 2023
Exchange rates
Translation $1 =
£0.80
£0.83
Transaction $1 =
£0.82
£0.77
Translation $1 =
€0.93
€0.96
(b) Acquisitions and disposals
The acquisitions and disposals movement in the year ended 30 June
2024 was primarily attributable to the acquisition of Don Papa Rum
and to the disposal of Windsor Global Co., Ltd. and Guinness
Cameroun S.A.
See pages 180-183 for further details.
(c) Exceptional items
In the year ended 30 June 2024, exceptional operating items were a gain
of $56 million (2023 – a loss of $766 million), mainly due to the reversal
of the Shui Jing Fang brand impairment (a gain of $379 million)
partially offset by an impairment charge in respect of the Chase brand
and goodwill and tangible fixed assets (a charge of $101 million),
an impairment charge in respect of certain brands in the US ready to
drink portfolio (a charge of $54 million), various dispute and litigation
matters (a charge of $107 million) and the supply chain agility
programme (a charge of $61 million). In the year ended 30 June 2023,
exceptional operating items were a loss of $766 million, mainly due to
charges related to brand impairment ($613 million) and the supply
chain agility programme ($121 million).
In the year ended 30 June 2024, exceptional non-operating items were a
loss of $70 million (2023 – a gain of $364 million), mainly driven by the
loss on the sale of the Windsor business in Korea ($58 million). In the year
ended 30 June 2023, exceptional non-operating items were a gain of
$364 million, mainly driven by the gain in relation to the sale of
Guinness Cameroun S.A. ($343 million).
See pages 172-173 for further details.
(d) Fair value remeasurement
The adjustment to cost of sales reflects the elimination of fair value
changes for biological assets in respect of growing agave plants of
$16 million loss for the year ended 30 June 2024 (2023 – $nil). The
adjustments to marketing and other operating expenses were the
elimination of fair value changes to contingent consideration liabilities
and earn-out arrangements in respect of prior year acquisitions of
$155 million gain for the year ended 30 June 2024 (2023 – $153
million gain).
GROUP FINANCIAL REVIEW
Diageo Annual Report 2024
45
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
(e) Taxation
The reported tax rate for the year ended 30 June 2024 was 23.7%
compared with 20.6% for the year ended 30 June 2023.
Included in the tax charge of $1,294 million in the year ended 30 June
2024 is a net exceptional tax charge of $24 million, including an
exceptional tax charge of $95 million in relation to the reversal of the
Shui Jing Fang brand impairment charge, partly offset by a tax credit
of $19 million in respect of the Chase brand impairment and the
related tangible fixed assets, a tax credit of $13 million comprised of
brand impairments in the US ready to drink portfolio, a tax credit of
$23 million in relation to various dispute and litigation matters in North
America and a tax credit of $15 million in respect of the supply chain
agility programme.
Included in the tax charge of $1,163 million in the year ended 30 June
2023 is a net exceptional tax credit of $226 million, including an
exceptional tax credit of $154 million in respect of brand impairments,
mainly the McDowell's brand, a tax credit of $68 million in respect of
the deductibility of fees paid to Diageo plc for guaranteeing externally
issued debt of its US group entities, a tax credit of $27 million in
respect of the supply chain agility programme, partly offset by a tax
charge of $52 million in respect of the sale of Guinness Cameroun S.A.
The tax rate before exceptional items for the year ended 30 June 2024
was 23.2% compared with 23.0% for the year ended 30 June 2023.
We expect the tax rate before exceptional items for the year ending
30 June 2025 to be in the region of 24%.
(f) Dividend
The group aims to increase the dividend each year. The decision in
respect of the dividend is made with reference to the dividend cover,
as well as current performance trends, including sales and profit after
tax together with cash generation. Diageo targets dividend cover (the
ratio of basic earnings per share before exceptional items to dividend
per share) within the range of 1.8 - 2.2 times. For the year ended 30
June 2024, dividend cover was 1.7 times. The recommended final
dividend for the year ended 30 June 2024, to be put to the
shareholders for approval at the Annual General Meeting is 62.98
cents, an increase of 5% on the prior year final dividend. This would
bring the recommended full year dividend to 103.48 cents per share,
an increase of 5% on the prior year. The group will keep future returns
of capital, including dividends, under review through the year ending
30 June 2025, to ensure Diageo’s capital is allocated in the best way
to maximise value for the business and its stakeholders.
Subject to approval by shareholders, the final dividend will be paid to
holders of ordinary shares and US ADRs on the register as of
30 August 2024. The ex-dividend date will be 29 August 2024 for
holders of ordinary shares, and 30 August 2024 for US ADR holders.
Holders of ordinary shares will receive their dividends in sterling unless
they elect to receive their dividends in US dollar by 20 September
2024. The dividend per share in pence to be paid to ordinary
shareholders will be announced on 3 October 2024 and will be
determined by the actual foreign exchange rates achieved by Diageo
buying forward contracts for Sterling currency, entered into during the
three days preceding the announcement. The final dividend, once
approved by shareholders, will be paid to both holders of ordinary
shares and US ADRs on 17 October 2024. A dividend reinvestment
plan is available to holders of ordinary shares in respect of the final
dividend and the plan notice date is 20 September 2024.
(g) Return of capital
Diageo completed a total of $1.0 billion return of capital during the
year ended 30 June 2024. This programme followed the successful
completion of Diageo's previous return of capital programme that
ended on 2 June 2023, in which $0.6 billion of capital (announced as
up to £0.5 billion on 26 January 2023) was returned to shareholders.
In the year ended 30 June 2024, the company purchased 27.4 million
ordinary shares (2023 – 37.8 million) at a cost of $987 million,
including transaction costs (2023 – $1,673 million including transaction
costs of $16 million). All shares purchased under the share buyback
programme were cancelled.
Movement in net borrowings and equity
Movements in net borrowings
2024
2023
$ million
re-presented(1)
$ million
Net borrowings at the beginning of the year
(19,582)
(17,107)
Free cash flow (2)
2,609
2,235
Movements in loans and other investments
(47)
(68)
Acquisitions (3)
(6)
(404)
Investment in associates (3)
(133)
(112)
Sale of businesses and brands (4)
87
559
Share buyback programme (5)
(987)
(1,673)
Net sale of own shares for share schemes (6)
21
36
Purchase of treasury shares in respect of
subsidiaries
(10)
—
Dividend paid to non-controlling interests
(117)
(117)
Net movements in bonds (7)
558
887
Purchase of shares of non-controlling interests (8)
(223)
(178)
Net movements in other borrowings (9)
(106)
69
Equity dividend paid
(2,242)
(2,065)
Net decrease in cash and cash equivalents
(596)
(831)
Net increase in bonds and other borrowings
(453)
(958)
Exchange differences (10)
(199)
(646)
Other non-cash items
(187)
(40)
Net borrowings at the end of the year
(21,017)
(19,582)
(1) See pages 166-167 for an explanation under Accounting
information and policies.
(2) See page 232 for the analysis of free cash flow.
(3) In the year ended 30 June 2024, Diageo paid $6 million in respect
of prior year acquisitions (2023 – $31 million). In the year ended 30
June 2023, acquisitions also included upfront payments of €246
million ($261 million) for Kanlaon Limited and Chat Noir Co. Inc. (the
owner of Don Papa Rum) and $102 million for Balcones Distilling.
In the years ended 30 June 2024 and 2023, investment in associates
included additional investments in a number of Distill Ventures
associates.
(4) In the year ended 30 June 2024, sale of businesses and brands
included a net cash consideration, net of disposal costs, of $88 million
for the disposal of Windsor Global Co., Ltd. In the year ended 30 June
2023, sale of businesses and brands included the disposal of Guinness
Cameroun S.A. beer business for a net cash consideration, net of
disposal costs, of $438 million and the disposal of the Popular brands
of Diageo’s USL business, for a cash consideration, net of disposal
costs, of $92 million.
(5) See point (g) above for details of Diageo's return of capital
programmes.
GROUP FINA NCIAL REVIEW continued
46
Diageo Annual Report 2024
(6) Net sale of own shares comprised receipts from employees on the
exercise of share options of $38 million (2023 – $63 million) less
purchase of own shares for the future settlement of obligations under
the employee share option schemes of $17 million (2023 – $27 million).
(7) In the year ended 30 June 2024, the group issued bonds of $1,700
million ($1,690 million - net of discount and fee) consisting of $800
million 5.375% fixed rate notes due 2026, $900 million 5.625% fixed
rate notes due 2033, €500 million ($535 million - net of discount and
fee) floating rate notes due 2026 and repaid bonds of $500 million
and €600 million ($632 million) and €500 million ($535 million). In
the year ended 30 June 2023, the group issued bonds of
$2,000 million ($1,989 million - net of discount and fee) consisting of
$500 million 5.2% fixed rate notes due 2025, $750 million 5.3% fixed
rate notes due 2027, $750 million 5.5% fixed rate notes due 2033 and
€500 million 3.5% fixed rate notes due 2025 ($548 million - net
discount and fee), and repaid bonds of $300 million and $1,350
million.
(8) On 16 January 2024, Diageo agreed with Combs Wine and Spirits
LLC to purchase the 50% of the share capital of DeLeon Holdco LLC
that Diageo did not already own. On 24 March 2023, Diageo
completed the purchase of an additional 14.97% of the share capital
of East African Breweries PLC (EABL). This increased Diageo's
controlling shareholding position in EABL from 50.03% to 65.00%.
(9) In the year ended 30 June 2024, the net movements in other
borrowings principally arose from the $229 million increase in
commercial paper offset by cash outflows of foreign currency swaps
and forwards of $124 million and $104 million repayment of lease
liabilities. In the year ended 30 June 2023, the net movements in other
borrowings principally arose from the increase in commercial paper,
collateral and bank loan balances offset by cash outflows of foreign
currency swaps and forwards and repayment of lease liabilities.
(10) In the year ended 30 June 2024, exchange losses arising on net
borrowings of $199 million were primarily driven by adverse exchange
movements on sterling and euro denominated borrowings and
unfavourable movements on cash and cash equivalents partially offset
by favourable movements on foreign currency swaps and forwards. In
the year ended 30 June 2023, exchange losses arising on net
borrowings of $646 million were primarily driven by unfavourable
exchange movements on sterling and euro denominated borrowings
and unfavourable exchange movements on cash and cash
equivalents, foreign currency swaps and forwards.
Movements in equity
2024
2023
$ million
re-presented(1)
$ million
Equity at the beginning of the year
11,709
11,511
Adjustment to 2023 closing equity in respect
of hyperinflation in Ghana (2)
51
—
Adjusted equity at the beginning of the year
11,760
11,511
Profit for the year
4,166
4,479
Exchange adjustments (3)
(645)
(358)
Remeasurement of post-employment benefit
plans net of taxation
(61)
(562)
Purchase of shares of non-controlling interests
(4)
(223)
(178)
Hyperinflation adjustments net of taxation (2)
365
180
Associates' transactions with non-controlling
interests
—
(8)
Dividend declared to non-controlling interests
(121)
(117)
Equity dividend declared
(2,243)
(2,071)
Share buyback programme (5)
(997)
(1,543)
Other reserve movements
69
376
Equity at the end of the year
12,070
11,709
(1) See pages 166-167 for an explanation under Accounting
information and policies.
(2) See pages 167 and 228-230 for details on hyperinflation
adjustments.
(3) Exchange movements in the year ended 30 June 2024 primarily
arose from exchange losses driven by the Turkish lira, the Mexican
peso, sterling and the euro. Exchange movements in the year ended
30 June 2023 primarily arose from exchange losses driven by sterling,
the Turkish lira, the Indian rupee and the Chinese yuan, partially offset
by gains in the euro, the Mexican peso, and foreign exchange on
borrowings designated into net investment hedge before the functional
currency change.
(4) On 16 January 2024, Diageo agreed with Combs Wine and Spirits
LLC to purchase the 50% of the share capital of DeLeon Holdco LLC
that Diageo did not already own. On 24 March 2023, Diageo
completed the purchase of an additional 14.97% of the share capital
of East African Breweries PLC (EABL). This increased Diageo's
controlling shareholding position in EABL from 50.03% to 65.00%.
(5) See page 46 for details of Diageo's return of capital programmes.
Post-employment benefit plans
The net surplus of the group’s post-employment benefit plans
decreased by $22 million from $739 million at 30 June 2023 to $717
million at 30 June 2024. The decrease in net surplus was
predominantly attributable to the adverse change in the market value
of assets held by the post-employment benefit plans in the UK that was
partially offset by the favourable change in the inflation rate in the
United Kingdom (from 2.7% to 2.6%).
Total cash contributions by the group to all post-employment benefit
plans in the year ending 30 June 2025 are estimated to be
approximately $55 million.
Diageo Annual Report 2024
47
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
'Spirit of Progress'
Putting positive societal impact at the heart of our business strategy
Promote positive drinking
51
Doing business the right way
53
Our people and culture
55
Health and safety
57
Champion inclusion and diversity
59
Pioneer grain-to-glass sustainability
61
Our ESG reporting approach
74
We are a successful global business,
building and nurturing some of the world’s
most recognised brands. A fundamental part
of our success is taking focused action at scale
to make our business sustainable and resilient
for today and for future generations.
'SPIRIT OF PROGRESS'
48
Diageo Annual Report 2024
Responding to the issues that matter
‘Spirit of Progress‘ is Diageo's environmental, social and governance
(ESG) action plan designed to address the most material issues facing
our company, brands, people, suppliers and communities. Its ambitions
are embedded in our business strategy and it aims to make a positive
impact on people and the planet everywhere we live, work, source
and sell.
At the heart of ‘Spirit of Progress‘ framework are three priorities:
• Promote positive drinking – changing the way the world drinks for
the better, through promoting moderation and addressing the
harmful use of alcohol.
• Champion inclusion and diversity – creating an environment where
everyone contributes to a better business.
• Pioneer grain-to-glass sustainability – preserving the natural
resources we all depend on.
At the launch in 2020, we set out a series of ambitious priority targets
that aimed to deliver progress against our most material ESG issues.(1)
We are proud to have already met several targets well ahead of
schedule, including two, supporting the promotion of positive drinking.
However, ESG strategy and reporting is a fast-moving area, and we
regularly assess our strategy in the context of successes and challenges,
changes in the reporting landscape and feedback from our stakeholders.
All companies are dealing with uncertainty in meeting ESG-related
ambitions, and we are no different. We focus on external factors
we can influence, however there remain many external factors
which we can't control. As a result, our roadmaps to delivery on our
targets remain subject to uncertainty across most areas. We also
regularly apply our learnings from successes and challenges to
update our roadmaps.
Therefore, in fiscal 24, we have reconsidered the underlying targets in
our three priority areas. Our objective has been to direct our resources
towards those areas where our learnings and engagements with
stakeholders tell us we have the best opportunity to mitigate the
highest risks and deliver the highest impact. Our review has also
considered preliminary results of a refreshed double materiality
assessment ahead of our alignment with the requirements of the
European Union’s Corporate Sustainability Reporting Directive (CSRD).
This section of the Annual Report sets out our progress against our
12 priority performance targets which cover the areas most material
to our business. We believe the selected performance targets also
address our highest risks and as a result, we will be directing a higher
proportion of our resources to these priorities to accelerate action,
maintain momentum and refocus our efforts. The remaining targets
will continue to be part of ‘Spirit of Progress‘ and further details of
actions taken can be found in our ESG Reporting Index and on our
website. We have also included context on target changes in our
Reporting boundaries and methodologies, starting from page 238-257.
Promote positive drinking
Around the world, we reach and engage audiences with messages
that aim to change attitudes, whether it's highlighting the harm of
underage drinking or binge drinking, warning of the dangers of drink
driving, or using our brands to highlight the importance of moderation.
We are proud to have met our 2030 targets for DRINKiQ and
brand-led moderation campaigns in fiscal 22 and 23 respectively.
They remain important tools in our work to promote positive drinking
and are embedded into our operations.
'Spirit of Progress' framework
See page 48
See page 51
See page 59
See page 67
See page 53
• Business integrity
• Standing up for human rights
• Our people and culture
• Health and safety
See page 67
See page 69
(1)
For the materiality matrix please refer to our ESG Reporting Index.
Diageo Annual Report 2024
49
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Our educational programmes, designed to change attitudes to the
risks of alcohol misuse, are targeted at areas we believe we can have
the biggest reach and impact, particularly in the context of each
geography where we sell our products.
As a result, we will be increasing our focus on SMASHED, an award-
winning programme providing education on the dangers of underage
drinking, and on raising awareness of the dangers of drink driving
through educational programmes and other partnerships. Our reporting
will reflect an increased emphasis on these programmes, while also
providing qualitative information on our wider approach to promoting
positive drinking.
Champion inclusion and diversity
Championing inclusion and diversity is at the heart of what we do.
Our experience and belief is that gender and ethnic diversity in our
leadership population helps drive better and more sustainable
performance. We also believe that providing hospitality and business
skills through Learning for Life to under-represented groups helps
support both our communities and an industry that is a crucial partner
for Diageo. Therefore, we will continue to maintain a strong focus on
these areas and report on our progress in our Annual Report.
We will also continue to track our spend with diverse suppliers; please
refer to our ESG Reporting Index for more information.
Our other inclusion and diversity ambitions remain important to our holistic
value chain strategy; our qualitative reporting on our work with women in
our community beneficiary programmes, progressive marketing portrayal
and Diageo Bar Academy is included on page 60.
Pioneering grain-to-glass sustainability
Our business depends on natural resources, and we are directly
affected by changes in climate and the related challenges of
water- stress and nature loss. Our refined action plan focuses on
two key areas: water and greenhouse gas emissions.
Water is our most important natural resource and water-stress is a
growing challenge in many countries. We will be accelerating our
efforts to maximise our stewardship of this precious resource,
prioritising water efficiency in own operations around the world,
replenishment in water-stressed communities and collective action
to improve water accessibility, availability and quality as priority
performance targets.
We are proud to have met our commitment to investment in access
to clean water, sanitation and hygiene (WASH) in fiscal 23 and will
continue to partner with communities to ensure the same level of
impact is delivered, providing clear examples each year.
Greenhouse gas emissions contribute to climate change, and we must
do our part to reduce them. We will continue to focus on reducing
greenhouse gas emissions in our direct operations around the world,
investing in energy efficiency and switching to renewable energy.
We will continue to work with our suppliers to decarbonise, but as
described on pages 69-71, we will be refocusing our supply chain
efforts on areas where we exert the most control and those categories
of emissions which are most material to our footprint. Our Scope 1, 2
and 3 greenhouse gas emission reduction goals will remain as priority
performance targets.
Our efforts to reduce emissions are supported by key packaging targets,
including reducing packaging weight and increasing recycled content,
for which we will continue to provide quantitative data. We also believe
strongly that our regenerative agricultural programmes will reduce
emissions, address water-stress and nature loss over the longer term.
Other supporting targets relating to our efforts to reduce greenhouse
gas emissions, including renewable energy, our work with smallholder
farmers, and other packaging and waste targets, will continue to be
tracked and reported in our ESG Reporting Index.
Maintaining and measuring culture
Our culture is defined by our people, who are dedicated to driving
sustainable growth by doing business the right way, every day,
everywhere. To enable this, we focus on embedding our culture in all
aspects of our business, keeping people safe, protecting human rights
and living our values through our Code of Business Conduct. We report
on each of these topics in turn in this section (see page 55-58).
Governance
Both the Board and the Executive Committee oversee ‘Spirit of
Progress‘. As Chief Executive, Debra Crew, is ultimately accountable
for the overall performance of Diageo's ESG action plan, and its
targets. Each target has a member of the Executive Committee
accountable for delivery and progress is reviewed regularly by the
Executive Committee and the Board. The Board reviews our most
material ESG issues, our strategy to address those issues and our
targets used to measure our strategy in action. The review of our
performance targets undertaken in fiscal 24 was led by members
of the Executive Committee and approved by the Board.
Linking performance to remuneration
Our review of ‘Spirit of Progress’ did not change our view on five of
our ambitions which are considered key performance indicators.
The targets in our long-term incentive plans include:
• Number of people who confirmed changed attitudes on the
dangers of underage drinking following participation in a Diageo
supported education programme.
• Inclusion and diversity – percentage of female leaders globally.
• Inclusion and diversity – percentage of ethnically diverse
leaders globally.
• Improvement in water efficiency, measured by our water
efficiency index.
• Reduction in greenhouse gas emissions in our direct operations
(Scope 1 and 2).
These represent all three strategic priorities of our ‘Spirit of Progress‘
action plan, and reflect our vision to mitigate risks, act on opportunities
and make a positive impact on people and the planet.
New regulatory frameworks
By 2026, we expect to report under the International Sustainability
Standards Board (ISSB) and CSRD. We are undertaking a double
materiality assessment, the results of which will be reported on in fiscal
25. Our preliminary view is that our materiality assessment supports
our performance target review and simplification.
We continue to report aligned to the recommendations of the
Taskforce on Climate-related Financial Disclosures (TCFD). Given
the interconnectivity of climate and nature, we have incorporated
some of the Taskforce for Nature-related Financial Disclosures (TNFD)
into our TCFD reporting, with an aim to be fully aligned with TNFD in
the medium-term.
In the United States, California has recently enacted the Voluntary Carbon
Market Disclosures Act, California Assembly Bill No. 1305 (AB-1305)
requiring companies operating in California to make certain disclosures
regarding carbon neutrality and carbon emissions reduction claims, and
voluntary carbon offsets. We provide disclosures pursuant to AB-1305 in this
section of the Annual Report, our Net Zero Carbon Strategy on our website
and our responses to CDP (formerly known as the Carbon Disclosure
Project) climate change questionnaire, available through CDP's website.
Reporting transparently
We define our performance measures carefully, along with clear
reporting boundaries and methodologies for each. For more details,
see pages 238-257.
'SPIRIT OF PROGRESS ' continued
50
Diageo Annual Report 2024
Promote positive drinking
We want to change the way people drink – for the better. This is why
we promote moderate drinking and invest in education programmes
to discourage the harmful use of alcohol.
We want to change the way the world drinks – for the better.
Our brands have been part of people’s celebrations for generations;
we make them with pride and they are made to be enjoyed responsibly.
We embrace our responsibility to proactively promote positive
drinking. Therefore, in 2020, as part of the 'Spirit of Progress' strategy,
we unveiled our Positive Drinking approach with four pillars to deliver
impact and change:
• Tackling harmful drinking through education.
• Promoting moderation via our brand marketing.
• Tackling underage drinking.
• Changing attitudes to drink driving.
We continuously evaluate our strategies, considering both opportunities
and learnings. After incorporating feedback from our stakeholders, the
decision was taken that in fiscal 24 we would continue to scale our
education programmes to address underage drinking and drink driving.
Having hit our targets for DRINKiQ, our interactive online education
platform and moderation messaging in our brand strategy, we
embedded these crucial programmes into the rhythm of our daily
business, with examples on page 52.
Protecting young people
We believe it is never acceptable for anyone underage to consume
alcohol. That is why we have run campaigns and education
programmes to combat underage drinking for many years.
SMASHED is a programme that educates young people aged 10-17
in 38 countries on the dangers of underage drinking. It was developed
by Collingwood Learning, and we have been proud to sponsor it
since 2018.
SMASHED began in 2005 as a live theatre production and has since been
enhanced to enable online learning as well as live performances. To make
the programme as successful as possible, the performance can be tailored
to specific countries using local actors and cultural references.
Tackling underage drinking through SMASHED
Target by 2030
Scale up our SMASHED
partnership and educate 10
million young people, parents
and teachers on the dangers
of underage drinking
Number of people educated
on the dangers of underage
drinking through a Diageo-
supported education
programme in fiscal 24
2.2m
10m
n 2030 Target
10m
n 2023 progress to date
3.7m
n 2024 progress to date
5.9m
In fiscal 24 approximately 2.2m people have taken part in a live
session or an online SMASHED programme. This includes a projected
1.8mΔ people who have confirmed changed attitudes to the dangers
of underage drinking based on our sampling of participant surveys.
We have educated approximately 6 million people since our baseline
year of 2018.
This year, our progress toward achieving our global SMASHED target
has notably accelerated. From hosting regional partner summits in
Latin America and Caribbean, reaching young people during school
holidays in Africa to maximising online digital profiling of ideal partner
schools in South East Asia, our approach to rolling out SMASHED in
fiscal 24 has been innovative and collaborative.
Driving responsibly
We've long championed awareness on the risks of drink driving,
including collaborating with law enforcement and local authorities.
In 2021, we launched the Wrong Side of the Road (WSOTR) digital
learning resource with the United Nations Institute for Training
and Research (UNITAR), aimed at raising awareness about the
consequences of drink driving on individuals and communities.
WSOTR is available in digital and classroom formats and is now
live in 24 countries.
Changing attitudes to drink driving
Target by 2030
Extend our UNITAR
partnership and promote
changes in attitudes to
drink driving, reaching
five million people
Number of people educated
about the dangers of drink
driving in fiscal 24
1.0m
5m
n 2030 Target
5m
n 2023 progress to date
1.2m
n 2024 progress to date
2.2m
In fiscal 24, we reached 1m people through WSOTR and other drink driving
programmes. To date, we have reached 2.2m people since fiscal 20.
This fiscal, we worked to accelerate the development and roll out of
partnerships between our in-market teams and local governments as
well as other key local stakeholders.
For example, in India, we continued to partner with Regional
Transport Offices in eight states to embed WSOTR into the driving
licence application process. We also ran a Greater Chennai traffic
police anti-drink drive campaign. The WSOTR team organised an
awareness drive with the Greater Chennai Police to educate people
on the dangers of drink driving. Over 2,500 individuals were educated
at 20 different locations through this initiative.
In South Africa we launched the WSOTR 'WhatsApp' campaign with
the Department of Gauteng Roads and Transport. The objective was
to empower Gauteng's youth with subsidised fees for learners licences,
and through drivers' programmes promoting responsible drinking and
creating safer roads. This campaign delivered approximately 50,000
completions of WSOTR.
△
Within PricewaterhouseCoopers LLP’s (PwC’s) independent limited assurance scope –
see pages 258-261 of this Annual Report. For Reporting boundaries and
methodologies, see pages 238-257.
PROM OTE POSITIVE DRINKING
Diageo Annual Report 2024
51
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
We also look to develop partnerships with organisations that we
believe will help deliver our mutual ambitions. Therefore, in February
we partnered with Mothers Against Drunk Driving (MADD) in the
United States, an organisation dedicated to the eradication of drink
driving. With our combined expertise and resources, together we will
focus on education, awareness, and prevention campaigns. As part
of this partnership, MADD joined Diageo’s Multicultural Consortium for
Responsible Drinking to help address the harmful use of alcohol in the
Black, Latino and Native American communities. Diageo also became
an inaugural member of the MADD Network. Together we will continue
to build on our learnings and accelerate our progress going forward.
DRINKiQ
For DRINKiQ, we have seen further momentum in fiscal 24 through
the development of creative campaigns that have weaved together
the global ambitions around DRINKiQ and moderation. For example,
in March 2024, SUHO, a renowned K-pop star who leads the group
EXO fronted a Diageo campaign ‘Enjoy the Flow, Savour Every Moment’
to promote moderation and responsible drinking. The digital campaign
also led visitors in the APAC region to the DRINKiQ site. Within a week
of the launch more than five million people viewed the campaign.
Make moderation aspirational
Moderation encompasses a broad range of different consumer
behaviours and choices, such as choosing not to drink on certain
occasions, or substituting a favourite drink with a non-alcoholic
version. We aim to enable and reinforce the breadth of choices
that consumers have to moderate. As well as delivering choice
to consumers, we know through our insights work that making
moderation feel aspirational and therefore a 'popular choice' is
critical in driving positive drinking attitudes and behaviours.
In fiscal 24, we have successfully driven aspiration with a variety of
campaigns, some led by a key brand, others leveraging a number
of brands across our portfolio. Highlights include:
1. In October we launched Captain Morgan Spiced Gold 0.0%,
the brand’s first alcohol-free offering, supported in Great Britain
and Germany by the highly engaging 'Why You Whying' advertising
campaign. The campaign reached over 19 million people in
Great Britain and 14 million in Germany, with 82% of consumers in
Great Britain and 90% of consumers in Germany agreeing that the
campaign 'makes drinking moderately feel like a popular choice'.
2. In December we launched the 'Magic of Moderation' campaign in
Great Britain featuring Guinness, Johnnie Walker, Tanqueray 0.0%
and Seedlip. The campaign promotes moderate ways of drinking
to allow people to make the most of their socialising occasions.
The campaign reached five million people in Great Britain,
with 85% of consumers agreeing that it 'makes drinking
moderately feel like a popular choice'.
In addition to our brand moderation campaigns, our non-alcoholic
brands also support our positive drinking ambition. We know that
our 0.0 brands have a strong role to play in giving consumers choice
and that communications for these brands can promote positive
moderation behaviours and attitudes. For example, in fiscal 24,
Guinness 0.0 has tapped into the moderation mindset to become
the fastest growing alcohol-free beer in Great Britain and Ireland.
The brand will be the official global responsible drinking partner of
the English Premier League, providing further opportunities to support
our positive drinking agenda.
Marketing in a responsible way
The Diageo Marketing Code (DMC) not only sets minimum standards
for responsible marketing, it also represents a cornerstone of our
corporate culture and the way we do business. The DMC includes,
among other principles, our commitment to making sure we depict
and encourage only responsible and moderate drinking, and never
target underage audiences. We are proud to have a proven track
record of compliance, which is underpinned by mature business
processes, and appropriate checks and balances in every market
we operate in.
In support of our commitment to responsible marketing, this year
we have rolled out several tools to help our marketers uphold our
standard more easily:
• A refreshed Digital Marketing Standard, with clearer requirements
on social media governance, targeting adults in digital media and
consumer data compliance, amongst other topics.
• An updated Influencer Marketing Standard, with enhanced
requirements for selection of influencers, DMC briefing, approvals
and required disclosures.
• A self-certification e-learning module, for all Diageo and agency
staff to ensure understanding of the DMC.
• A test of an AI-based assistant to support human DMC reviews and
approvals of marketing materials, making the process faster without
compromising accuracy and control.
This year, the International Alliance for Responsible Drinking (IARD)
reassessed our compliance with their Digital Guiding Principles. These
principles set out five measures that should be in place for all online
alcohol marketing communications. We are pleased to report that,
after having 155 items from 14 markets measured by an independent
third party, our score was 100% full compliance rate. This achievement
showcases how we leverage technology to uphold our responsible
marketing practices, combining automated monitoring with robust
social media governance.
Finally, across some of our markets, advertising monitoring and
industry bodies publicly report breaches of self-regulatory alcohol
marketing codes. No complaints about Diageo marketing were
upheld by key industry bodies this fiscal year (see below) for any of
the following markets: United Kingdom, Australia and Ireland.
One complaint was upheld in November 2023 against Casamigos,
by the Distilled Spirits Council of the United States (DISCUS), about
an ad depicting motorcycle riding without a helmet and a product
placement in a music video, which depicted some scenes of
irresponsible consumption.
In response, Diageo agreed to not produce new Casamigos advertising
content depicting motorcycle riding without helmets and removed all
references to the music video from the brand’s channels.
Complaints upheld by key industry bodies that report publicly:
Incidents of non-compliance concerning
marketing communications – fiscal 24(1)
Country
Body
Industry complaints
upheld
Complaints about
Diageo brands
upheld
United States
Distilled Spirits
Council of the
United States
2
1
Australia
ABAC Scheme
33
0
United Kingdom
Advertising
Standards Authority
0
0
Portman Group
18
0
Republic of
Ireland
Advertising
Standards Authority
for Ireland
3
0
(1)
From 1 July 2023 to 5 May 2024.
PROM OTE POSITIVE DRINK ING continued
52
Diageo Annual Report 2024
Doing business the right way
We want to do business in the right way every day, everywhere.
We expect all stakeholders, including our people and suppliers,
to demonstrate integrity, live our values, and behave in an ethical
way as set out in our Code of Business Conduct.
Business Integrity
Working with integrity is fundamental to our identity and organisational
strategy. We make sure our people and suppliers demonstrate
integrity, live our values and behave in an ethical way that underpins
our Code of Business Conduct (Code). Each of us has a responsibility
for doing business the right way. By valuing not only what we do,
but how we conduct business, we generate success worth celebrating.
'Diageo’s Business Integrity agenda is embedded in every
part of their business'
In September we were delighted to be named one of the winners of
the 2023 NAVEX Customer Excellence Awards in the Governance,
Risk and Compliance ('GRC') Programme of the Year category.
Annually, NAVEX (the external provider of our Breach Management
database, EthicsPoint) honours organisations that demonstrate the
most innovative, impactful and successful risk and compliance
programmes in practice today. The judges said: 'Diageo’s Business
Integrity agenda is embedded in every part of their business... [It]
knows that performance can only be sustained if everyone is doing
the right thing, every day, everywhere'.
Code of Business Conduct
Our Code sets out the basis for how we work and conduct business.
It lists key principles which guide our day-to-day operations, decisions
and interactions with colleagues and other stakeholders. Our Code
forms what we stand for as a business and how we demonstrate our
high standards of integrity and ethical behaviour.
Each year, all eligible employees complete mandatory training on
the Code, and at the end of the training certify that they have read,
understood and complied with the Code and our global policies.
Training is via an interactive e-learning module accessible through
any device or classroom training for those who do not have regular
computer access. This year, 97% of eligible employees completed
the training (fiscal 23: 97%).
In fiscal 24, we came together to celebrate our first ever Global Spirit
of Integrity Day. The day covered key topics from our Code including
data privacy, cyber risk and dignity at work, as well as our controls
transformation and risk management programme. Attended live by
many of our employees, a number of our markets further enhanced
the themes of the day by running complimentary sessions after the
event. We expect to continue running similar programmes in the future.
Training our leaders
Treating each other with dignity and respect is an important part of
doing business the right way. Our Dignity at Work training programme
relaunched in fiscal 24, supported leaders with the right tools and
behavioural guides to lead with integrity. The programme was also
extended to new senior leaders joining the business in the year,
and was included in a new managing director onboarding playbook.
Encouraging people to speak up
We encourage everyone to report potential breaches of our Code,
policies or standards through our global confidential grievance and
whistleblowing service, SpeakUp. The service, which is available
through various channels (email, telephone and internet) in 19
languages, is monitored by the Global Business Integrity team to
ensure that all allegations are handled appropriately, confidentially
and fairly.
In fiscal 24, we launched a new campaign, 'I Spoke Up, Ask Me
Anything', which addressed and enhanced awareness of the
anonymous nature of SpeakUp reporting. See further details on
SpeakUp cases raised in the year and the resulting actions taken
in the Audit Committee Report (page 111-117).
Managing third-party risks
Business integrity is also vital to our relationships with third parties.
Our Know Your Business Partner (KYBP) programme helps us screen
for potential risks before we start a contractual relationship. In fiscal
24, improvements were made to our Breach Management process
including leveraging data analytics to better assess our third-party risk.
Celebrating Global Spirit of Integrity Day
Standing up for human rights
At Diageo, we strive to create an environment where all our people
feel they are treated fairly and with respect. We remain committed to
acting with integrity in our roles, to ensure we are doing business in
the right way, meeting external expectations and our own standards.
We act in line with the UN Guiding Principles on Business and Human
Rights (UNGPs) and are committed to embedding respect for human
rights into everyone’s working day, in every country throughout our
business and value chain. Our policies cover our responsibilities to
protect the human rights of everyone working in our direct operations,
our value chain and communities.
DOING BUSINESS THE RIGHT WAY
Diageo Annual Report 2024
53
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Our human rights governance
Our Code of Business Conduct and Global Human Rights Policy are
an integral part of ensuring that Diageo’s culture is aligned with our
purpose and values. Our Code is approved by our Board of Directors
and our Global Human Rights Policy is approved by our Chief
Executive Officer. Our human rights strategy is reviewed on a periodic
basis by the Audit Committee of the Board of Directors and by the
Executive’s Audit and Risk Committee (ARC) as part of our principal
risk on business ethics and integrity (see page 77-85). Responsibility
for delivery is shared between the members of Diageo’s Executive
Committee that are responsible for the human rights of our employees,
suppliers and communities. A number of our Executives, senior
business leaders and functional specialists lead the agenda via our
Human Rights Steering Group (group and market level) and assess
risks, emerging issues, compliance and remediation within our
enterprise risk management processes.
Staying ahead of emerging legal requirements and
increasing stakeholder expectations
We continue to monitor new regulations, including the EU’s
Corporate Sustainability Due Diligence Directive, and in fiscal 24,
took preparatory steps in anticipation of this regulation.
We have refreshed our list of salient risks, vulnerable groups, high risk
markets and high risk commodities in our supply chain. We have
implemented new risk assessment tools for our direct operations and
supply chain that allow us to better detect and mitigate risk before an
incident occurs. We are in the process of expanding our human rights due
diligence further along our value chain – incorporating new businesses,
brand promoters, third-party operations, suppliers', stakeholders and our
customers. When material potential risks are identified, we look to put in
place corrective action plans to mitigate the risk.
Focusing on salient human rights risks
In fiscal 24 we refreshed our assessment of salient risks that are most
relevant to our business as specified in the Declaration on Fundamental
Principles and Rights at Work and the UNGPs. We looked at human
rights benchmarks for our industry, priority commodities in our supply
chain and the increasing interdependence between human rights
and climate impacts.
The assessment identified the following salient risks: health and
safety, wages and benefits, working time, harassment and bullying,
discrimination, freedom of association and collective bargaining,
child labour, forced labour, water sanitation and hygiene and land
rights. Whilst we conduct ongoing due diligence in all areas, we have
prioritised health and safety, wages and benefits, working time,
harassment and bullying and discrimination based on severity,
likelihood, attribution, leverage and breach data.
Prioritising vulnerable groups
We recognise that some groups of people are more vulnerable to human
rights breaches and pay particular attention to these groups within our
risk assessments. Determined by human rights frameworks, our value
chain, and human rights impact assessments, our vulnerable groups
are women, ethnic minorities, persons with disabilities, the LGBTQIA+
community, indigenous peoples, migrant workers and contract/
temporary workers and children.
Assessing risk in our direct operations
We use a variety of risk assessment tools in our direct operations.
This includes self-assessment questionnaires for all direct operations,
third-party human rights assessments for high risk direct operations
and deep dive assessments for groups that we consider more
vulnerable to risk. Where assessments identify material human rights
concerns or suggest our approach can be strengthened to better
identify and prevent risk, we strive to put in place robust action plans
to resolve matters, working with external experts when appropriate.
Assessing risk and compliance in our supply chain
Within our Sustainable Procurement team, a dedicated Responsible
Sourcing team is in place to lead the management and
implementation of our human rights approach beyond our own
operations. Our Responsible Sourcing programme follows a risk-based
approach to assessing adherence to our Partnering with Suppliers
standard. Suppliers are risk-assessed against the following three
criteria: location of supplier site(s), category of product or service and
amount of spend. Suppliers who are assessed as high risk are required
to undertake an independent third-party Sedex Members Ethical Trade
Audit (SMETA) or an equivalent four-pillar ethical audit.
We have also mapped our salient risks within our full supply chain
allowing us to prioritise our actions and drive positive social impact
where it is needed most. Part of this assessment includes identifying
the scale, scope, remediability and likelihood of our salient risks
through different parts of our supply chain. These findings are helping
us to focus our interventions on specific human rights issues within each
supply chain for greater impact. For more information, please refer to
our ESG Reporting Index and our Modern Slavery Statement.
Taking action to mitigate risk
Where we identify risk, we take action to mitigate the risk to our
business and our people. For example:
• Contract labour review, recognising contract workers as a more
vulnerable group than direct employees. This reviewed the
effectiveness of our governance processes as well as conducting
interviews with contract workers to share their views. Based on the
findings and recommendations, we will strengthen our processes to
improve our governance over contract labour.
• Global Dignity at Work Policy which tackles harassment and bullying
in the workplace, and our Domestic and Family Abuse guidelines
supporting employees, their friends and family who may be
experiencing harassment and bullying outside the workplace.
• Global Brand Promoter standard and training which establishes
principles and guidelines to protect brand promoters from the risk of
sexual harassment.
• Child labour prevention programme for smallholder farmers,
where we have trained key functions and business partners in
Africa to prevent child labour. We also deliver training direct to
our smallholder farmers.
• Partnership with external parties to assess and address the health
impacts of heat stress in sugarcane farming for our rum supply
through improved access to shade, drinking water, personal
protective equipment and rest schedules.
• Regular training for teams and suppliers so they can effectively
manage human rights risks.
Providing access to grievance mechanisms
We provide a global grievance and whistleblowing mechanism to
our employees, business partners and communities, called ’SpeakUp’.
For more information, see Business Integrity (previous page).
Engaging our stakeholders
We recognise the importance of listening to and consulting
stakeholders on issues that affect them. We do this on an ongoing
basis through different mechanisms including worker interviews,
reviewing grievance data and holding community dialogues.
Assessing the effectiveness of our approach
We measure the effectiveness of our human rights governance
through our internal assurance framework and third-party human
rights assessments, in addition to monitoring allegation and breach
trends and root causes. We continue to enhance our risk mitigation
plans based on lessons learned. For example, we took our brand
promoter training online to increase accessibility.
This focus on due diligence and disclosure is crucial to us doing
business the right way. It enables us to have transparency in our
engagements with employees and all stakeholders. We will continue
to focus on this important area, embedding respect for human rights
into everyone’s working day, in every country and throughout our
value chain.
DOING BUSINESS THE RIGHT WAY continued
54
Diageo Annual Report 2024
Our people and culture:
The key to winning
Our talented and diverse workforce, together with our people’s passion for our brands and
unique culture continues to be a competitive advantage for our business, enabling our people
to perform at their best.
Highly engaged, talented and diverse workforce
At Diageo, we are proud to have strong employee engagement levels
across our business. Despite challenging economic circumstances our
people continue to express pride and passion for our consumers, business
and brands. In our most recent Your Voice survey, a high proportion of our
people (89%) are proud to work for Diageo, significantly exceeding the
external benchmark(1) by 10 percentage points. Our overall engagement
score also remains strong at 81%, which although being 3 percentage
points lower than last year, is 5 percentage points higher than the external
benchmark. This impressive engagement index puts us in an advantaged
position as an employer of choice and enables us to attract and retain the
best and most diverse talent.
Leadership and inclusive culture continue to be important drivers of
employee engagement. We have built a workforce with the right blend
of diversity and expertise in our leadership and line manager population.
We continue to upskill our managers’ coaching capabilities, equipping
them with the skills needed to inspire and develop their teams, through
our line manager development programme. In our recent Your Voice
survey, 81% of our people believe that their line managers encourage
and value different perspectives and styles.
Career and talent management is crucial to sustaining high employee
engagement levels and future-proofing our business performance.
Our 'Craft my Career' initiative provides the platform for our people
to have meaningful discussions on how they can grow and develop
at Diageo. We also prioritise developing key talent for future roles
through our global mobility and talent development programmes.
In fiscal 24, 71% of our leadership appointments were internal talent
and more than 5,500 people globally succeeded to make career
moves which translates to an average of at least 15 people every day.
We remained committed to enhancing digital, data and analytics
capabilities, which are vital for our present and future growth.
The Digital Talent Incubator programme was launched to further develop
our digital capabilities and build a sustainable talent pipeline for digital
roles. Additionally, through our collaboration with an external partner
specialising in digital capability building we successfully upskilled
more than 3,000 employees in digital competencies, reaffirming our
commitment to staying at the forefront of digital innovation.
Dial-up behaviours in action
Embedding a culture of speed and agility
We believe that a culture of speed and agility is important in the
current operating environment, marked by increased volatilities and
challenging macroeconomics. Our ability to respond faster to rapid
changes in our internal and external environment will enable us to
deliver consistent performance and maintain our competitive edge.
Therefore, we embarked on a culture transformation journey in fiscal
24 to further embed speed and agility across our business. We have
an advantaged and distinct culture in Diageo – that is characterised
by the passion our people have for the business, a strong sense of
ownership, purpose driven approach, a collaborative spirit, an
inclusive mindset and a commitment to doing business the right way.
We have continuously evolved our culture in Diageo over past 26
years, preserving our culturally distinctive strengths that continue to
enhance performance, whilst accelerating the key shifts that will be
critical to the next phase of Diageo’s growth ambition. As part of the
culture transformation programme, we have designed four ’dial-up’
behaviours which represent the key cultural pivots we want to make.
These behaviours have been purposefully chosen based on feedback
from internal and external stakeholders including our employees.
We have also refreshed our values to ensure proper alignment
with our cultural aspirations. Our refreshed values are: passionate
about consumers and customers, value each other, be better,
proud of what we do. Our four 'dial-up behaviours' are externally
curious, collaborating efficiently, experimenting, and learning and
acting decisively.
Over the last nine months, we have immersed people in the culture
change journey and equipped our employees to practise the new
'dial-up behaviours'. These immersion sessions have been facilitated
by a passionate group of over 550 culture change champions and
our business leaders. We have also integrated the 'dial-up behaviours'
into our performance management, reward and recognition processes.
Celebrate, our new and innovative recognition platform is now live
in over 56 countries. Following an accelerated expansion in Q2
and Q4 of fiscal 24, it now reaches the majority of our employees.
The programme helps foster a culture of gratitude and appreciation,
using instant and more frequent peer-to-peer recognition aligned
with our purpose of celebrating life every day, everywhere. Delivered
through a modern consumer grade user experience, the platform
has achieved a strong utilisation rate with over 90,000 recognition
moments experienced - the equivalent to one award every six minutes.
Furthermore, we are empowering and equipping our 4000+ people
managers across the globe with the necessary tools to role model
and influence behaviour change within their teams.
While we understand that cultural change can take time, we remain
committed to amplifying and clarifying the expectations for our
people. We believe that by doing so, we can build a more responsive
and resilient workforce that is better equipped to thrive and succeed
in today's rapidly changing business landscape.
(1)
Based on a blend of Ipsos Karian and Box, Qualtrics benchmark data. Global
Manufacturing benchmark includes organisations with global coverage that operate
within FMCG and other industry sectors.
OUR PEOPLE AND CULTURE
Diageo Annual Report 2024
55
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Creating the enabling environment for our people
to work and thrive
We believe that people are at their best, both at work and at home,
when they are physically and mentally thriving, emotionally balanced,
financially secure and socially connected. Our wellbeing philosophy
provides a framework around these four dimensions, ensuring that
wellbeing is a part of our culture every day, everywhere. In our most
recent employee opinion pulse survey, 88% of respondents felt they
are aware of the health and wellbeing resources and support Diageo
offers, which has in part been aided by active wellbeing champion
groups. Markets are supporting the wellbeing of our people in different
ways such as in Australia, where we have introduced ‘Wellbeing
Leave’ encouraging employees to proactively plan time away from
work to rest and support their wellbeing and in the United Kingdom,
where we had a dedicated wellbeing day in May to recognise
Mental Health Awareness Week.
In fiscal 24, we have further challenged the stigma around mental
health. Building on our already launched mental wellbeing app,
Unmind, we have created a Mental Health Awareness eLearning
and on World Mental Health Day we facilitated global conversations
where leaders shared their own experiences of mental health, to both
normalise and signpost to resources. We provide a focus on financial
wellbeing through regular masterclasses and mental 'wealth' first aid
training. Many markets have led employee physical wellness
challenges, such as Ireland’s ‘Go Joe Challenge’.
Fostering a positive workplace
Additionally, we have developed a suite of resources on a range of
globally relevant topics such as sleep, physical activity and staying
resilient during seasonal changes and have hosted multiple global
conversations on topics such as menopause and men’s health.
Our Diageo Flex philosophy continues to offer employees opportunities
to balance their work-life integration. Our family leave policy continues
to be popular and amongst market leaders, with 701 employees
utilising our extended paternity leave provision and 842 employees
utilising our extended maternity leave provision in fiscal 24. Lastly,
our investment in a multi-year technology transformation programme
will make it easier for our people to do more fulfilling work, improve
access to quality data and insights and drive greater productivity
and efficiency in our business process.
Average number of employees by region and gender(1)
Region(2)
Men
%
Women
%
Not
declared(3)
%
Total
North
America
1,844
59 %
1,286
41 %
14
—
3,144
Europe
5,972
57 % 4,538
43 %
14
— 10,524
Asia Pacific
5,797
66 % 2,965
34 %
1
—
8,763
Latin
America
and
Caribbean
2,761
62 %
1,675
38 %
1
—
4,437
Africa
2,225
64 %
1,272
36 %
2
—
3,499
Diageo
(total)
18,599
61 % 11,736
39 %
32
— 30,367
Average number of employees by role and gender(1)
Role
Men
%
Women
%
Not
declared(3)
%
Total
Executive(4)
7
54 %
6
46 %
—
—
13
Senior
manager(5)
320
56 %
252
44 %
1
—
573
Line
manager(6)
2,414
64 %
1,330
35 %
7
—
3,751
Supervised
employee(7)
15,858
61 % 10,148
39 %
24
— 26,030
Diageo
(total)
18,599
61 % 11,736
39 %
32
— 30,367
(1)
This data has been compiled as monthly average based on the proportion of
employees who have identified their gender identity as male, female or undisclosed,
and is not fully representative of the gender identity or diversity within our employee
population.
(2)
Employees have been allocated to the region where they live.
(3)
This data represents the proportion of employees who have chosen not to disclose
their gender identity as male or female.
(4)
Executive positions have been calculated based on year end as of 30 June.
(5)
Top leadership positions in Diageo, excluding Executive Committee.
(6)
All Diageo employees (excluding senior managers and Executive Committee)
with one or more direct reports.
(7)
All Diageo employees (excluding senior managers and Executive Committee)
who have no direct reports.
OUR PEOPLE A ND CULTURE continued
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Diageo Annual Report 2024
Health and safety
We prioritise the health and safety of our people throughout our value chain to ensure everyone
is safe when working on-site, at home, on the road, every day, everywhere.
Embedding a culture of health and safety
We believe that safety is everyone's responsibility and an integral part
of everyone's job. Empowering and involving our people in safety
embeds our belief that there is no acceptable level of accidents.
Our Global Health, Safety and Wellbeing Policy, along with our Global
Risk Management Standards, lay the foundation for our corporate
approach to health and safety. We conduct risk assessments and
utilise compliance systems, technology, and training that help us
create and embed innovative ways of working that continuously
improve safety.
We encourage our employees' participation and involvement in
accident investigations and improvement initiatives, and also provide
them with the most up-to-date health and safety training, so they can
carry out day-to-day tasks and activities safely. In addition, we conduct
company-wide communication campaigns and as such in fiscal 24
we held 'Stop and Think', 'Refocus our Minds', 'Leading for Safety'
and 'Strive for Zero' campaigns.
We have completed the first of our three-year 'Safer Together' strategy
which incorporates a safety culture and a technology roadmap.
Our overall strategy is designed to prevent severe, fatal, and process
safety incidents while enhancing our health and safety culture.
Our roadmap is designed to further embed an improved safety culture
into all locations. Our technology roadmap includes digital solutions,
automation, forklift truck technology, manual handling aids and
artificial intelligence with the aim of improving our health and safety
performance. Over the next two years we plan to invest over $50
million on 36 shuttle warehouses in our scotch operations where
casks are put away on pallets by an automatic shuttle, removing
manual handling, in an effort to improve safety and increase
productivity. Our strategy and roadmaps extend to our contractors
and third-party providers.
Company health and safety initiatives
Five elements of our 'Strive for Zero' campaign
Theme from our 'Stop and Think' campaign aimed
at commercial teams
Senior Leadership supporting risk assessment reviews
AI platform in place at some European locations
HEALTH AND SAFETY
Diageo Annual Report 2024
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S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Empowering responsibility: Fostering a safe
work environment
Leaders across the organisation are responsible for cascading and
implementing health and safety policies and procedures among their
direct reports and third parties within their remit. We also expect all
employees to take responsibility for their health and safety and those
around them, by acting in accordance with our Code.
We utilise a variety of tools to identify health and safety risks as per
our Global Health, Safety and Wellbeing Policy. Each location is
required to perform hazard identification and risk assessments which
assist us in identifying and addressing unsafe conditions. We also have
a safe observation programme across all locations to identify unsafe
behaviours, recognise positive behaviours and to report work-related
hazards. All employees and third parties are encouraged to remove
themselves from work situations they believe could cause injury or ill
health. Hazards are logged on local action planning systems and
tracked for closure.
To track the effectiveness of our approach, all our locations,
markets and global functional teams regularly monitor and review
health and safety. We report weekly our performance measures to
the Global Supply Chain and Procurement Governance Leadership,
to Supply Chain and Procurement Leadership monthly and to the
Executive Committee at quarterly meetings.
Our performance
We report on lost time accident frequency rate (LTAFR). This year,
we sustained 1.06Δ lost-time accidents (LTAs) per 1,000 full-time
employees (including directly supervised contractors), compared
to 0.91 in fiscal 23.
5 year LTAFR trend
1.06
0.91
0.92
1.03
0.60⁽¹⁾
2024
2023
2022
2021
2020
Our LTAFR increased against last fiscal, driven by increased numbers
of lost time accidents in Scotland and North America. Both of these
markets together with tequila and Türkiye market implemented
safety improvement plans aimed at improving safety performance
and safety culture. These improvement plans will be continued into
the next fiscal.
Our total recordable accident frequency rate (TRAFR) records
work- related injuries that need more than first aid treatment decreased
during this fiscal, demonstrating a consistent year-on-year improvement
in our overall numbers across the last three fiscal years, with a notable
improvement in our tequila and Türkiye market. We investigate each
recordable accident to establish the root cause as well as uncover all
contributing factors and insights we can learn from. We share the key
learnings across the organisation aiming to prevent recurrences.
For more information, please refer to our ESG Reporting Index.
(Δ) Within PricewaterhouseCoopers LLP’s (PwC’s) independent limited assurance
scope – see pages 258-261 of this Annual Report. For Reporting boundaries
and methodologies, see pages 238-257.
(1)
Fiscal 20 performance was impacted by Covid and reduced operations.
Shuttle Warehouse: Injuries occur on a more regular basis due to manual cask
handling - we are investing to digitise and automate to reduce the risk
Continuous improvement initiatives
Our workplaces are constantly evolving with new technologies,
processes, and equipment. Continuous improvement ensures that
health and safety measures keep pace with these changes,
addressing emerging hazards effectively. In fiscal 24 we introduced
several initiatives and will continue to do so as part of our culture
and technology roadmaps in fiscal 25.
• Across our commercial organisation, we have launched a driver
training programme – a driver behaviour monitoring application,
which provides bespoke training modules linked to the individuals
driving behaviour.
• We continue to roll out the Diageo Behavioural Standard in Africa,
focused on assessing the safety culture of our African locations,
which inform action and communication plans. Plans have started
in Mexico to roll out this global standard across our tequila business.
Other regions such as Europe and North America are working with
consultants to launch a standard suitable to their bespoke activities.
• We introduced a new AI platform in some of our European facilities.
The platform provides a 3D visual interface of the location and
allows staff to interact with various safety 'tools' in a very intuitive,
visual way within this digital space. Using a range of media
including; touch screens, large format digital kiosks, tablets and
mobile devices staff and visitors can interact with all elements of
the safety management systems. This includes site induction and
familiarisation, reporting safety hazards, completing safety
observations, communication of safety incidents and access to a
range of safety documentation. In addition, the digital platform
provides 3D representation and digital twin model of the workplace,
developing people's spatial awareness and providing an intuitive
medium for training and safety awareness.
• We are continuing to improve our data capabilities to predict
and prevent injuries.
• We continue to develop our global health and safety platform and
are introducing electronic solutions for permit to work, management
of change and contractor management.
Continuous improvement in health and safety is vital as we continue
to enhance workplace conditions and reduce risks.
HEA LTH A ND SAFETY continued
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Diageo Annual Report 2024
Champion inclusion and diversity
Championing inclusion and diversity is at the heart of what we do,
and is crucial to our purpose of ‘celebrating life, every day, everywhere’.
Our people are critical to our success. We believe everybody should
be able to work in an environment where they can thrive, and their
contributions are valued. We are proud that in our most recent Your
Voice survey, 81% (fiscal 23: 84%) of employees would recommend
Diageo as a great place to work and 83% (fiscal 23: 85%) agreed
that people from different backgrounds and opinions can be
themselves and thrive in the company. Despite a small drop in
results, our outcomes are above external benchmarks.
We are committed to shaping broader societal change, reflective of
our consumers. We look to champion this across our entire business –
with our people, through our value chain, across our brands and
within the communities in which we operate. Inclusion and diversity is
a critical enabler of our ‘Spirit of Progress’ ambitions and every senior
leader plays their part and is incentivised in driving progress to deliver
this ambition.
Whilst we celebrate where we are today, we know there is more to do.
Alongside progressing our gender and ethnicity ambitions, we must
also focus on achieving our ambitions across all aspects of diversity.
Strengthening our female talent pipeline
In fiscal 24, representation of women in leadership roles, including
our Executive Committee, remained strong at 44%, against our
2030 ambition of 50%. We're proud to have 70% female Board
representation, and 46% female Executive Committee representation.
This led to Diageo being recognised as a Top Ten Best Performing
company for both women on boards and in leadership roles in the
FTSE Women Leaders Review. We have also been listed first in the
United Kingdom and third globally from 4,000 companies in the
Equileap Gender Equality Report recognising our continued
commitment to leading the way in gender equality.
We focus on strengthening our female leadership pipeline and investing
in the next generation of female leaders, particularly across areas
where women have historically been under-represented, including
commercial, general management and supply roles. Examples of this
include our 'Horizons' development programme piloted in fiscal 24 to
strengthen general manager succession and support the transition of
leaders across functions, with 55% female representation in our first
cohort. We launched the Global Supply Chain and Procurement
'Accelerator' leadership programme of which 66% of participants
were female and the 'Striding Women' initiative across LAC
strengthening retention and diversity of future talent. Our North
America business also launched a commercial pilot partnering with
Sistas in Sales (SIS), an organisation committed to serve women of
colour in professional sales careers across the United States.
These initiatives are complemented by our policies and practices –
helping us to foster a gender-inclusive environment, providing support
at varying life stages including our 'Family Leave' policy, ‘Thriving
Through Menopause’ guidelines, 'Pregnancy Loss' guidelines and
our 'Fertility’ guidelines which recently launched in Ireland.
Our 20 Spirited Women Network chapters are key to creating and
amplifying our guidelines and policies, as well as partnering with the
business to best develop and grow talent. In fiscal 24 our Great Britain
and Ireland chapters championed mentoring and coaching
programmes reaching 364 pairings, of which 84% were female.
Maintaining ethnic diversity
Today, 40% of our Board and 46% of our leadership population, including
our Executive Committee, is ethnically diverse and we are proud to have
reached our 45% ethnicity leadership representation ambition ahead of
2030. We achieved this through 43% of internal promotions and 45%
external appointments into the leadership cohort being ethnically diverse
in fiscal 24. We want to maintain the momentum achieved to date, while
embedding the actions and enhancing our culture that has led to such
positive outcomes. Disclosure is key to this and we are proud that 96% of
our leadership population and 71% overall, in the markets where legislation
allows, have shared this information voluntarily.
We remain committed to creating a diverse and inclusive workforce that
represents the communities we serve, and understand the importance
of diversifying our talent attraction and external partnerships. In North
America, we've renewed partnerships with Prospanica (The Association
of Hispanic MBAs & Business Professionals) and the National Black
MBA Association to support a diverse talent pipeline. In Great Britain,
we've partnered with Multiverse to launch a two-year apprenticeship
programme aimed at under-represented groups in commercial roles.
The cohort consisted of ethnically diverse and female apprentices,
further strengthening our future leader pipeline.
Gender representation of our leadership(1), (3)
Role
Men
%
Women
%
Total
Leadership population(2)
327
56%
258
44%
585(3)
Ethnic representation of our leadership(1), (4)
Role
Ethnically
diverse
%
Non-
ethnically
diverse
%
Decline
to self-
identify
%
Not
disclosed
%
Total
Leadership
population(2)
259
46%
270
47%
19
3%
20
4% 568
(1)
This data is calculated as an average across the four quarters of fiscal 24.
(2)
Leadership population encompasses Executive Committee and senior managers.
(3)
One leader has opted not to disclose their gender; they cannot be positively
attributed to either group and therefore are included.
(4)
18 leaders are based in countries that do not collect ethnicity data. As such,
these leaders are not in scope. Please refer to the Reporting boundaries
and methodologies for further information, see pages 238-257.
Building an inclusive culture through leading progressive
policies and guidelines
Our market-leading policies and practices are shaped by and for
our people and allow us to continue to provide an environment
where they are supported and cared for.
We continue to embed and scale our existing policies and guidelines,
including 'Domestic and Family Abuse', 'Gender Expression and
Identity’ and 'Disability Inclusion' guidelines. We also continue to
support our employees’ individual circumstances and needs through
our 'Flexible Working' and 'Wellbeing' philosophies. In fiscal 24 we
launched our Carers Leave policy in the UK, which went beyond
statutory entitlement giving our people up to 10 days paid leave to
care, or arrange care, for dependents. This policy is accessible to all
employees, regardless of gender, but we recognise that women are
more likely to take up caring responsibilities. We will be extending this
policy to other markets during fiscal 25.
CHAM PION INCLUSION AND DIVERSITY
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F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Leveraging the power of our Resource Groups to drive
inclusion locally
At Diageo, creating a sense of belonging for everyone is at the heart
of everything we do. Our 60 employee resource groups (ERGs)
worldwide champion key calendar moments that represent the voice
of our consumers and promote inclusivity. These include events such
as Hispanic Futures Month led by 'Connectados'; Black Heritage
Month sponsored by 'AHEAD' (African Heritage Employees at Diageo);
International Day of People with Disabilities in partnership with the
'We Are All Able' group; the 'Rainbow Network' Pride flag-raising
event, and our annual Inclusion Week celebration now in its seventh
year, seeing over 5,800 employees join across 29 virtual sessions.
In addition to this, fiscal 24 saw new initiatives and innovations
including:
• Neuroinclusion – Diageo's first neurodivergent ERG PRISM launched
in Ireland and Great Britain. In partnership with PRISM, our Irish
Brand Homes were accredited by Ireland's National Autism Charity
‘As I Am’ as autism friendly attractions in November 2023.
• LGBT+ Gold Standard – The launch of Diageo India’s ‘Rainbow
Network’ which saw members partner with the business to help
secure the prestigious Gold Award for LGBT+ Inclusion by India’s
Workplace Equality Index (IWEI).
• Guinness Luck of the Dragon – To toast Lunar New Year the
‘P.A.N' (Pacific Asian Network) ERG partnered with Guinness Open
Gate Breweries in Baltimore and Chicago to launch a limited-edition
brew and identified two local Asian American and Pacific Islanders
(AAPI) nonprofits to support as part of the festivities.
Promoting inclusivity within our value chain
Part of how we promote sustainable growth, and a resilient supply
chain is giving equal access to resources, skills, and employment
opportunities in communities where we live, work, source and sell.
An important way we deliver this is through Learning for Life (L4L),
our business and hospitality skills programme for people from
under-represented groups. L4L also tackles barriers faced by other
under-represented groups including ethnically diverse communities
and people with disabilities. Our inclusive by design principles include
recruitment practices, training content and venue accessibility, as well
as modules on inclusion and diversity.
Building a thriving and inclusive hospitality
industry
Ambition by 2030
Provide business and
hospitality skills to 200,000
people, increasing
employability and improving
livelihoods through Learning
for Life and our other skills
programmes
Number of people reached
through Learning for Life and
other skills programmes in
fiscal 24
36k
200k
n 2030 Target
200k
n 2023 progress to date
62k
n 2024 progress to date
98k
In fiscal 24, we reached 36,000 people in 36 countries and territories
with L4L, over 50% of them women. To deliver an even greater
positive impact, this year we piloted new partnerships with our
customers and distributors to increase employment rates for students
graduating from our programme.
Through Diageo Bar Academy we provide accessible training and
resources aiming to create a sustainable, inclusive, and thriving
hospitality industry that works for all. In fiscal 24 we continued to
deliver in-person and online training to hospitality workers, with an
emphasis on women, in Africa (Zambia, Mozambique, Cameroon)
and India to support their industry progression.
Increasing the representation of diverse voices through our
progressive marketing practices
As one of the world's largest advertisers, we're committed to playing our
part across the industry to ensure that everyone, from script to screen,
sees themselves represented. We use our marketing to challenge
stereotypes and commit investment to address under-representation
of diverse voices in media, making mainstream media more inclusive.
In fiscal 24, we are proud to have made significant advancements
in our accessibility practices across our media and campaigns.
Working with television station ITV, Guinness made sporting history
by trialling live descriptive audio commentary for two Guinness Six
Nations rugby games, to help make sure blind and partially-sighted
fans could follow every aspect of the game. Smirnoff’s biggest global
campaign for over a decade, 'We Do We', launched across different
markets shining a light on under-represented groups and advocating
for more inclusive socialising. In the UK, the brand partnered with
accessibility and inclusive consultancy, 'Tilting the Lens', to execute
an 'access for all' pledge to make socialising and our events more
accessible. In India, Smirnoff partnered with Kala Ghoda Art festival,
one of India’s top exhibition festivals in Mumbai to support the Hijra
community, a transgender community facing significant social
exclusion. In Brazil, the brand partnered with IZA, launching a unique
track and dance challenge to support local Afro-Brazilian communities
and Pride activities across the country.
Creating inclusive communities
We champion inclusion and diversity in the communities connected
to our production sites and sourcing areas. We work with WaterAid
and CARE International UK to ensure that when we provide Water
Sanitation and Hygiene (WASH) to communities in water-stressed
markets, we also facilitate community dialogues to tackle social
norms that prevent women's equal access to and agency over WASH.
This year more than 50% of WASH committee members were women
across our programmes in nine countries. We have also expanded
our inclusive approach to our work with smallholder farmers to include
Kenya, Tanzania, Nigeria and Ghana. In partnership with Sightsavers
and CARE International UK, we provide equal access to agricultural
training and resources for women, youth and people with disabilities.
See more detail in our ESG Reporting Index.
Driving sustainable economic impact with diverse suppliers
We believe diverse-owned and disadvantaged suppliers deliver
sustainable economic impact in the many communities where we
operate. We champion diverse suppliers through partnership,
advocacy and celebrating success.
In fiscal 24, Diageo was awarded Platinum Top Global Champion
for Supplier Diversity and Inclusion by WEConnect International.
This award recognises our deep commitment to global inclusive
sourcing from diverse groups including ethnic minority, women,
LGBT, veteran and disabled-owned businesses. More information
on our supplier diversity strategy and programmes can be found in
our ESG Reporting Index.
CHA M PION INCLUSION AND DIVERSITY continued
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Diageo Annual Report 2024
Managing climate and nature risks
and opportunities by pioneering
grain-to-glass sustainability
Our business depends on natural resources and we are directly affected by
changes in climate and the related challenges of nature loss, particularly
freshwater. We continue to address the risks and opportunities that climate
change and nature pose to our business through focused programmes on our
most material risks, and greatest opportunities.
Introduction
We are committed to acting responsibly to mitigate our contribution
to global warming, to conserve the environment on which we rely and
to support our licence to operate and grow. Climate risk is intensifying,
with extreme weather events and temperature rises taking place even
faster than many scientists had expected. While our analysis suggests
our business is resilient in the short- and medium-term, we must take
action now to ensure our continued resilience, as well as that of the
communities in which we operate.
Pioneering grain-to-glass sustainability is how we adapt to climate change
and address nature loss throughout our supply chain, mitigating the risks
associated with changing environmental and biodiversity factors. Putting
climate, nature and people at the heart of our strategy is good for our
business and good for the planet. We believe that through the mitigations
and adaptations we have in place or planned, our business is resilient to
the impacts of climate change and nature loss.
Our Action Plan – ‘Spirit of Progress‘
Pioneering grain-to-glass sustainability means setting ambitious targets.
Our ‘Spirit of Progress’ targets reflect our most material ESG issues and
align to the UN Sustainable Development Goals. We are also proud to
be a signatory to the UN's Race to Zero and Race to Resilience campaigns
reflecting our commitment to climate change mitigation and adaptation.
The issues surrounding climate change are complex, making progress
against our ambitious targets challenging – for example the measurement
and reduction of Scope 3 greenhouse gas emissions, and the development
of the infrastructure to reduce Scope 1 and 2 emissions are particularly
challenging. As we become more advanced in understanding our impacts
and taking action to address them, we will also evolve our practices and
metrics. We regularly review our grain-to-glass sustainability strategy, and in
fiscal 24 we further refined it to accelerate our water ambitions and refine
our carbon focus. We have reconsidered how we prioritise and report on
our most important topics, focusing on our priority performance targets.
Performance against supporting goals including some of our packaging and
waste targets have been separately reported in the ESG Reporting Index.
Reporting
We have used the guidance of the Task Force on Climate-related Financial
Disclosures (TCFD) framework for reporting. Our Net Zero Carbon Strategy
(first published in 2022) outlines how we will achieve our decarbonisation
vision across our business and value chain. We continually refine this
strategy, considering the guidance of the UK Transition Plan Taskforce and
we expect to refresh our strategy in the future to adapt to ever-changing
market, infrastructure and policy conditions.
Increasingly we are incorporating nature risks and dependencies into
our strategic planning. We have begun to identify and quantify our
material impacts and dependencies, following the guidance of the
Taskforce on Nature-related Financial Disclosures (TNFD)'s LEAP
(Locate, Evaluate, Assess, Prepare) framework.
Governance
Given the importance of the risks, we have governance processes
in place to ensure that we consider and factor climate and nature risk
into our business operations and planning processes. To supplement
our ‘Spirit of Progress‘ governance (summarised on page 50),
our sustainability teams and senior leaders hold monthly sustainability
performance reviews. We track water efficiency and carbon reduction
projects and hold quarterly strategic business reviews focusing on
multi-year progress and plans. Significant risks identified are escalated
to enterprise risk management forums at group level. We oversee
climate and nature risk specifically at the highest level of the company,
managing through these governance structures and processes:
• Executive sponsorship and responsibility is shared jointly between
the President, Global Supply Chain & Procurement and Chief
Sustainability Officer (Ewan Andrew) and the Global Corporate
Relations Director (Daniel Mobley).
• They are supported by our cross-functional Climate and Nature Risk
Steering Group.
• The Climate and Nature Risk Steering Group provides regular updates
to the executive sponsors and the Board which allows for potential risks
and opportunities to be part of strategic decision-making.
• The Board retains ultimate responsibility for the oversight of climate-
related risks and opportunities.
• Additionally, several cross-functional working groups are responsible
for addressing the key risks and opportunities we identify.
• Any impacts on our consolidated financial statements from climate
and nature risks and performance against non-financial metrics are
shared with and considered by the Audit Committee annually.
• Any potential financial impacts from climate and nature risks are
also reviewed and considered by the Audit Committee.
Board oversight
Audit Committee
Executive Committee ownership
Executive sponsors
President, Global Supply
Chain & Procurement and
Chief Sustainability Officer
Global Corporate Relations
Director
Cross-functional Climate and Nature Risk Steering Group
Corporate relations
Supply & Procurement
Strategy
Risk
Finance
Legal
Marketing
Working groups assigned to address key risks
and opportunities identified
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ADDITIONAL INFORMATION
Risk Management
Identifying climate risks and opportunities
We divide climate risk into physical and transition risks. Physical risks
include chronic changes, like sea level rises, temperature changes
and acute events like floods, droughts and heatwaves. Transition risks
arise from actions to mitigate climate change, such as policy and legal
changes (e.g. carbon taxes); technology changes (e.g. renewable
energy) or market changes (e.g. growing consumer demand for more
sustainable products). Both categories of risk are already occurring
and likely to increase. As temperatures continue to rise globally, we
continue to assess and prepare for emerging physical and transition risks.
We are partnering with climate resilience and nature experts to identify
and assess how generally recognised climate and nature risks apply
specifically to our business. The factors that determine how climate
change creates risks and opportunities for our business are multiple
and complex, creating challenges in quantifying the size of the impact
and likelihood of these risks. Notwithstanding, scenario analysis allows
us to test the various assumptions related to climate change and how
they may affect our business. This year, we have further developed our
capability in modelling the impacts of climate change under physical
and transition risk scenarios.
Climate change resilience
Our experience in managing the impact of normal variations in
climatic conditions, water availability and agricultural yields has made
us more resilient and adaptable. We do this through careful planning
in our supply chain and procurement organisation. We work with
peers to drive enhanced technological practices at scale, which
optimise crop management and seed quality. We also collaborate on
the development of novel high-yielding, drought and temperature-
resilient crop varieties. We manage water in a way that makes our
operations more resilient and helps our local communities and
agricultural sourcing areas to adapt, with a specific focus on water-
stressed areas. Since first referencing it in 2010, we have integrated
climate risk into our enterprise risk management processes, within our
principal risk factors. This is now an integral part of our strategic and
business continuity planning.
Identifying and assessing our physical risks
To assess the physical risks that we are exposed to and how they may
develop under various scenarios, from 2021 to 2024, we worked with
climate resilience experts to look at all of our direct operations sites
and key third-party suppliers. We have also included some sites that
are planned or under construction, to ensure we understand their
exposure and prepare their resilience. This table illustrates how we
have phased the work:
Fiscal year
2021
2022
2023
2024
Markets/
regions
assessed
for
physical
risks
Largest
supply
centres
• Scotland
• North
America
Highest
water risk
• Africa
• Mexico
• India
• Türkiye
Remaining
locations
• Asia Pacific
• Latin
America
and
Caribbean
• Europe
Acquisitions
and additions
to operational
footprint
• Asia Pacific
• North
America
• Europe
Following each successive year's analysis, the total global physical risk
footprint was refreshed.
We conducted physical risk assessments that measured the exposure
and vulnerability of the activities at our sites, the key third-party
operations and suppliers' assets to 19 climate-related hazards. In
addition, we reviewed the vulnerability of the main agricultural
materials and our key distribution routes to climate change. We then
considered how the climate-related hazards and our site vulnerabilities
would materialise under two different levels of future warming:
Intergovernmental Panel on Climate Change (IPCC) scenario RCP
(Representative Concentration Pathway) 4.5 – medium warming of
2-3°C, and IPCC scenario RCP8.5 – severe warming of 4-5°C and two
timeframes (to 2030 and to 2050). These scenarios were chosen to
represent a 'worst case' (RCP8.5) and a 'medium case' (RCP4.5) under
which to assess our resilience.
IPCC scenario
Description
RCP 4.5
Warming of 2-3°C by 2100
RCP 8.5
Warming of 4-5°C by 2100
For our own sites and many of our third-party operator sites producing
beverages on our behalf, we analysed climate-related risks they are
likely to be exposed to. For those that are most strategically important
or at greatest risk, we carried out more detailed assessments. At each
location, we considered a combination of the different production
activities (e.g. distilling and packaging) as well as parts of the
supportive processes that might be affected (e.g. infrastructure, water
supply and energy sources) and the 19 physical climate-related risks
that might occur.
We also analysed our key suppliers' factories and warehouses; for
example those handling our most critical or specialised ingredients
and components, key agricultural commodities, and our most critical
distribution routes, to identify which might be exposed to physical risk
in the future.
Given the dependence of our business on agricultural raw materials,
we gave this area particular attention, conducting detailed analyses of
the most important crops used in our products. This research
highlighted the vulnerabilities of each crop type, how their exposure
may increase in the growing regions over time and the possible
adaptation and mitigation responses to these. The diagram on page
63 illustrates the main risks the most important commodities are
exposed to, by region.
In addition to the bulk agricultural raw materials outlined in the illustration,
we conducted a high-level analysis of raw materials included in our
products critical for the characteristics they impart – for example, juniper,
angelica and liquorice. The results of the agricultural raw material
assessments have informed and will continue to inform our strategy.
Risk assessment results – our most important
physical risks
Our climate risk assessment, without consideration of mitigation or
adaptation actions, confirmed three key points:
1. Water-stress, including drought, is our most significant climate-
related physical risk in terms of prevalence, trajectory and potential
financial impact. It affects our ability to produce our products, the
access to agricultural ingredients that we need and, ultimately, our
licence to operate.
2. All agricultural raw materials are at risk from climate change; we
see that risk increasing under the timeframes and scenarios we
analysed. Our models suggest that the costs of most commodities
are likely to increase as a result of climate change, although
estimates of the precise impact vary significantly depending on the
model used and underscoring the difficulty of these projections.
These factors potentially affect our own operations and those of
some of our suppliers.
3. Acute weather events, including floods, winds, hurricanes/storms,
heatwaves and wildfires, are projected to increase and may
cause disruption to our operations, although their impact is unlikely
to be as significant as that of the risks related to water and
agricultural materials.
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Diageo Annual Report 2024
Key climate risks to agricultural raw materials by region
North America
Europe
Türkiye
Maize
Barley
Barley
Dairy
Grapes
Sugar
beet
American
white oak
Wheat
Rye
Wheat
Rye
Hops
Sugar
beet
Hops
Anise
Sugar beet
Latin America and Caribbean
Africa
Asia Pacific
Agave
Barley
Maize
Rice
Sugar
cane
Sorghum
Cassava
Molasses (sugar
cane)
Sugar
cane
Vanilla
Barley
Sugar
beet
Grapes
Priority raw materials by volume
Climate risks likely to affect agricultural raw materials
ò Barley
ò Broken rice
ò Agave
ò Rye
ò Maize
ò Dairy
ò Molasses
ò Others
ò Wheat
ò Grapes &
raisins
ò Sugar
ò Sorghum
Temperature
Precipitation (variability/
extremes)
Fires
Drought
Water-stress
Hurricane/
storm
Flood
Disease
Sea level
Geographical scope of our physical risk assessments
Region
Owned/key third-party
sites assessed
Detailed assessments
Agricultural
commodities
Supplier assets
(factories, warehouses)
Ports
North America
14
4
8
86
6
Europe
79
13
18
262
27
Asia Pacific
70
11
6
281
9
Latin America and Caribbean
47
6
2
251
13
Africa
48
5
6
366
14
Total
258
39
n/a(1)
1,246
69
(1)
Some commodities were analysed in more than one location
For more details on our scenario analysis approach, see the Non-financial Reporting boundaries and methodologies section on pages 239-241.
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ADDITIONAL INFORMATION
9
13
17
12
11
10
8
7
6
16
3
1
2
22
24
21
19
23
14
18
15
35
28
26
32
31
29
27
25
20
33
34
5
4
30
Deep dive – our water scarcity risk
Water is vital to our operations and the raw materials we use when creating our products. We give great focus to understanding water-related risks
so we can mitigate and adapt to them.
In addition to our physical climate risk assessments to analyse the risks from water availability, water temperature, water quality and flooding, we
also conduct water-stress analyses at our sites every two years.
We undertake this work using site surveys and World Resources Institute (WRI) Aqueduct data. We also complete water source vulnerability
assessments (SVAs) to further enhance the insights we need to address risks. By fiscal 23, we worked with our expert partners to complete SVAs at
22 of our sites located in water-stressed areas; in fiscal 24 we completed SVAs on a further eight sites. This work provides comprehensive insights
into how our risk profile may vary with climate change, such as the degree of vulnerability to water-stress within our operations and supply chains.
We can then use these insights to help us act where we believe it is most needed, whether that is in increased water efficiency requirements,
replenishment commitments or prioritised climate adaptation planning.
Focus on water-stress
We have been regularly assessing our wholly-owned production sites for water-stress since 2008. The most recent water risk assessment, conducted
in 2023, identified five new water-stressed sites and was updated in fiscal 24 to reflect changes in our operations due to disposals. We follow a
three-step approach to assessing water-stress in our production sites, combining the results from the WRI Aqueduct mapping tool with external
validation from independent hydrologists and internal site surveys encompassing physical, regulatory, social, and reputational considerations.
Below are the operational sites that we have identified as being in water-stressed areas, the sites for which we have conducted source vulnerability
assessments (SVAs) and the countries where we have identified priority water basins.
Diageo operational sites located in water-stressed areas, and priority water basins in 2024
ò
Sites
ò
Sites where an
SVA has been
carried out
ò
Countries where
we have identified
priority water basins
Mexico
Guatemala
Brazil
Uganda
South Africa
Türkiye
India
El Charcon
Zacapa
Itaitinga
Kampala
Isipingo
Alaşehir
Nashik
Malkajgiri
Agricultural lands
Venezuela
Ghana
Tanzania
Kenya
Şarköy
Baramati
Kumbalgodu
La Primavera
Valencia
Kaase
Mwanza
Kisumu
Acıpayam
Aurangabad
Asansol
Achimota
Moshi
East African Maltings
Nevşehir
Alwar
Gopalpur
Nigeria
Dar es Salaam
Tusker
Tarsus
Pioneer
Indonesia
Lagos
Seychelles
Taşel
Nacharam
LKJ Packaging
Seybrew
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Quantitative impact of physical risk determined by
scenario analysis
This year, we collaborated with climate resilience experts to develop
and implement an automated scenario analysis tool to inform our
climate adaptation strategy. The tool allows us to perform further
scenario analyses and test numerous sensitivities to defined variables.
For example, we can analyse the sensitivity to climate risks of certain
categories or markets and estimate the impact of the adaptation
measures that we have implemented. This is a significant step forward
in the integration of climate risk into our strategic planning processes.
We modelled the chronic risk of water availability, the acute risk of
drought, commodity price increases due to climate change and one-
off climate-related events.
Water-stress and drought
Under the warming scenarios we modelled, nearly a quarter of our
sales will be exposed to increased water-stress in both scenarios and
timeframes. Under these warming scenarios, the absolute number of
sites may not increase significantly, but, under both timeframes, those
sites affected may suffer even greater shortages of water, which may
impact our operations and the health and wellbeing of employees at
those sites.
Analysing the financial impact of drought is particularly difficult due to
the many factors involved, including the probability of drought, the
length of time operations may be suspended and the impact of any
adaptation or contingency measures. We have modelled what we are
currently able to through scenario analysis, our own assessment of
vulnerability and with highly conservative assumptions (e.g. limited
downtime in all sites due to drought). We have concluded that, by
2030, we do not anticipate that drought will have a significant impact
on our operations (including key third-party operations) or on our
financial condition. Beyond 2030, it is more difficult to analyse, given
the increased uncertainties inherent in modelling over a significant
period of time. Our models show that adaptation actions are needed,
particularly in the period between 2030 and 2050 in order to prevent
impactful interruption to our operations and supply chains. If no action
is taken, the outcome may potentially result in lost sales. In our strategy
section below, we outline the interventions we are currently
implementing to future-proof our business against drought.
Commodity scarcity and pricing
Commodity price increases due to climate change are more difficult to
estimate, with the models we used producing highly varied estimates.
Climate risk is likely to result in a projected price increase for the
majority of our commodities. Our scenario analysis helps us build in
commodity price risk into our raw material procurement strategies,
particularly for crops with unique provenance (e.g. agave and vanilla)
or high sensitivity to growing conditions (e.g. hops). Our modelling
suggests the biggest risks of higher prices in 2030 and again in 2050
are likely to impact agave, sorghum, rice, wheat, dairy and hops.
There are considerable differences between models, but the impacts in
both 2030 and 2050 may be significant.
Flooding and tropical storms
Flooding and storms are the next most likely physical risks to affect our
financial performance, given the risk of damage to our sites and
disruption to our supply of agricultural ingredients. Although the direct
risk to our sites from acute physical events will increase, our scale,
global supply footprint and capabilities in resilience management
mean we are well-positioned to ensure flooding and storms do not
interrupt our overall ability to serve our customers or have a significant
financial impact on a global scale.
Heatwaves, wildfires and landslides are also identified as acute
physical risks. Their potential financial impact is not modelled in our
scenario analysis but adaptations to these risks are planned where
they are projected to increase.
Identifying and assessing our transition risks and
opportunities
We have performed additional scenario analysis to estimate the
financial impact of transition risks and opportunities under a Paris-
aligned emissions scenario (RCP2.6). The analysis provided us with
a better understanding of our risks and opportunities associated
with transitioning to a low-carbon economy. Through this analysis we
have refined our financial estimation and gained further clarity on how
to respond.
We identified those risks with the most potential impact by looking at
our agricultural inputs, production and packaging, distribution and
sales channels. Through this analysis, we were able to determine the
most important transition risks and opportunities to monitor, including:
1. Decarbonisation costs: Changes to our supply chain and production
costs, including carbon taxes and related changes to input costs
(risk and opportunity).
2. Consumer behaviour: Changes in consumer behaviour to opt for
more sustainable options, e.g. choosing circular products or locally
produced brands (risk and opportunity).
3. Regulatory changes: Shifts in public policies, e.g. restrictions on
packaging, water use, agricultural materials or land that affect our
ability to make our products (risk).
4. Technology changes: Adopting low-carbon production of our
products and packaging and the associated risk of not doing this
fast enough (risk and opportunity).
Of those risks and opportunities outlined above, the greatest impacts
are likely to arise from consumer behaviour and from input cost
increases related to the cost of decarbonisation. The table on page 66
summarises the physical and transition risks and opportunities we
consider the most important.
Quantitative impact of transition risks and
opportunities
Transitioning to a low-carbon economy presents both risks to and
opportunities for our business. Through our scenario analysis, we
have been able to estimate the impact on our operations and
financial condition to 2030, concluding that it is unlikely to be
significant over that period – even assuming that we bear any
changes in production costs.
Packaging is the key transition risk and opportunity
We identified that the key driver of transition risk to 2050, was our use
of glass, which could contribute to an overall production cost increase.
We noted that lower transport and energy costs would partially
mitigate this impact. We acknowledge that extending the analysis to
2050 is subject to many variables and ambiguities and, therefore,
substantial uncertainty. However, it allows us to estimate what a 'worst-
case scenario' may look like, based on our best available modelling of
cost trajectories.
Our modelling has allowed us to estimate the impact on our
operations and the financial condition of some of the possible
mitigating actions we take, which can include pricing, improvement in
energy use, sourcing and using lightweight glass, reducing the carbon
intensity of glass production and using returnable or reusable
packaging. The results of the scenario analysis of both physical and
transition risks are reflected in our assessment of viability and
impairment (see page 86).
Diageo Annual Report 2024
65
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Summary of our most important climate risks and opportunities
Risks
Risk description
Water scarcity
Increasing water scarcity and water-stress affects our
ability to continue to source from and produce in water-
stressed areas
Agricultural raw material availability
Climate-related impacts on agricultural material
availability cause scarcity or price increases
Category
Physical – chronic
Physical – chronic
Timeframe(1)
Short-term (one to five years), medium-term (five to 10
years) and long-term (10 to 30 years)
Medium-, long-term
Impact (if not mitigated)
Moderate(2)
Moderate(2)
Response examples
• Improvements in water use efficiency in our operations,
with more ambitious targets at water-stressed sites
• Water replenishment plans in 100% of water-stressed
areas
• Collective action activities to improve water security in
Diageo's ‘priority water basins’
• Nature-based solutions that support climate mitigation,
adaptation and water replenishment
• Exploring alternative formats and ingredients with
potential to reduce water use
• Rainwater harvesting, Aquifer recharge, Dam de-silting
• Regenerative agriculture adaptations
• Smallholder farmer support
• Development of drought-resistant ingredients (e.g.
sorghum, anise and barley varieties)
• Alternative sourcing locations
• Substitution with alternative crops
• Increased use of cover cropping
• Improved water management in agricultural practices
Risk description
Input costs
Policy changes (carbon taxation, shift to renewables)
cause increases in input costs
Consumer behaviour
Consumers prioritise purchasing more sustainable
products, rejecting those perceived to have a negative
environmental impact
Category
Transition – policy/legal
Transition – market
Timeframe(1)
Short-, medium-term
Short-, medium-, long-term
Impact (if not mitigated)
Moderate(2)
Moderate(2)
Response examples
• Supply chain decarbonisation
• Engaging suppliers in low-carbon technology options
for their operations
• Reduced packaging weight
• Reduced packaging weight
• Increased recycled content in packaging
• Developing circular product offerings
• Purchasing more sustainably-grown raw materials
• Communicating these changes to consumers
Opportunities
Opportunity description
Supply chain decarbonisation
Reducing our Scope 1, 2 and 3 emissions lowers our
exposure to carbon taxes and related costs, and
improves our reputation with customers and consumers
Innovation in sustainable products and packaging
Developing more sustainable products meets consumers
increasing demands
Category
Transition – policy/legal
Transition – market
Timeframe(1)
Short-, medium-term
Short-, medium-term
Impact (if not realised)
Moderate(2)
Moderate(2)
Response examples
• Decarbonisation programme and capital investment in
our operations
• Renewable energy investments
• Regenerative agriculture programme
• Collaboration, partnerships and capability building
within our supply chain
• Innovation to deliver more sustainable products (e.g.
refillable and reusable packaging, alternative
packaging materials)
• ecoSPIRITS (reusable glass packaging format), lower
waste, lower carbon distribution technology
(1)
Timeframes chosen align to those used in our scenario analyses, where short-term (one to five years) reflects the typical strategic planning timeframe, medium-term (five to 10 years)
includes the timeframe to 2030 which our scenarios model, and long-term (10 to 30 years) includes the timeframe to 2050 which is also modelled by our scenarios.
(2)
'Low' impact is defined as having a negligible impact on customer service, or an absorbable disruptive impact on one or more brands. 'Moderate' impact is defined as disruption to
production/supply chain creating an inability to service a small portion of our customer base, the impact of which is manageable; or a significant short-term impact on one or more of
our core or local priority brands that is absorbable by the business. 'High' impact is defined as an inability to service a significant portion of our customer base, or major reputational
damage.
PIONEER GRA IN-TO-GLASS SUSTAINABILITY continued
66
Diageo Annual Report 2024
Integrating nature risk into our climate risk strategy
In alignment with the recommendations of the Taskforce on Nature-
related Financial Disclosures (TNFD), we have commenced assessing
our nature-related dependencies, impacts, risks and opportunities. We
conducted a nature baseline across our supply chains during fiscal 24.
We identified material pressures across the value chain and estimated
our contribution to environmental impacts. We identified the
geographic areas where these could be harmful to nature, using
datasets covering four dimensions of nature: land, water, biodiversity
and ecosystem services. Our assessment encompassed our
agricultural upstream supply chains, our direct operations and an
initial assessment of some of our packaging supply chains.
Results of our nature risk assessment
The greatest risks are to our agricultural raw material sourcing arising
from water scarcity, as much of our agricultural materials are grown in
water-stressed regions. The results aligned with the observations from
our climate scenario analysis. The raw materials with the highest
relative nature impact were assessed as agave, broken rice,
sugarcane, sorghum and barley.
Although we have been conducting climate risk assessments for
several years, this nature risk assessment is a new analysis and only a
subset of ecosystem services could be incorporated into the model.
We have made good progress on understanding our dependencies
and impact on nature and have begun to weave nature into our
broader strategy. We intend to continue our assessment of and
response to nature-related dependencies, impacts, risks and
opportunities, aligned to the recommendations of the TNFD.
Our strategy for grain-to-glass sustainability
Our 'Pioneer grain-to-glass sustainability' strategy acknowledges the
breadth of the environmental and social consequences of a changing
climate and our dependencies on nature and people. It recognises
how interlinked these issues are and how deeply connected and
dependent our value chain is on nature, broader society and its
evolving expectations. We continue to learn and evolve our approach,
aiming to take action where it has the most material impact.
Our targets are mapped against our most material issues, water and
carbon, and reflect the complexity of the risks and opportunities we
face. By taking action and delivering on our commitments, we are
taking steps to make our business more resilient while preserving our
licence to operate and grow.
Our carbon and water roadmaps outline the projects needed to
deliver our 2030 targets. These plans are backed by capital
investment and undergo regular and rigorous stress testing to build
confidence in our ability to deliver our targets. We are learning and
improving our plans and are extending them across our supply chain.
Enhancing and digitising our sustainability data and reporting
framework has and will continue to provide more detailed insight into
what is required to deliver our strategy.
We expect to invest around $1.2 billion between 2020 and 2030 to
accelerate our ambition to preserve water and take a more focused
approach to carbon reduction, with around $0.3 billion invested so far.
Much of the progress within our own operations comes from our sites
in Africa and India. We are beginning to see the impact of our
investments in our North America and Europe regions, with more
action to come as we head toward 2030.
Preserve Water for life
Water is the most important ingredient in our products. It is also a
precious shared resource that is facing increasing pressure in many
parts of the world, due to the impacts of climate change and the
competing demands for freshwater resources. As outlined in our
physical risk assessment, it is our most important climate risk.
In fiscal 24, we undertook a detailed review of our water strategy to
assess how we are addressing risks and opportunities and to further
accelerate our impact and approach. The results of this review
underpin our current four-pillar strategic approach, focusing on
operations, supply chain, communities and advocacy. We are prioritising
the integration of our water programmes with other actions we are
taking to address impacts on climate, nature and people. For
example, a key development in our refreshed strategy is that we will
extend our water replenishment and collective action programmes to
include indirect water use in our upstream supply chain. As a result, we
will increase the number of our priority basins to prioritise action. We
will also better leverage our brands to deliver on our goals and
increase our focus on engaging with governments to encourage
progressive climate and water policy and investments. Our ambitious
action on water will help to ensure our sites, supply chains and
communities build resiliency in a changing climate.
Water efficiency
Target by 2030
Reduce water use in our
operations with a 40%
improvement in water use
efficiency in water-stressed areas
Percentage change in water
efficiency index from the prior
year – in water-stressed areas
(6.2)%Δ
100.0%
(16.1)%
83.9%
(5.2)%
78.7%
60.0%
(6.2)%
Fiscal 20
baseline
Fiscal 21-23
change
Fiscal 23
cumulative
Fiscal 24
change
Fiscal 24
cumulative
Fiscal 30
target
Target by 2030
Reduce water use in our
operations with a 30%
improvement across the
company
Percentage change in water
efficiency index from the prior
year – across the company
(3.7)%Δ
100.0%
(12.3)%
87.7%
(3.3)%
84.4%
70.0%
(3.7)%
Fiscal 20
baseline
Fiscal 21-23
change
Fiscal 23
cumulative
Fiscal 24
change
Fiscal 24
cumulative
Fiscal 30
target
Following a detailed review of our water use efficiency methodology in
fiscal 23, we adopted an enhanced measurement methodology – the
water efficiency index. This shows the aggregated change in water use
efficiency across our production processes (brewing/packaging and
distilling) weighted by their water use. Brewing/packaging do not require
maturation; the process occurs closer to the sale of our products. However,
distillation can occur years before a product is packaged and sold.
Therefore, efficiency in brewing/packaging is measured against the litres
of product packaged, while distillation efficiency is measured against the
litres of pure alcohol (LPA) produced, addressing the maturation period.
This year, we used 29,820 m3 of water for agricultural purposes on land
under our operational control in Mexico and Türkiye. We report this
separately from water used in our direct operations and do not include it in
our water efficiency calculations. More detail can be found in our Reporting
boundaries and methodologies section on pages 238-257. Our focus on
water-stressed areas has continued to deliver strong water use
efficiency performance with a 6.2% improvement versus fiscal 23 and
21.3% improvement since our fiscal 20 baseline. This was primarily
driven by the continuous improvement initiatives at our sites in East
Africa, where we further optimised our water recovery plants.
Diageo Annual Report 2024
67
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Our performance across the company on water use efficiency has
improved by 3.7% in comparison to the previous year and by 15.6%
since our fiscal 20 baseline(1). We also delivered efficiency improvements
in our Scottish sites, resulting from better performance of the reverse
osmosis plant at our Cameronbridge site.
Four years into our action plan, we are ahead of our water use efficiency
commitments, both globally and in water-stressed areas. Our efforts to
date have been primarily focused on more established production
regions with higher exposure to water-stress, like Africa and India.
Future, planned divestments in areas where we have already made
strong progress, for example Guinness Nigeria, may result in a slowed
progress versus our baseline, however, we will continue to drive
improvements at remaining sites and will take further action at our sites
in Latin America, which have seen significant expansion.
As we continue to install or increase the capacity of water recovery
technologies across our sites, the volume of water recovered and
recycled from water-stressed areas reached 890,476 m3 in fiscal 24 –
equivalent to 17% of total water used in water-stressed areas.
Innovation and new technologies are critical to meeting our water use
efficiency targets. We are partnering with Diageo Sustainable Solutions
(DSS) to find, test and embed the new technologies into our roadmaps.
In fiscal 24, we launched a DSS innovation round addressing five
different water challenges, including water use efficiency and
maximising the value of wastewater streams. We are concluding our
4T2 Sensor pilot at our Leven site, optimising water use associated with
clean-in-place systems through sensor technology. We are now
planning a scale adoption of this technology across other sites.
(1) Under the previous water efficiency methodology, water use efficiency per litre of product
packaged (litres/litre) - across the company was 4.1Δ, measured in litres of water per litre
of product packaged (litres/litre). The percentage change in litres of water used per litre
of product packaged from the prior year - across the company was a 2.8%Δ
improvement compared to fiscal 23 and 11.2% improvement compared to our fiscal 20
baseline. Water use efficiency per litre of product packaged (litres/litre) – water-stressed
areas was 3.2Δ, measured in litres of water per litre of product packaged (litres/litre). The
percentage change in litres of water used per litre of product packaged from the prior
year – water-stressed areas was a 6.6%Δ improvement compared to fiscal 23. Under the
new methodology, the water efficiency index – across the company was 84.4Δ and the
water efficiency index – water-stressed areas was 78.7Δ in fiscal 24.
Water replenishment
Target by 2026
Replenish more water than
we use for operations in
water-stressed areas
Cumulative change in
volumetric replenishment
capacity of projects developed
from fiscal 16 to fiscal 24
70%
100.0%
n 2026 Target
100 %
n 2023 progress to date
71.5%
n 2024 progress to date
70.0%
Our water replenishment programme continues to deliver positive results,
with another strong year delivering local water projects. We are on track to
reach our 2026 target of replenishing more water than we use for our
operations in water-stressed areas. In fiscal 24, we implemented projects
that have the annual volumetric replenishment capacity of 1,230,000 m3Δ
of water. Despite the cumulative progress against this target, the year on
year performance can vary because of the multiple projects and
performance changes. Cumulatively (fiscal 16 to fiscal 24) we have
replenished 70% of our estimated fiscal 26 volume.
Overall, in fiscal 24, we completed 30 replenishment projects in 10
countries, cumulatively implementing over 120 projects between fiscal 21
and fiscal 24. In Jalisco, Mexico, we were proud to partner with the local
authority to invest in a significant wastewater treatment plant, which will
also redirect treated water to be used by local farms – delivering both
water quality and water availability benefits to the catchment. In Kenya, we
completed nine clean water and sanitation projects in schools and villages
in our supply chain, as part of our replenishment programme. In Türkiye,
we continued to progress our irrigation improvement project with our
grape farmers, increasing the number of hectares of vineyards. Where
appropriate, we implemented nature-based solutions which this year
included reforestation in Kenya and infiltration in India.
An important part of our approach on water is that it remains people-centric.
We have committed to providing access to clean water, sanitation and
hygiene (WASH) in water-stressed communities near our sites and in water-
stressed areas that supply our raw materials. In fiscal 23, we reached our
2030 target, meaning all nine of the markets included in our target invested
in WASH projects since 2020. We will maintain this commitment, investing
every year to 2030. For more information, refer to our ESG Reporting Index.
(Δ) Within PricewaterhouseCoopers LLP’s (PwC’s) independent limited assurance scope –
see pages 258-261 of this Annual Report. For Reporting boundaries and
methodologies, see pages 238-257
Water collective action
Target by 2030
Engage in collective action in all
priority water basins to improve
water accessibility, availability
and quality and contribute to
net positive water impact
Percentage of priority water
basins with collective action
participation
67%
12
n 2030 Target
12
n 2023 progress to date
6
n 2024 progress to date
8
Recognising that businesses need to partner with others to build
climate resilience and ensure continuity of operations, our collective
action programme embraces a collaborative approach towards water
stewardship in our 12 priority water-stressed basins across 10 countries.
The collective action programme involves multi-stakeholder
partnerships including other companies, NGOs, public sector
organisations and communities. Together these partnership initiatives
aim to pool knowledge, expertise and resources to identify and
implement solutions to address shared water challenges.
In fiscal 24, through our partnership with The Nature Conservancy, we
started two more collective action initiatives; one with WaterAid under
the Lagos Aqua Initiative in Nigeria’s Ogun basin to transform WASH
services in Lagos; and another in the Gediz basin in Türkiye for
conservation of water resources and enhanced fertiliser management.
We were named the basin champion for two more basins in fiscal 24 – the
Santiago Lerma River Basin in Mexico and the Upper Godavari River Basin
in India. This is in addition to being basin champion for Kenya’s Upper Tana
Basin. As basin champion, Diageo commits to providing overall leadership
on efforts to rejuvenate selected basins. This is a strong reflection of Diageo’s
commitment to addressing shared water challenges and acknowledges
that our efforts can only be successful when approached collectively.
Advocacy
Water is under pressure around the world, and the issues around preserving
it are challenging and complex. It will take multilateral action to address the
challenge of the water, climate and nature crisis. At COP28, we were
among businesses calling for more action on water and climate resilience.
We also attended the UN SDG Summit in New York and World Water
Week in Stockholm to share our ambition and learnings, and advocate for
more companies and partners to scale up collaboration. We are members
of leading international organisations such as the Water Resilience Coalition,
Alliance for Water Stewardship and we have strategic partnerships with
WaterAid and The Nature Conservancy that support this call to action.
PIONEER GRA IN-TO-GLASS SUSTAINABILITY continued
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Diageo Annual Report 2024
GHG emission
targets set for
2015, 2007
baseline
‘Spirit of Progress’ targets
set for 2030 + 2050
Absolute reduction
SCOPE 1+2: (50)%
SCOPES 1-3: (30)%
2007 baseline
2008
2015
2020
Published
Diageo Net
Zero Carbon
Strategy
2024
2030
2050
Our carbon commitment and learnings
We are committed to accelerating towards a low-carbon future and
following a science-based approach to drive the pace and scale of
change required. Our targets to achieve net zero emissions(1)
demonstrate our commitment to mitigating our impact on climate
change. To achieve this goal, we have developed decarbonisation
roadmaps detailing the measures we are taking and will take to
reduce emissions and ensuring that new sites are developed with low
emission technologies embedded from the outset. Across our supply
chain we are clear on the decarbonisation levers that we control and
the solutions that require collaboration with others to progress.
We acknowledge that realising this scale of transformation will require
partnering for systemic change and delivering decarbonisation
solutions in areas outside our direct control. Not all of our suppliers
and partners are at the same stage of the net zero journey, nor is the
necessary external infrastructure always available at scale.
We recognise that policy frameworks and market signals are not
always incentivising the necessary pace of change across all markets
in which we operate. We are focusing on the areas where we can
affect the biggest positive impacts across our value chain, partnering
with others and advocating for change to unlock some of the external
challenges we face. The pathway that we are pursuing, for the critical
enablers that will be required to deliver against it, is outlined below.
Our risk assessment and scenario analysis inform us that consumer
behaviour is an important transition risk and companies that do not
decarbonise their operations will suffer, as consumers continue to
demand more sustainable products. Decarbonisation requires
investment and partnership by working with suppliers to innovate in
low-carbon manufacturing techniques.
Our pathway to net zero(1)
Our approach to delivery
Scope 1 (6%)(2)
Scope 2 (0.1%)(2)
Scope 3 (94%)(2)
1. Embedding energy efficiency into our
processes.
2. Progressing to 100% renewable
electricity, fuel and heat.
3. Renewable energy certificates,
innovations, partnerships and carbon
removals to close the gap(1).
1. Continue to switch to renewable
electricity.
2. Create additional renewable energy
capacity to power our sites, exporting
surplus energy to the local grid,
through on-site developments and
using power purchase agreements.
For Scope 3 greenhouse gas emissions, we will shift our
focus to delivering triple wins through a refreshed strategy
focusing on three pillars of engagement, prioritising our
level of engagement and investment to where we have the
greatest level of control and in those areas that are most
critical to our license to operate. These three workstreams
include 1) Diageo enabled projects, 2) Strategic innovation
and 3) Selective engagement (collaborative action).
Enabled by scalable technology and process innovations and transformational partnerships to decarbonise the end-to-end supply chain.
(1)
Net zero emissions are reached when anthropogenic (i.e. human-caused) emissions of greenhouse gases into the atmosphere are balanced by anthropogenic removals over a
specified period. A science-based approach to net zero covers emission scope 1, 2 and 3 with direct abatement of approximately 90% from our emissions baseline and up to 10% of
high-quality certified carbon offsets to neutralise hard-to-abate residual emissions to close the gap to zero.
(2) This is an estimate based on current management expectations; the underlying assumptions and future developments may change over time, which would cause changes to management
expectations and this information. See pages 62-66 for more about the potential impact of climate change on Diageo and our current plans to manage and mitigate risks.
(3) ‘Carbon-neutral’ or ‘carbon neutrality’ refers to an outcome where GHG emissions have been neutralised through a combination of emissions reductions efforts and the purchase of
carbon offsets/credits resulting in no net release of carbon dioxide. Any carbon offset purchases for discrete carbon neutral claims are specifically for certification and are not included
in annually reported Diageo greenhouse gas emission footprint.
(4) Four carbon-neutral facilities have been assessed and certified using PAS 2060 – Carbon Neutrality Standard and Certification (Scope 1 and 2, Direct Operations boundary). We also
require site emissions be reduced in alignment with an equivalent net zero trajectory, allowing less than 5-10% of residual emissions to be neutralised via the purchase of carbon offsets.
Any purchased carbon offsets for these specific carbon neutral claims are not applied to fiscal 24 reported greenhouse gas emissions.
Diageo Annual Report 2024
69
GHG emission
targets set for 2020,
2007 baseline
Science-Based Target Initiative
approves near-term targets (2021)
RE100 50%
renewable electricity
sourcing by 2025
NEAR-TERM TARGETS
RE100 Direct Operations
100% renewable
electricity sourcing
Absolute Reduction
SCOPE 1: net zero
SCOPE 2: net zero
SCOPE 3: (50)%
2020 baseline
LONG-TERM TARGETS
Net zero across total
value chain
(all emission scopes)
Absolute Reduction
SCOPE 1: net zero
SCOPE 2: net zero
SCOPE 3: net zero
2020 baseline
Packaging
initiatives
lower Scope
3 emissions
Diageo joins Race
to Zero Campaign
Diageo announces
first carbon-neutral(3)
distilleries(4)
Diageo joins RE100
commitment
Partnership
with Encirc to
produce net zero
glass bottles
Biomass and solar
investment across
East Africa
Continuation of direct operations
Scope 1 and 2 GHG emission reduction
plans (see approach below)
Continuation of Supply Chain Scope 3 greenhouse gas emission
reduction plans (see approach below)
Achieved (33)%
reduction in Scope
1+2 emissions
First scotch
bioenergy plants
using distillery
co-products in
the world
Achieved 2020 targets
- SCOPE 1+2: (50)%
- SCOPES 1-3: (33)%
€100m investment to decarbonise
St. James’s Gate brewery announced
Investment to increase biomass, biogas
& biofuel use across Scotch sites
Scale up of brands in EcoSPIRITS
circular packaging EcoTOTE format
S T R A T E G I C R E P O R T
G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Emissions from our direct operations
Target by 2030
Become net zero carbon in
our direct operations (Scope 1
and 2)
Percentage change in
absolute greenhouse gas
emissions (direct and indirect
greenhouse gas emissions by
weight (market/net based))
from the prior year
(10.7)%Δ
100.0%
(14.7)%
85.3%
(9.1)%
76.2%
Net zero
(10.7)%
Fiscal 20
baseline
Fiscal 21-23
change
Fiscal 23
cumulative
Fiscal 24
change
Fiscal 24
cumulative
Fiscal 30
target
In fiscal 24, we decreased greenhouse gas emissions from our
direct operations by a further 10.7%, continuing our year-on-year
reduction towards our 2030 target. Investing in renewable energy
across our global footprint has enabled us to reduce our emissions,
despite production increases in brewed and distilled volumes across
several markets.
This year, our performance has benefitted from increased biomass use
at our existing bioenergy plants in Mexico, East Africa and Scotland
and further roll out of liquid biofuel at a number of scotch distillery and
malting sites. We continue to use renewable natural gas in Canada
and Scotland, where we directly contribute Diageo distillery co-product
feedstock to generate our green gas certificates. We also reopened
our iconic Port Ellen Scotch whisky distillery, operating on renewable
fuel and electricity, with a carbon-neutral commitment.(1)
Across our other sites, we have been converting fossil fuel energy use
to zero carbon renewable electricity. Several incremental projects at
our packaging sites are expected to deliver their first full year of
benefit in fiscal 25, with the switching of our Runcorn beer packaging
site natural gas combined heat and power plant to imported
renewable electricity through the grid.
Our continued reduction of greenhouse gas emissions has driven a
cumulative saving of 23.8% in greenhouse gas emissions versus our
fiscal 20 baseline. We have delivered these savings through
investment in new and existing bioenergy plants in East Africa,
Scotland, India and Mexico, where we have replaced fossil fuel use
with liquid biofuel. We have also switched to renewable natural gas in
Canada and Scotland.
We source renewable electricity in sites such as Africa and LAC
that has helped us reduce our Scope 2 emissions from our fiscal
20 baseline.
We are rolling out innovative and proven technologies at our sites,
guided by mature decarbonisation roadmaps and detailed capital
investment plans. We are making progress on reducing our direct
operations emissions, with our planned rate of reduction increasing
as we approach 2030, through the optimisation of energy use and
conversion to renewable energy sources.
For more information on our use of renewable energy, please refer to
our ESG Reporting Index.
(1)
We assess and certify sites using PAS 2060 – Carbon Neutrality Standard and
Certification (Scope 1 and 2, direct operations boundary). We also require that site
emissions be reduced in alignment with an equivalent net zero trajectory, allowing
less than 5-10% of residual emissions to be neutralised using the purchase of carbon
offsets. Any purchased carbon offsets for these specific carbon neutral claims are not
applied to fiscal 24 reported greenhouse gas emissions.
Total direct and indirect greenhouse gas
emissions by region by year
Total direct and indirect greenhouse gas emissions by weight (market/net
based) (1,000 tonnes CO2e)
Region
2020
2021
2022
2023
2024
North America
127
125
100
83
86
Europe
152
129
145
195
179
Asia Pacific
32
10
10
9
7
Latin America and
Caribbean
22
27
38
25
9
Africa
137
154
132
89
77
Diageo (total)
470
445
424
401
358Δ
Streamlined Energy and Carbon Reporting (SECR)
2020
2021
2022
2023
2024
Total Global energy consumption (MWh)
3,310,508 3,396,078 3,560,231 3,502,997 3,459,068
Market based (net) intensity ratio of GHG emissions
(g CO2e per litre of packaged product)
139
122
105
105
96Δ
Total UK energy consumption (MWh)
1,056,931 1,064,795 1,091,153 1,244,375 1,247,734
Direct (MWh)
924,022
927,917
951,302 1,097,353 1,092,867
Indirect (MWh)
132,910
136,878
139,851
147,021
154,867
Total UK direct and indirect GHG emissions (kt CO2e)
86
71
84
136
121
Scope 1
86
71
84
136
121
Scope 2
0
0
0
0
0
(Δ) Within PricewaterhouseCoopers LLP’s (PwC’s) independent limited assurance scope – see pages 258-261 of this Annual Report. For Reporting boundaries and methodologies, see pages
238-257.
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Diageo Annual Report 2024
Emissions from across our value chain
Target by 2030
Reduce our value chain
(Scope 3) carbon emissions
by 50%
Percentage change in
absolute greenhouse gas
emissions (ktCO2e) from the
prior year
(5.0)%
100.0%
19.5%
119.5%
(6.0)%
113.5%
50.0%
(5.0)%
Fiscal 20
baseline
Fiscal 21-23
change
Fiscal 23
cumulative
Fiscal 24
change
Fiscal 24
cumulative
Fiscal 30
target
Our value chain (Scope 3 greenhouse gas emissions) target is to achieve
an absolute reduction of 50% by 2030 (and 100% by 2050) compared to
our fiscal 20 baseline. Compared to fiscal 23, our Scope 3 greenhouse gas
emissions were reduced by 5%, a significant improvement on the previous
year. Scope 3 performance depends on many internal and external
factors. In the current year, the improvement has been driven primarily by
resource efficiency, improved inventory management, fluctuating demand
and logistics and distribution optimisation, partially offset by increased
emissions capital expenditure associated with our grain-to-glass
sustainability strategy.
Despite a positive performance in fiscal 24, we are still showing
an increase of 13.5% compared to our fiscal 20 baseline, a year
impacted by Covid-19, resulting in artificially low Scope 3 emissions.
Performance since then has been impacted as a result of business
growth and also a reflection of the challenge of reducing emissions
across the value chain.
We recognise that external factors can help or hinder our intended
progress. We are improving and refining our decarbonisation
roadmap as we learn, leading to increased engagement and
planning with key partners along our supply chain to address some
of these opportunities and challenges. However, there are still many
hurdles to overcome as outlined above in our pathway to net zero.
In fiscal 25, we will evolve our Science Based Targets Initiative (SBTi) targets
by disaggregating our Forest, Land and Agriculture (FLAG) emissions for
separate reporting where appropriate. As a first step, we are further
analysing all categories of material emissions in our value chain to reflect
the changes in our business since we first set SBTi targets. These steps,
together with enhancements to our decarbonisation roadmap, will provide
clearer direction for our business and our partners.
Moving towards regenerative agricultural sourcing
Businesses have a shared interest in helping to restore the natural resources
on which we all depend. We are committed to making our agricultural
supply chains economically, socially and environmentally sustainable.
Regenerative agriculture programmes
Target by 2030
Develop regenerative
agriculture programmes in
five key sourcing landscapes
Number of regenerative
agriculture programmes
initiated
3
5
n 2030 Target
5
n 2023 progress to date
1
n 2024 progress to date
4
In fiscal 24, we progressed our ambition to help farmers test
regenerative agriculture across some of our key ingredients including
barley, wheat and agave. Whilst these early stage programmes are
important, we recognise the challenges facing regenerative
agriculture. These can only be addressed through mobilising increased
collective action, simplifying the ask of our suppliers and designing
shared transition plans.
We launched three new regenerative agriculture programmes in the
fiscal, with two in key geographies.
For the Scotch programme, 20 farms across three regions are
participating and engaging with partners to reduce their carbon
footprint and inform future agronomic improvements. Through our
partnership with James Hutton Institute, we commissioned research
trials on cover crops and seed mixes to analyse their ability to improve
the soil. We have also looked at how to best integrate cover crops and
seed mixing into rotations to reduce fertiliser application.
Our tequila regenerative agriculture programme has focused on
delivering a robust baseline and agronomic assessment across 19 of
our most strategic agave suppliers and on our own Don Julio agave
farm. The results provided insights on how to decarbonise existing
practices and improve nutrient management. We have set up a
demonstration area on our farm to conduct improvement trials for
engagement with our suppliers.
We entered the second year of the Guinness barley regenerative
programme in Ireland. Through our collaboration with Agricarbon, our
soil carbon measurement partner, on-the-ground field measurements
have been used to establish a baseline which will act as a reference as
we continue to identify additional levers to increase soil carbon stocks.
Making packaging more sustainable
We continue to respond proactively to legislation and consumer
demand for sustainable products. We are committed to reducing our
value chain carbon footprint by reducing packaging weight,
increasing our recycled content, reducing single use packaging and
deploying and scaling circular business models.
Many consumers want to transition to sustainable products but, in practice,
experience barriers to being able to do so. To address these barriers, we
are focused on value, desirability and delivering sustainable objectives.
Aligning with our customers is critical to making progress alongside
consumers. In anticipation of future trends, we are piloting a number of test
and learn initiatives including circular business models.
We are leveraging Diageo-enabled initiatives and partnerships and
supplier programmes. For example, we have partnered with
ecoSPIRITS to pilot the use of refillable spirits packaging (ecoTOTES) in
the on-trade across 18 markets over the next three years. Each
refillable container is designed to be used up to 150 times and aims to
eliminate up to 1,000 single-use bottles over their lifespan.
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F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Other examples of how we are reducing our packaging footprint in
fiscal 24 include:
• We launched our Baileys aluminium bottle in selected international
airports. The new aluminium bottle is five times lighter than the
traditional 70cl Baileys bottles, with an anticipated 44% reduction in
carbon versus the current glass bottle.
• We rationalised select sizes of our glass beer bottle portfolio and
launched our lightweight design, saving 3,000 tonnes of glass per
annum.
• We redesigned our Johnnie Walker Blue Label range, reducing
weight across the portfolio of sizes and contributing to the overall
weight saving of 170 kilotonnes of glass purchased in the year.
Reducing packaging weight and increasing
recycled content
Target by 2030
Continue our work to reduce
total packaging and increase
recycled content in our
packaging (delivering a 10%
reduction in packaging
weight and increasing the
percentage of recycled
content in our packaging to
60%)
Percentage change of total
packaging (by weight) in
fiscal 24
(14)%
100%
15%
115%
(16)%
99%
90%
(14)%
Fiscal 20
baseline
Fiscal 21-23
change
Fiscal 23
cumulative
Fiscal 24
change
Fiscal 24
cumulative
Fiscal 30
target
In fiscal 24, we continued to focus our efforts across our core portfolio
and we reduced our packaging weight by 14%, in comparison to fiscal
23. This is 1% below our 2020 baseline, despite increased production
volumes from fiscal 20 to fiscal 24.
We have made significant progress in fiscal 24, with some pivotal shifts
across our beer and ready to drink portfolios, transitioning targeted
products to aluminium cans and saving 2,000 tonnes of glass per
annum. Our ambition to eliminate cartons, wherever reasonably
possible, has resulted in the elimination of 9 million cartons across our
tequila portfolio – in particular, across our Don Julio range – reducing
our packaging weight by 591 tonnes.
Change in percentage of recycled content (by
weight) in fiscal 24
3%
60%
n 2030 Target
60%
n 2023 progress to date
39%
n 2024 progress to date
42%
In fiscal 24, our recycled content totalled 42%. For glass, we increased
recycled content in our Cîroc portfolio to 26% and across our green glass,
we continue to push towards 95%. We are working across our brands to
obtain technical approvals of higher recycled content in our packaging
and we continue to partner with suppliers and industry bodies.
We continue to trial increased recycled content in glass and while
access to quality cullet remains a challenge in the industry, we are
confident that we can adapt to the required changes and are already
implementing higher recycled content across some of our brands, in
both green and amber glass. Diageo remains committed to identifying
collaborations and finding solutions to support improvements to
infrastructure and availability of material. In North America, we
launched the ‘Don’t Trash Glass’ initiative during fiscal 23, a
partnership with the Glass Packaging Institute and Glass King, to
improve glass recycling rates. During its first year, the programme
collected over 900 tonnes of glass and is now expanding into
additional states.
For more information on rPET (recycled polyethylene terephthalate) in our
plastic packaging, recyclability of our packaging and waste reduction
efforts, refer to our ESG Reporting Index.
PIONEER GRA IN-TO-GLASS SUSTAINABILITY continued
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How we have reported consistently with the recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD)
In this year's disclosures, we have complied with the FCA's Listing Rule 9.8.6(R). Our climate-related financial disclosures are considered to be
consistent with the TCFD's recommendations and recommended disclosures, as illustrated in the index below.
TCFD recommendation
Consistency
GOVERNANCE See page 61
a. Describe the board’s oversight of climate-related risks and opportunities.
Yes. See page 61.
b. Describe management’s role in assessing and managing climate-related
risks and opportunities.
RISK MANAGEMENT See pages 62-66
a. Describe the organisation’s processes for identifying and assessing climate-
related risks.
Yes. See pages 62-66. Having completed comprehensive risk
assessments our focus is now on ensuring appropriate
adaptation plans are in place for all risks identified.
b. Describe the organisation’s processes for managing climate-related risks.
c. Describe how processes for identifying, assessing and managing climate-
related risks are integrated into the organisation’s overall risk management.
STRATEGY See pages 67-72
a. Describe the climate-related risks and opportunities the organisation has
identified over the short-, medium-, and long-term.
We have described risks and opportunities for our business, in all
of our owned, operating locations and our most important third-
party operations, as well as the impact of those risks and
opportunities on our strategy. We have modelled the resilience
of our strategy under three climate-related scenarios. See pages
239-241. We have co-developed a scenario analysis tool with
climate experts to enable regular updates to our scenario
analyses.
b. Describe the impact of climate-related risks and opportunities on the
organisation’s businesses, strategy and financial planning.
c. Describe the resilience of the organisation’s strategy, taking into
consideration different climate-related scenarios, including a 2°C or lower
scenario.
METRICS & TARGETS See pages 67-72
a. Disclose the metrics used by the organisation to assess climate-related risks
and opportunities in line with its strategy and risk management process.
Yes. See pages 67-72.
b. Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 greenhouse gas
(GHG) emissions and the related risks.
Yes for Scope 1 and 2. See page 70. We are working with global
GHG accounting bodies and our suppliers to get more detailed
Scope 3 data. As we refine our value chain data, we can be
more specific about our GHG footprint.
c. Describe the targets used by the organisation to manage climate-related
risks and opportunities and performance against targets.
Yes. See pages 67-72.
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G O V E R N A N C E R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Our ESG reporting approach
Reporting transparently on the ESG issues that affect our business, and that our business creates, plays a vital role in delivering our strategy. It helps
us to manage ESG risks, take opportunities and promote sustainable development everywhere we live, work, source and sell.
Our ESG reporting suite aims to provide comprehensive and comparable disclosures for a broad range of stakeholders. As well as publishing our
integrated Annual Report and ESG Reporting Index each year, we also submit non-financial information to benchmarking and index organisations,
including those listed on the Awards and ranking page of our website.
The non-financial reporting space is evolving quickly. We are committed to continually evaluating and improving our approach and to actively
tracking emerging ESG regulation, frameworks and good practice. Since launching our ‘Spirit of Progress’ ESG action plan, we have set out to help
create a more inclusive and sustainable world, creating a positive impact in our company, and for our society.
How we report to our stakeholders – our reporting suite
Annual Report Where we present our
most material disclosures and describe how
our strategy delivers value for our business
and other stakeholders. The performance of
non-financial KPIs are integrated into the
relevant focus area sections. The document
also includes detailed non-financial
reporting boundaries and methodologies.
Diageo.com Where, through the ‘Spirit of
Progress‘ section, we give more details of
our approach and performance, with
examples of our strategy in action.
ESG Reporting Index Where we provide
additional disclosures in line with the GRI
(Global Reporting Initiative) Standards, UNGC
advanced reporting criteria index and our
response to the Sustainability Accounting
Standards Board (SASB).
Who are our stakeholders? Everyone who is affected by our business, and everyone who affects it, is a stakeholder. A detailed description of our
stakeholder engagement process is on pages 100-105 of this Annual Report.
This non-financial and sustainability information statement provided on pages 75-76 provides an overview of topics and related reporting
references in our external reporting as required by sections 414CA and 414CB of the Companies Act 2006.
OUR ESG REPORTING APPROACH
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Diageo Annual Report 2024
Non-financial and sustainability information statement
Environmental matters
1(a) environmental matters
(including the impact of the
company’s business on the
environment)
‘Spirit of
Progress‘
• Global Environment Policy(1)
• Sustainable Agriculture Guidelines(1)
• Sustainable Packaging Commitments(1)
• Partnering with Suppliers Standard(1)
• Deforestation Guidelines(4)
• Water Stewardship Strategy(4)
• Net Zero Carbon Strategy(4)
• Reinventing Packaging Strategy(4)
• Diageo Water Collective Action Implementation
Guide(4)
p.48-50
Pioneer grain-
to-glass
sustainability
p.61-73
Our people
1(b) the company’s employees
Our people
and culture
• Talent and diverse
workforce
• Culture
• Gender and ethnic
diversity
• Inclusive hospitality
industry and communities
• Progressive marketing
• Diverse suppliers
• Code of Business Conduct(2)
• Great Britain / Scotland and Republic of Ireland
Gender Pay Gap Report 2023(4)
• Global Human Rights Policy(1)
• Directors' Remuneration Policy(4)
p.55-56
Champion
inclusion and
diversity
Health and
safety
• Embedding culture of
health and safety
• Global Health, Safety and Wellbeing Policy(1)
p.57-58
1(c) social matters
‘Spirit of
Progress‘
p.48-50
Promote
positive
drinking
• Tackling underage
drinking
• Changing attitude to drink
driving
• Make moderation
aspirational
• Marketing in a responsible
way
• Global Marketing and Digital Marketing Policy(1)
• Global Employee Alcohol Policy(1)
p.51-52
Human rights
1(d) respect for human rights
Human rights
• Standing up for human
rights
• Global Human Rights Policy(1)
• Modern Slavery Statement(3)
• Global Brand Promoter Standard(1)
• Privacy Policy(1)
p.53-54
Anti-bribery and corruption
1(e) anti-corruption and anti-bribery
matters
Doing
business the
right way
• Code of Business Conduct(1)
• Privacy Policy(1)
• Global Tax Policy(1)
• Global Information Management and Security
Policy(4)
p.53-54
Business model
2(a) a brief description of the
company’s business model
Diageo's
business
model
• Strategic Report
• Business integrity
• Assessing risk
• Engaging stakeholders
p.12-23
Reporting requirement as per
Companies Act 2006 414CA and 414CB
Focus area
Read more in Diageo's reports
Relevant policies, standards or documents
Page
reference
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F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Risk management
2(d) a description of the principal
risks relating to the matters
mentioned in subsection
Our principal
risks and risk
management
• Effective risk management
• Principal risks
• Global Quality Policy(1)
• Business Continuity Management Standard(4)
• Risk Management Standard(4)
p.77-85
Viability
statement
• Viability statement
p.86
Non-financial performance
2(e) a description of the non-
financial key performance
indicators relevant to the
company’s business
Our
performance:
monitoring
performance
and progress
• Our performance
• ‘Spirit of Progress’
p.26-27
Climate-related financial disclosures as required by sections 414CA and 414CB of the Companies Act 2006
(a) description of the company’s
governance arrangements in
relation to assessing and
managing climate-related risks and
opportunities;
Pioneer grain-
to-glass
sustainability
• Identifying climate risks
and opportunities
• Governance
See above under Environmental matters
p.61
(b) a description of how the
company identifies, assesses, and
manages climate-related risks and
opportunities;
• Identifying climate risks
and opportunities
p.62-67
(c) a description of how processes
for identifying, assessing, and
managing climate-related risks are
integrated into the company’s
overall risk management process;
• Our principal risk and risk
management
• Identifying climate risks
and opportunities
p.78-85
p.62-67
(d) a description of— (i) the
principal climate-related risks and
opportunities arising in connection
with the company’s operations,
and
• Our principal risk and risk
management
• Identifying climate risks
and opportunities
p.78-85
p.62-67
(d) a description of—(ii) the time
periods by reference to which those
risks and opportunities are
assessed;
• Identifying climate risks
and opportunities
• Quantitative impact of
transitions risks and
opportunities
• Our pathway to net zero
p.62-67
(e) a description of the actual and
potential impacts of the principal
climate-related risks and
opportunities on the company’s
business model and strategy;
• Identifying climate risks
and opportunities
• Identifying and assessing
our transitions risks and
opportunities
p.62-67
(f) an analysis of the resilience of
the company’s business model and
strategy, taking into consideration
different climate-related scenarios;
• Climate change resilience
• Viability statement
• Scenario analysis of
physical risks
p.61-67
and p.86
(g) a description of the targets used
by the company to manage
climate-related risks and to realise
climate-related opportunities and
of performance against those
targets; and
• Our strategy for grain-to-
glass sustainability
p.67-72
(h) a description of the key
performance indicators used to
assess progress against targets
used to manage climate-related
risks and realise climate-related
opportunities and of the
calculations on which those key
performance indicators are based
• Our strategy for grain-to-
glass sustainability
p.67-72
Reporting requirement as per
Companies Act 2006 414CA and 414CB
Focus area
Read more in Diageo's reports
Relevant policies, standards or documents
Page
reference
(1)
https://www.diageo.com/en/our-business/corporate-governance/code-of-business-conduct/policies-and-standards
(2)
https://www.diageo.com/en/our-business/corporate-governance/code-of-business-conduct
(3)
https://www.diageo.com/en/esg/doing-business-the-right-way/modern-slavery-statement
(4)
Externally published documents on different subsites
OUR ESG REPORTING APPROACH continued
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Diageo Annual Report 2024
Effective risk
management
Well-managed risk-taking lies at the heart of
our Growth Ambition. Effective risk
management drives better commercial
decisions, protects our assets and supports a
growing, resilient and sustainable business.
Our approach
We believe that effective risk management starts with the right
conversations to drive better business decisions. We identify and
embed mitigating actions for material risks that could impact our
current or future performance, and/or our reputation. Our risk
management efforts aim to be holistic and integrated, bringing
together risk management, internal controls and business integrity,
ensuring that our activities focus on the risks that could have the
greatest impact. We have recently reviewed and refreshed our
principal risks and our risk appetite. Our approach is also structured to
ensure that we take all reasonable steps to mitigate, but not
necessarily eliminate, our principal risks in this context.
Accountability for managing risk is embedded into our management
structures, an annual risk assessment establishes mitigation plans and
monitors risk on a continual basis.
Risk is regularly assessed through the biannual Audit and Risk
Committee (ARC) and our quarterly Risk and Controls (R&C) Steering
Committee, a subgroup of ARC. The R&C Steering Committee
provides oversight, guidance and co-ordination to key risks. The ARC
has a holistic view of all key internal control and risk management
activity, including risk management of fraud; the audit and risk
programme; and business conduct and ethics. Both committees
receive regular reports on the principal risks and the effectiveness of
the actions taken to mitigate these risks. The Audit Committee, acting
for the Board, independently reviews the risk assessments and reports.
We use internal and external data to monitor our principal risks and to
make proactive interventions. We also establish cross-functional
working groups and use expert advice where necessary to ensure
principal risks are effectively managed and, where appropriate,
escalated to the R&C Steering Committee, ARC and Audit Committee
for consideration.
Further details about our risk management approach are described
in the Corporate Governance report on page 99 and in the Audit
Committee report on pages 112 - 118.
Our principal risks
The Audit Committee considers principal risks to be the most
significant risks faced by the group, including those that are the most
material to our performance and that could threaten our business
model or future long-term performance, solvency or liquidity. They do
not comprise all the risks associated with our business and are not set
out in priority order. Additional risks not known to management, or
currently deemed to be less significant, may also have an adverse
effect on the business. Our principal risks are considered over a three-
to five-year timescale and we give consideration to risk velocity (how
quickly the risk could materialise) to ensure appropriate mitigating
actions are taken.
Risk appetite
The ARC and the Audit Committee have defined the group’s risk
appetite across our risk categories (Strategic, Financial, Operational
and Regulatory). A three-point risk appetite scale (Averse, Cautious
and Open) and appetite ratings have been applied, using both
quantitative and qualitative criteria that align to the delivery of our
Growth Ambition. This category-led approach enables practical
application of risk appetite thresholds to all principal risks, which
informs the level of mitigation required. Examples of risks for which we
have an averse appetite include those that could: harm our people;
impact product quality; cause us to market irresponsibly or act without
integrity; and be non-compliant with laws and regulations, including
those relating to financial reporting.
Risks that can be partially mitigated through insurance are also
identified and evaluated. We purchase insurance for the most critical
areas or where there is a legal requirement, seeking a balance
between retained risk and risk transfer.
Emerging risks
The ARC and Audit Committee formally review emerging risks. Our
Strategy and Controls, Audit and Risk Excellence teams undertake
horizon-scanning to monitor any potential disruptions that could
dramatically change our industry and/or our business, from both a
risk and opportunity perspective, for the Executive Committee to
understand the changing landscape and take appropriate actions.
We consider Artificial Intelligence (AI) to be a potential emerging risk,
or risk driver for our principal risks, and we are currently developing
our AI governance approach to ensure the right balance between
opportunity and risk. We are also seeing additional emerging
risk areas within existing principal risks, such as the increasing
significance of third-party risks in areas, for example in cyber and
data privacy; continuing changes in consumer demand and pervasive
geopolitical tensions.
New principal risk
Last year we introduced a new emerging risk relating to our multi-year
transformation programme. This year we are including this as a new
principal risk.
OUR PRINCIPAL RISKS AND RISK M ANAGEM ENT
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ADDITIONAL INFORMATION
Gross Risk Movement
Risk Velocity is measured
on the following scale:
Risk Appetite definitions
are as below:
Strategic outcomes
Risk included
in viability
assessment
Refers to the gross movement in the
risk, before mitigations and controls,
from the prior year.
Efficient growth
Very rapid – impact of the risk
would be evident within a month
Averse – avoid unnecessary risk
where possible
Consistent value creation
Increasing
Rapid – impact of the risk would be
evident in a quarter
Cautious – willing to take strongly
justified risks
Credibility and trust
Decreasing
Engaged people
Slow – impact of the risk would be
evident within a year
Open – willing to take justified risks
Stable
This list does not include all of our risks, and the risks listed are not set out in order of priority.
Risk and impact
Mitigation plans and developments in fiscal 24
1. Climate change and
sustainability
Core mitigations:
• The cross-functional Climate and Nature Risk Steering Group sets our strategy for ongoing climate and
nature risk assessment. Resource-scarcity issues have been identified and mitigated, especially within
our agricultural ingredient sourcing strategy, for example developing more climate-resistant and higher-
yielding varieties of sorghum for Kenya and Ghana.
• Physical risk exposures have now been identified for more than 95% of sites globally and being built
into site and category risk footprints. We have shifted our mitigations focus from risk understanding and
quantification, to building further resilience in our sites and supply chain.
• Our refreshed water strategy, is a 'grain-to-glass' approach which improves water use efficiency in
operations, replenishes water in water-stressed catchments, provides clean water to our communities,
supports farmers (especially smallholders), protects and restores nature and strongly advocates for
more collective action to contribute to a positive water impact – ultimately to build resilience and
enable growth.
• Our ‘Spirit of Progress‘ ambition was launched and operationalised to deliver against key targets and
longer-term goals. As part of 'Spirit of Progress', we are focused on water and energy efficiency and
switching to renewable energy. Our climate risk scenario modelling and mitigation plans incorporate
the risk of a 4-5°C climate change scenario, which may arise as a result of collective climate action
failure, as well as a moderate (2-3°C) scenario and a Paris-aligned (1.5-2°C) scenario.
Developments in fiscal 24:
• We continue to update our physical climate risk scenarios, which reflect the increase in climate
extremes we are seeing today.
• The importance of nature and its links to both climate mitigation and adaptation were increasingly
highlighted at events like COP28. Several global reviews have highlighted 'the vital importance of
protecting, conserving, restoring and sustainably using nature and ecosystems for effective and
sustainable climate action'.
• In fiscal 24 we trialled a shadow carbon price model in our capital expenditure strategy. We found that
incentives to reach our Scope 1 and 2 greenhouse gas emissions targets proved more impactful than
considering carbon pricing in our decision-making.
We have increased our mitigations of this risk by -
• Completing transition scenario analysis for our total business using an automated scenario analysis tool.
• Further increasing the resource dedicated to the mitigation of climate impact within our sustainability,
sourcing and finance teams.
• Conducting a nature-baseline impact assessment, which provides deep insights on our business’s
baseline impacts on nature related to our direct operation activities, as well as our upstream sourcing of
beverage raw materials and packaging materials.
Risk Appetite
Cautious
Risk Velocity
Slow
Gross Risk
Movement
Stable
Failure of collective climate action to
meet sustainability goals may result
in severe warming of 4-5°C as per
IPCC RCP8.5 modelling. Indeed any
global warming above the Paris
agreement target of 1.5-2°C carries
substantial risks to society, and this
scenario is increasingly likely.
While Diageo is currently resilient to
climate risks due to ongoing
adaptation efforts, society is already
facing a number of challenges,
including water-stress, extreme
weather events, temperature rises,
food system impacts, biodiversity
loss and ecosystem collapse. In
response to this, governments are
implementing increased regulation
aimed at addressing these issues.
Failure of the business to meet
environmental sustainability goals
could result in loss of licence to
operate, financial loss, supply chain
disruption and reputational
damage amongst customers,
consumers, investors and other
stakeholders.
Failure of the business to build
climate resilient operations could
result in the inability to operate
and/or financial loss.
Our assessment of the impact on
our business has not changed year-
on-year.
OUR PRINCIPA L RISK S AND RISK MANAGEMENT continued
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Risk and impact
Mitigation plans and developments in fiscal 24
2. Regulation, trade
barriers and indirect tax
Core mitigations:
• We run multi-year public policy campaigns to minimise risk and unlock tax, trade and regulatory
opportunities. We engage with multilateral organisations and at a market level with health and
finance ministries.
• We utilise economic modelling to demonstrate the impact of tax policy.
• With respect to our Positive Drinking programmes, we work with international and market trade bodies
who conduct scientific research which provides an evidence base for policy redevelopment. All
opportunity and risk is assessed and detailed quarterly in a public policy dashboard to ensure the right
resources are deployed against each.
Developments in fiscal 24:
• International organisations that influence governmental policy decisions on alcohol taxation are
increasingly focusing on measures to increase the overall level of taxation on alcohol products, rather
than more targeted measures to reduce harmful consumption.
• Within these organisations, there have been some calls to differentiate between ‘lower strength’ and
‘higher strength’ alcoholic products, and in some areas, ‘higher strength’ has been framed as being
more harmful. Such arguments can be used to support proposals that higher taxes should be levied on
the consumption of ‘higher strength’ products.
We have increased our mitigations of this risk by –
• Expanding our advocacy efforts to challenge ineffective and discriminatory tax policies. We continue to
engage positively with a wide range of international organisations to advocate for policies and
interventions that promote positive drinking, whilst at the same not discriminating against our products.
Risk Appetite
Cautious
Risk Velocity
Slow
Gross Risk
Movement
Stable
In a volatile external landscape
geopolitically and economically,
we see risks associated with
ongoing conflicts in Europe and
the Middle East, global inflation,
debt and energy price crises
which cause pressures on
public finances, resulting in the
need to raise new tax revenue.
In addition, public health
concerns may lead regulators in
major markets to ban or restrict
the marketing or sale of alcohol,
while increased trade tensions
and/or fiscal pressures may
prompt the introduction of
additional trade barriers and/
or disproportionate tax increases,
all of which may result in
financial loss.
3. Geopolitical volatility
and business
interruption
Core Mitigations:
• We have global policies and programmes in place, including the Global Corporate Security Policy, to
protect our people, property, and business. In-market Corporate Security resources are in place for
higher-risk markets.
• We have a long-standing global Business Continuity Programme, including training, to enhance
capability to react effectively to a crisis and minimise disruption.
• Our global risk monitoring programme identifies emerging risks and supports avoidance and
mitigation.
• The global supply chain risk programmes we have implemented improve our ability to maintain
operational processes through volatility.
• Insurance policies are in place to protect against the financial consequences of covered events.
• Our multi-channel product availability enables consumers to flexibly continue to purchase our products.
• Our global ‘Flex Philosophy’ on working patterns and home working are well-embedded and supports
business continuity.
Developments in fiscal 24:
• The outbreak of the conflict in the Middle East was the most significant development in fiscal 24, driving
tensions and further hostilities within the region and impacting Red Sea shipping. The risk of further
escalation remains.
• Other disruptive vectors have impacted us in fiscal 24, such as the ongoing war in Ukraine, unrest in
Latin America and elsewhere, and organised crime. These have been within the range of volatility
predicted last year, and impacts have been limited and manageable.
• We continue to monitor key and worsening regional tensions, and the risk of unrest related to the large
number of elections taking place globally through the remainder of 2024.
We have increased our mitigations of this risk by -
• Enhancing our focus on the external environment and forecasting, given anticipated volatility.
• Heightening scrutiny on organisational business continuity planning and crisis preparedness, including
for risks relating to technology and supply chain.
• Enhancing our travel risk management programme.
Risk Appetite
Cautious
Risk Velocity
Very Rapid
Gross Risk
Movement
Stable
Geopolitical forces, driven by
several vectors globally, coupled
with macroeconomic stress,
increase the likelihood of
international and domestic
tensions, disputes, conflict, unrest,
and crime.
A significant interruption to our
business due to external events
(such as a public health threat/
pandemic, war, or natural
hazard) could restrict access to
our products, negatively affect
our operations and brands, or
pose a threat to the safety of our
employees; any of which could
have a negative impact on our
commercial and financial
performance.
Upcoming election cycles in
some markets may lead to
increased volatility.
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Risk and impact
Mitigation plans and developments in fiscal 24
4. Macroeconomic and
financial volatility
Core mitigations:
• We monitor locally and globally key business drivers and performance to prepare for rapid changes in
the external environment, which we integrate into our market strategies to ensure we leverage the
power of our total portfolio to recruit consumers.
• Central hedging and currency monitoring take place to manage volatility.
• Strategic analysis and scenario planning is managed at both a global and a local level, to strengthen
market strategies and risk management across the business.
• We have multi-country investment and local sourcing strategies.
• There are dedicated cross-functional steering groups to manage acute issues including inflation.
Developments in fiscal 24:
• Macroeconomic growth is positive, but growth is slower than anticipated.
• Inflation rates, whilst slowing, remain elevated and interest rates remain relatively high. The cumulative
effect of this longer period of sustained, elevated inflation intensifies pressures on both businesses and
consumers. Sustained, elevated inflation and interest rates impact consumer spending power and
businesses’ ability to increase prices to offset rising input costs.
We have increased our mitigations of this risk by -
• Building greater capabilities to monitor, and act on, macroeconomic volatility, for example by
developing greater visibility, resilience, and agility in supply chain management, as well as investing
behind deeper consumer insights to understand how consumer behaviours are changing in the current
economic environment.
Risk Appetite
Cautious
Risk Velocity
Rapid
Gross Risk
Movement
Stable
Failure to react quickly enough to
changing macroeconomic
conditions and financial volatility
could adversely impact financial
performance. Macroeconomic
conditions include GDP growth
rates, inflation, other changes to
consumer discretionary spending
(e.g. unemployment), and global
trade tensions. Financial volatility
risk could arise from variability in
financial markets, interest rate
fluctuations and currency
instability.
5. International direct
tax
Core mitigations:
• We monitor and, where appropriate, express views on the formulation of tax laws either directly or
through trade associations or similar bodies.
• We continuously monitor the international tax landscape for new taxes and tax legislation introduced.
We monitor and improve on our tax processes, data, and system capabilities to enable us to ensure
compliance. We also seek to standardise, centralise and automate tax activities and controls, where
possible, to improve efficiency.
• We continue to review and adapt our global transfer pricing policies to ensure profits are taxed in line
with business activities and economic substance.
Developments in fiscal 24:
• The international tax environment continues to be challenging.
• Countries acting individually and collectively, for example, as part of the EU/OECD, continue to
propose and introduce measures that may increase the tax burden of multinational companies.
• Governments continue to face various pressures and are looking to tax measures to influence corporate
behaviour and to balance national budgets. These pressures are further exacerbated by ongoing
global macroeconomic volatility coupled with geopolitical tensions and the challenging sustainability
commitments made by governments.
• Tax measures resulting from these pressures may include changes to the corporation tax base or rates,
increases in excise/customs duties, new taxes (e.g. on-line sales taxes) or a more aggressive approach
to tax audits.
• The expansion of digital filing requirements, mandatory disclosure regimes and greater tax
transparency in public reporting will likely add to the scrutiny of multinationals’ tax affairs from tax
authorities, NGOs, media and the general public.
Risk Appetite
Cautious
Risk Velocity
Slow
Gross Risk
Movement
Stable
Changes in the international tax
environment may lead to
additional compliance
requirements, higher compliance
costs, an increase in our effective
tax rate, new tax exposures and
additional uncertainty, which
could result in financial loss.
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Risk and impact
Mitigation plans and developments in fiscal 24
6. Supply chain
disruption
Core mitigations:
• The ongoing digital transformation of our supply chain has provided us with an end-to-end visibility
enabling real-time scenario planning and faster, more intelligent decision-making.
• The process of end-to-end supply chain brand mapping identifies risks and mitigation plans at each
node in our supply chain. Through this process, we proactively identify and create action plans for
vulnerabilities, reducing the likelihood of disruption.
• We have an embedded Value Chain Risk Management process which allows us to identify and
mitigate critical supplier risks.
• Our monthly scenario planning process allows us to anticipate and prepare for a range of potential
futures within our supply chain. Through this scenario planning, we develop and track contingency
plans and mitigation strategies.
• Our inventory management procedures at our supply sites and in-market locations allow for prompt
responses to shortages and supply chain delays.
• Our logistics network is diverse with multiple ports, routes, transportation modes and alternative carriers,
which reduces the likelihood of a disruption to our supply chain and the end customer.
Developments in fiscal 24:
• Geopolitical conflicts in the Red Sea have increased lead-times to Asia, Middle East and East Africa.
Our supply chain has proven resilient through the disruption.
• There has been an increased number of cyber incidents in our extended supply chain.
We have increased our mitigations of this risk by -
• Transforming our processes including demand planning, end-to-end value chain assessments, cyber-
health assessment programme and service level execution agreements for critical suppliers. We have
further transformed and simplified our portfolio, adding agility across markets.
• Transforming our physical locations including increasing our operational resilience by adding capacity
across multiple areas of our operations (including our Shenzhen Free Trade Zone hub), qualifying
additional carriers, ports, and modes of transport to ensure less reliance on specific routes and
expanding our distribution network to include regional hubs.
• Transforming our digital capabilities including deployment of advanced supply planning, artificial
intelligence enabled logistics and the startup of our digital scenario planning have made us more
connected and more resilient.
Risk Appetite
Cautious
Risk Velocity
Very rapid
Gross Risk
Movement
Decreasing
Supply chain disruption occurs as a
result of various factors, including
but not limited to, demand volatility
resulting from geopolitical tensions,
increased likelihood of severe
weather events, global
macroeconomic conditions, or
supply disruption resulting from
cyber security threats, supplier
failures, and regulatory changes.
Supply chain disruptions can result
in longer transit times, supplier
insolvency and material shortages
and therefore may have a negative
impact on commercial and
financial performance.
As the aftermath of the pandemic
has diminished, and global supply
chains have become more agile,
the likelihood of a systemic global
disruption has reduced. The focus
on building resiliency in our own
supply chains has reduced the
impact of a potential disruption.
7. Cyber and IT
resilience
Core mitigations:
• Our cyber risk management framework continues to be embedded across markets and functions.
• We run a cyber security training and awareness outreach programme, including regular phishing
exercises.
• We have an identity and access management framework in place.
• For critical applications we validate that disaster recovery plans are thoroughly tested and ensure that
data backup and restore procedures work reliably.
• Our Security Operations Centre uses advanced technology to proactively detect and block
attempted attacks.
• We perform secure assurance and compliance checks on our cloud-hosted IT service providers.
• Security controls are in place across our priority manufacturing plants.
• We have a robust and sustainable IT general controls environment.
Developments in fiscal 24:
• There is a steady increase in cyber-attacks across the manufacturing sector affecting IT landscapes and
supply chains evidenced by recent attacks within the industry.
• Updating our cyber risk framework and processes to produce new and increased cyber-security
disclosure reporting requirements.
We have increased our mitigations of this risk by -
• Strengthening our third-party cyber risk management programme to raise the minimum standards of
cyber security across the supply chains of our critical non-IT suppliers.
• Implementing additional controls to support our cloud environments.
Risk Appetite
Cautious
Risk Velocity
Very Rapid
Gross Risk
Movement
Stable
Sophisticated cyber security
threats (both within our network
and at third parties) continue to
be prevalent. This could lead to
theft, loss, and misappropriation
of critical assets, such as personal
and consumer data, and key
operational systems. Inadequate
IT resilience arrangements and
greater dependence on third-
party suppliers and externally
hosted systems and processes
could cause disruption to core
business operations, resulting in
financial loss, global regulatory
enforcement, and reputational
damage.
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8. Business ethics and
integrity
Core mitigations:
• Our Code of Business Conduct and supporting policies and standards on all elements of this principal
risk set out compliance requirements which are then embedded throughout Diageo with regular
training, communications, annual certification, and risk-based global and local engagement activities.
• Effective whistleblower mechanisms are in place for complaints to be raised, properly investigated and
where required, remedial actions taken.
• Robust third-party due diligence procedures which identify key risks are required before entering into
new business relationships.
• A well-embedded control assurance programme and centralised second line of defence continued to
operate effectively throughout the fiscal.
Developments in fiscal 24:
• There have been increases in enforcement of bribery/corruption and related offences in the United
States and United Kingdom, and enforcement related to applicable sanctions across the United States,
European Union and the United Kingdom, since the start of the Russia/Ukraine conflict.
• Human Rights continues to be an area of high focus, with a growing number of countries transitioning
from voluntary standards to legally mandated requirements.
• Data Privacy legislation is also broadening in scope, with the European Union developing a new digital
agenda, with legislation covering data, digital competition and (AI), overlapping with GDPR. The US
Securities and Exchange Commission recently issued new cyber-security disclosure requirements and
India passed its first comprehensive data protection law in 2023 and enforcement commenced in 2024.
• Macroeconomic volatility and inflationary pressures are resulting in heightened regulatory scrutiny
regarding competition.
We have added to our existing mitigations during the year by -
• Increasing our analysis on whistleblowing matters to further identify trends and insights and institute
appropriate interventions.
• Forming a Fraud Risk Management Working Group and are developing our plans to put in place
additional reasonable prevention procedures.
• Refreshing our human rights strategy and introducing new risk assessment tools for our direct operations
and supply chain. Through this process, when potential risks are identified we put in place corrective
action plans to mitigate the risk.
• Reviewing and updating our data privacy risk assessment process and framework and refreshing our
identification, assessment and mitigation of risks.
Risk Appetite
Averse
Risk Velocity
Very rapid
Gross Risk
Movement
Stable
Diageo’s geographic footprint
coupled with the regulated
nature of the beverage alcohol
industry, cross-jurisdictional
regulations that apply to our
business and rapid changes in
the technological landscape,
mean that our people and
operations have an inherent risk
of breaching regulations (such
as anti-corruption, money
laundering, global competition,
human rights, data protection
and economic sanctions) or
being seen to act in an
unethical manner.
Globally we see a trend of
increased regulatory expectations
with new legal regimes being
imposed, and a heightened
enforcement stance being
adopted by regulators across
different markets in which
Diageo operates.
Lack of an embedded business
integrity culture could result in
significant penalties, financial loss
and reputational damage.
Although the gross risk has
remained stable, across the
different markets in which we
operate there are increasing
regulations from the governing
bodies.
Risk and impact
Mitigation plans and developments in fiscal 24
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9. Consumer demand
disruption
Core mitigations:
• The long-term consumer shifts are mitigated through consumer strategies and products which anticipate
altered demand. The short-term fluctuations in demand can be mitigated through improved agility and
responsiveness. For example, if we anticipate a shift to at-home socialising, we pivot our marketing
strategies accordingly.
• A large part of our mitigation strategy is our highly diversified portfolio of brands sold across the world,
to ensure broad coverage of consumer occasions, geographies, trends and price points.
• We use a suite of proprietary and third-party data tools, including our brand guidance system, global
performance suite and consumer choice framework which allow us to track and monitor long-range
global trends, behaviours in TBA, brand health consumer sentiment.
• Data from across all sources guides decision-making through our end-to-end strategic cycle, at
corporate strategy and market level, including our annual marketing business planning, integrated
business planning, and monthly business performance management.
Developments in fiscal 24:
• Premiumisation in TBA remains a stable long-term trend but there has been a temporary deceleration at
specific spirits price tiers following the end of a three year Covid ‘super-cycle’. Fiscal 24 saw some abrupt shifts
in consumer behaviour in some markets, whilst in others the change has been more gradual.
• As the rate of change of spirits premiumisation normalises, so too the new norms of socialising post-pandemic
have begun to cement themselves. We see an enduring emphasis on socialising at home; the rise of non-
traditional channels; a growing drive towards moderation; an increasing interplay between TBA and food; and
a general expansion of the where and when of drinking alcohol that brings with it increased consumer
demand for convenience.
• In addition to shifts in consumer behaviour, marketing’s ability (in a general sense and not specific to Diageo)
to align successfully with consumer values at scale, has grown more precarious. Growing cultural and political
polarisation in many of the world’s leading economies requires increasingly deft and sensitive brand building.
We have increased our mitigations of this risk by-
• Upgrading our demand radar tool, which allows us to model value- and volume-based projections at the
market, sub-category and price tier level based on different macroeconomic factors.
• Upgrading our consumer choice framework data program, which will deliver our largest and most detailed
quantitative study of TBA, with c. 200 million consumer data points across 77,000 respondents in 40 countries.
• Continuing to carve out distinct and non-overlapping cultural spaces for our brands. We choose our
ambassadors and spokespeople with extreme care. However, as the marketing model leans more and more
towards cultural vibrancy, the need to be part of the public conversation increases.
Risk Appetite
Open
Risk Velocity
Rapid
Gross Risk
Movement
Stable
Consumer demand, particularly
in the short term, remains
unpredictable due to
macroeconomic volatility, with
inflation and cost-of-living crises
across many countries adversely
impacting consumer priorities and
spending power.
Longer term, consumer demand
is also being shaped by the
ongoing digitalisation of society;
by shifts in socialising beyond
traditional channels and venues;
by changing health and lifestyle
priorities; by new competitive
adjacencies in the world of
immersive entertainment; as well
as by an increasing desire for
moderation – both literally in
terms of alcohol consumption
and holistically in terms of time,
social energy and financial
resources. Inability to respond
and adapt our products or
processes to these disruptive
market forces could impact our
ability to effectively service our
customers and consumers with
the required agility.
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Risk and impact
Mitigation plans and developments in fiscal 24
10. Product quality and
counterfeit
Core mitigations:
Product quality
• Food safety system standards (FSSC 22000) are implemented in wholly owned brewing and packaging sites.
The majority of these sites are certified, with tracking in place and timelines agreed for the remaining sites with
the exceptions being newly acquired and re-developed sites, where we are upgrading the systems to meet the
standards.
• We monitor and track the Global Food Safety Initiative certification of our third-party operations, with the goal
of all third-parties obtaining certification. Exceptions to this certification requirement are being managed based
on risk and we exercise our right to audit where necessary.
• A product integrity testing programme is in place for all product categories. The scheme covers our sites and
third-party sites. Results and improvement actions are actively tracked.
• We have robust, tested, processes in place to manage quality and food safety related incidents.
Counterfeit
• We have anti-counterfeiting measures embedded in our packaging to deter against reuse, making our
products more difficult to copy.
• We run training and engagement programmes with law enforcement and customs officials across all high-
and medium-risk markets, to ensure they are able to spot potential counterfeits and contact us for immediate
action, and participate in industry initiatives to monitor and prevent counterfeiting activity, pursuing
enforcement and prosecution where possible.
• We run training and awareness programmes with commercial teams and distributors across markets, to
educate them on the appropriate response to potential counterfeit cases.
• We manage glass collection and recycling programmes in medium- and high-risk markets, to remove empty
glass bottles from the counterfeit supply chain and prevent refilling.
• We run an online monitoring and take-down programme across high-risk e-commerce and social media
platforms, and directly engage with these platforms to create awareness and stop counterfeit listings.
Developments in fiscal 24:
Product quality
• As our partnerships with new suppliers, third parties and M&A activities continue to change, we need to
adapt and improve our supplier quality management, third-party producer quality management and
acquisition quality management programmes.
• The number of food safety alerts raised by regulatory authorities in relation to alcoholic drinks continues
to rise.
• As we explore new package formats, raw materials and processing solutions, these present new quality
challenges and risks.
We have increased our mitigations of this risk by -
• Developing a formal food safety and quality culture programme, a food loss and waste standard and
an environmental monitoring standard.
• Strengthening our hazard analysis, critical control point (HACCP) standard and rolling it out across
manufacturing sites.
• Harmonising and strengthening our internal quality standards for our new and innovate packaging
formats.
• Standardising the global approach to quality and food safety compliance with the development of a
quality and food safety manual.
• Expanding our global quality standards to bring further rigour to our quality ways of working for non-
alcoholic and ready-to-drink products.
Counterfeit
• Geopolitical tensions are growing globally, which may increase the existing counterfeit risk in some regions.
Geo-economic pressures are also encouraging more consumers to seek out lower prices often from
unregulated sources exploited by counterfeiters.
• Counterfeit glass and closure production is leading to more counterfeit production at scale.
• The growth of tequila has continued to see a rise in counterfeit tequila cases in some markets.
• The quality of counterfeits has continued to improve to the extent that consumers cannot readily distinguish
between genuine and counterfeit.
We have increased our mitigations of this risk by -
• Changing our brand protection resourcing in China to a global model, ensuring we have the correct resource
to mitigate the risk from high-quality counterfeit glass and closure production.
• Mapping local laws and regulations relating to the transit of counterfeit and decoded products, to allow us to
implement strategies and alliances in the correct markets to mitigate against the cross-border risk.
Risk Appetite
Cautious
Risk Velocity
Rapid
Gross Risk
Movement
Stable
Accidental or malicious
contamination of raw materials
or finished product, and/or
ineffective brand protection and
intervention to address
counterfeiting of our products
supplied to market, could cause
harm to consumers, damage our
corporate and brand reputation
and pose potential threats to our
people due to the illicit nature of
organisations involved in
counterfeiting activities.
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Mitigation plans and developments in fiscal 24
11. Transformation
Core mitigations:
• Key business transformation projects have steering groups in place led by a senior executive and
regular progress updates are provided to the Executive Committee and Board (where relevant).
• We have succession planning processes to help ensure a pipeline of high-quality, diverse talent for the
roles that are critical to our transformation projects.
• We have heavily invested into the transformation projects hiring additional employees fully dedicated to
the projects and external consultants and partners who also bring in new skills. For example, we have
partnered with SAP and IBM Consulting to redesign and improve Diageo’s processes and enhance
Diageo’s business resilience and controls environment.
• We invest in new and emerging capabilities and provide training courses in key areas such as digital,
ESG and leadership.
• We regularly horizon scan for important external changes that can impact us and our strategic
transformation plans, such as evolving stakeholder expectations and heightened regulatory
requirements, and adapt project plans accordingly.
Developments in fiscal 24:
• Market competition for key leadership and specialist talent remains strong, with the UK economy
experiencing specific challenges, such as a shortage of skilled talent.
• We are part way through implementing multiple business transformation projects, with many key
changes still to be delivered.
We have increased our mitigations of this risk by -
• Hiring a Chief Strategy and Transformation Officer in fiscal 24 to manage and deploy key business
transformation projects and to help ensure these projects are governed appropriately.
• Embarking on a culture transformation journey to embed speed and agility across our business.
• Although implementing these projects carry significant risks, our mitigation strategies aim to gradually
reduce these risks over time. For example, we have had to adapt to changes in consumer preferences
by shifting priorities and resources to different productivity initiatives within our supply chain agility
programme. Ongoing evaluation and adjustment of our risk mitigation strategies are essential for
effectively managing the complexities of these projects.
Risk Appetite
Cautious
Risk Velocity
Rapid
Gross Risk Movement
New risk
Failure to execute strategic
business transformation projects
effectively, namely the
implementation of SAP S/4
HANA, our ‘Spirit of Progress‘
plan and our supply chain agility
programme, could result in delays
or changes to their expected
benefits which may have a
negative impact on our critical
business processes or on our
operating and financial
performance.
As the external environment
continues to change, the ambition
and objectives of our strategic
transformation initiatives may
need to adapt which may require
new and different capabilities and
skills within our workforce and
may negatively impact our ability
to deliver the anticipated benefits
in the time period expected, or
at all.
In particular, failure to have the
right strategic partnerships and
talent in key positions to deliver
and sustain our strategic business
transformation projects may result
in delays, unforeseen costs and
other disruptions to our business,
competitive positioning and
financial performance.
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Viability statement
The Directors have examined the group's long-term prospects to
evaluate its sustainability. This examination encompassed an analysis
of the group's operations, principal risks, as well as factors anticipated
to influence its future performance, financial standing, cash flows,
liquidity, and borrowing capabilities, as outlined in this Annual Report.
Assessment
To ensure an accurate assessment of the group's long-term viability, the
Directors evaluated its overall funding capacity and available headroom to
endure severe and plausible downside scenarios. Additionally, they
conducted a thorough assessment of the significant risks confronting the
group, including those posing a threat to its business model, future
performance, solvency, or liquidity. This evaluation also included a review
and understanding of the mitigating factors associated with each principal
risk. A summary of these risks and their corresponding mitigating factors
can be found in this Annual Report.
The viability assessment has three parts
Initially, the Directors assess the periods during which they reasonably
expect the group to remain operational and fulfil its obligations. A three-
year timeframe was deemed appropriate for this viability evaluation,
aligning with the group's strategic plan and instilling a high degree of
confidence in the assessment of viability. Subsequently, they evaluated the
potential repercussions of severe yet plausible scenarios throughout this
duration. It was determined that none of these scenarios, either individually
or collectively, would cause Diageo to cease to be viable.
A summary of the modelled severe and plausible risks, along with the
severity levels examined, is provided below.
Furthermore, the Directors analysed the group's liquidity sources to
support both the strategic plan and the potential impact of severe
scenarios over this timeframe. Diageo maintains continuous access to
the debt capital markets and committed facilities throughout the
viability period enabling the refinancing of any maturing debt or
meeting new funding requirements under commercially acceptable
terms. The group's liquidity is underpinned by a mix of short-term and
long-term debt programmes, as well as $3.25 billion in committed
credit facilities, available if necessary. Additionally, the group retains
flexibility in reducing discretionary expenditures, such as acquisitions
and capital outlays, and can temporarily suspend or reduce returns of
capital to shareholders (dividends or share buybacks).
Risk scenarios modelled
Description and severity
Principal risks
Global economic
downturn
Interest rate hikes and market instability, are reducing consumer confidence and sales volumes.
Financial failures affecting cash deposits, and higher tax rates are reducing profitability.
Sales: These factors will likely result in decreased sales volumes due to reduced consumer
confidence, heightened price sensitivity, and increased volatility amongst suppliers.
Geopolitical volatility
and business
disruption
Supply chain disruption
International direct tax
Increased
geopolitical
tensions
Increased geopolitical tensions result in increased cyber-attacks on direct operations and third-
party suppliers impacting supply operations across multiple Diageo sites and resulting in
production downtime. Cash repatriation also poses a cash availability risk.
Sales: Lost sales from adverse impact on consumer demand/availability, production downtime
and route-to-market disruption.
Cyber and IT resilience
Geopolitical volatility
and business disruption
Consumer demand
disruption
Consumer choice
changes and
regulatory impact
This year's modelling expanded to include regulatory fines and product recalls. Shifting consumer
preferences away from alcohol due to changing lifestyles and social habits, alongside fragmented
demand reflecting personal values, leads to decreased sales and profitability as consumers
abstain from purchasing our products. Additionally, high public debt levels and increased anti-
alcohol pressure prompt governments to impose excise increases, restrictive trade measures, or
excessive regulatory actions, resulting in lost sales to the no and low segment and reduced sales
growth. Moreover, increased excise taxes further reduce profit.
Sales are anticipated to decline due to shifting consumer preferences away from alcohol,
government actions, and increased regulatory scrutiny.
Regulation, trade
barriers and indirect
tax
Consumer demand
disruption
Climate change
and natural hazard
Increasing global temperatures impact our ability to make products due to constrained water
supply, leading to a rotational short-term shutdown occurring across some of our water-stressed
sites. Climate change drives increasing costs of raw materials, while the acceleration of taxation
against carbon use increases our operational costs. Extreme weather events occur more frequently,
impacting our supply facilities, causing production outages. The assumptions associated with this
scenario are based upon our TCFD scenario modelling, and applied to a three-year period.
Sales: Loss of sales due to operational outages as a result of ceasing of production at water-
stressed sites, and the impact of extreme weather events.
Climate change and
sustainability
Supply chain
disruption
Geopolitical volatility
and business
disruption
Combined scenarios
The highly unlikely event of the combination of all of the above scenarios occurring at the same time.
Management prepared 18 month cash flow forecasts which were also
sensitised to reflect severe but plausible downside scenarios taking into
consideration the group's principal risks. In the base case scenario,
management included assumptions for mid-single digit net sales growth,
slightly growing operating margin and global TBA market share growth. In
light of the ongoing geopolitical volatility, the base case outlook and severe
but plausible downside scenarios incorporated considerations for a
prolonged global recession, supply chain disruptions, higher inflation and
further geopolitical deterioration. Even under these scenarios, the group’s
liquidity is still expected to remain strong. Mitigating actions, should they be
required, are all within management’s control and could include reductions
in discretionary spending such as acquisitions and capital expenditure,
lower level of A&P and investment in maturing stock, as well as a
temporary suspension in its return of capital to shareholders (dividends
or share buybacks) in the next 12 months, or drawdowns on committed
facilities. Having considered the outcome of these assessments, the
Directors are comfortable that the company is a going concern for at
least 12 months from the date of signing the group's consolidated
financial statements.
Conclusion
On the basis described above, the Directors have a reasonable
expectation that the group will be able to continue in operation and meet
its liabilities as they fall due over the three-year period of their assessment.
This Strategic Report, which has been approved by a duly appointed and authorised committee of the
Board of Directors, was signed on its behalf by Tom Shropshire, the Company Secretary, on 29 July 2024.
VIA BILITY STA TEMENT
86
Diageo Annual Report 2024
Governance report
Contents
Letter from the Chair of the Board of Directors
88
Governance at a glance
90
Board of Directors
92
Executive Committee
94
Corporate governance report
96
Audit Committee report
111
Nomination Committee report
118
Directors’ remuneration report
122
Directors’ report
Diageo Annual Report 2024
87
148
Compliance with the UK Corporate Governance Code
The Board considers that, for the year ended 30 June 2024, Diageo has fully applied the Principles and complied with the Provisions of
the UK Corporate Governance Code 2018 (the Code).
The table below details where content complying with the Code's requirements can be found.
Visit diageo.com for more information.
1
Board Leadership & Company Purpose
A.
Board of Directors
Board of Directors
92
Board Chair Succession
119
Performance Evaluation
105
B.
Purpose, Values and
Culture
Our Business Today
4
’Spirit of Progress’
48
C.
Resources and
Control Framework
Business Model
12
Our Principal Risks and Risk
Management
77
Corporate Governance Structure
and Division of Responsibilities
91
D.
Stakeholder
Engagement
Stakeholder Engagement
100
Section 172 Statement
9
E.
Workforce Policies
and Practices
Our Business Today
4
’Spirit of Progress’
48
Doing Business the Right Way
53
Business Integrity Programmes
114
2
Division of Responsibilities
F.
Role of the Chair
Letter from the Chair of the Board of
Directors
88
Corporate Governance Structure
and Division of Responsibilities
91
Performance Evaluation
105
G.
Division of
Responsibilities
Corporate Governance Structure
and Division of Responsibilities
91
Composition of the Board
96
H.
Role of the Non-
Executive Director
Corporate Governance Structure
and Division of Responsibilities
91
Board of Directors
92
I.
Board Policies,
Process, Information,
Time and Resources
How the Board monitors Culture
108
Duties of the Board
96
Board Activities
99
3
Composition, Succession and Evaluation
J.
Appointments to the
Board
Board Chair Succession
119
Champion Inclusion and
Diversity
59
Recruitment and election
procedures
119
K.
Board Skills, Experience
and Knowledge
Composition of the Board
96
L.
Board Evaluation
Performance Evaluation
105
4
Audit, Risk and Internal Controls
M.
Independence, and
Effectiveness of Internal
and External Auditors
Audit Committee Report
111
N.
Fair, Balanced, and
Understandable
Assessment
Directors' Confirmations
110
O.
Risk and Internal
Controls
Corporate Governance
Structure and Division of
Responsibilities
91
Our Principal Risks and
Risk Management
77
5
Remuneration
P.
Alignment to Purpose,
Values and Long-Term
Success
Remuneration Committee
Chair's letter
122
Remuneration at a Glance
125
Director's Remuneration Policy
128
Q.
Remuneration Policy
Remuneration Committee
Chair’s letter
122
Director’s remuneration policy
128
R.
Independent Judgement
and Discretion
Remuneration Committee
Chair’s letter
122
Consideration of wider
workforce remuneration
133
Fiscal 24 Board Attendance
Annual General
Meeting 2023
Board
(maximum 6)
Audit Committee
(maximum 5)
Nomination Committee
(maximum 6)
Remuneration Committee
(maximum 6)
Javier Ferrán
ü
6/6
—
5/6
—
Debra Crew
ü
6/6
—
—
—
Lavanya Chandrashekar
ü
6/6
—
—
—
Susan Kilsby
ü
6/6
5/5
6/6
6/6
Melissa Bethell
ü
6/6
5/5
6/6
6/6
Karen Blackett
ü
6/6
4/5
6/6
5/6
Valérie Chapoulaud-Floquet
ü
5/6
4/5
5/6
5/6
Sir John Manzoni
ü
6/6
5/5
5/6
6/6
Alan Stewart
ü
6/6
5/5
6/6
6/6
Ireena Vittal
ü
6/6
5/5
6/6
6/6
Former Directors
Lady Mendelsohn(1)
N/A
1/1
1/1
1/1
1/1
(1)
Lady Mendelsohn retired from the Board prior to the company's Annual General Meeting on 28 September 2023.
Diageo Annual Report 2024
89
Supporting the business
through Leadership
Dear Shareholder
It is with great pleasure that I present, on behalf
of the Board, the corporate governance report
for the year ended 30 June 2024. This report
summarises how Diageo's leadership and
governance structures have supported Diageo
during the course of the year in seeking to
achieve long-term sustainable success.
The Board is committed actively to creating long-term sustainable
growth and delivering shareholder value. We aim to do so by building
Diageo's business through a portfolio of leading international brands,
aligned to the highest growth categories and core industry trends. This
year has seen continued volatility in consumer markets in a number of
different geographies. In such a challenging external environment, it is
particularly important that Diageo has resilient leadership, with a clear
strategy, underpinned by strong values and culture, while remaining
agile and adaptable, moving swiftly to respond to consumer trends
and opportunities. It is the Board's responsibility to ensure that the
company has the leadership required to achieve its long-term success
and that management has the strategic direction and aims to achieve
its growth ambition, supported by and centred on a strong, values-
based culture.
While navigating the current turbulent external environment, we have
continued to invest behind the business, ensuring that Diageo is well-
positioned in key categories and to take advantage of opportunities in
fast-moving consumer trends. We look to manage our capital
allocation in an appropriate manner, investing in growth areas,
managing our portfolio, resources and footprint to optimise efficiency
and focusing resources where they are most effective.
Leadership has been an area of particular focus for directors recently
as we look to build the future composition of the Board, reflecting
changes in some key roles through the coming months and into the
second half of fiscal 25. We aim to have a balanced and experienced
Board, comprising a diverse range of individuals with different skills
and from different backgrounds, with an ability to express informed
and independent views and opinions. With the recently announced
new appointments to the Board, I am confident that Diageo will
continue to have the effective and resilient leadership required to
achieve its growth ambition over the long term.
Javier Ferrán (Chair)
LETTER FROM THE CHAIR OF THE BOARD OF DIRECTORS
88
Diageo Annual Report 2024
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
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Board of Directors
Chief Executive has
delegated authority to
these Committees
Executive
Committee
Finance
Committee
Filings
Assurance
Committee
Audit
Committee
Nomination
Committee
Remuneration
Committee
Business unit risk
management
Risk & Controls
Steering Committee
Audit & Risk
Committee
Corporate governance structure and division of responsibilities
Non-Executive Directors
Melissa Bethell, Karen Blackett,
Valérie Chapoulaud-Floquet, Sir
John Manzoni, Alan Stewart and
Ireena Vittal
The Non-Executive Directors, all of
whom the Board has determined
are independent, experienced and
influential individuals from a
diverse range of industries,
backgrounds and countries.
• Constructively challenge the
Executive Directors
• Develop proposals on strategy
• Scrutinise the performance of
management
• Satisfy themselves on the
integrity of the financial
information, controls and systems
of risk management
• Set the levels of remuneration for
Executive Directors and senior
management
• Make recommendations to the
Board concerning appointments
to the Board
• Devote such time as is necessary
to the proper performance of
their duties
A summary of the terms and
conditions of appointment of the
Non-Executive Directors is available
at https://www.diageo.com/en/
our-business/corporate-
governance.
Senior Independent Director
Susan Kilsby
• Acts as a sounding board for the
Chair and serves as an
intermediary for the other
Directors where necessary
• Together with the other Non-
Executive Directors, leads the
review of the performance of the
Chair, taking into account the
views of the Executive Directors
• Available to shareholders if they
have concerns where contact
through the normal channels
has failed
Company Secretary
Tom Shropshire
• The Board is supported by the
Company Secretary who
ensures information is made
available to Board members in a
timely fashion
• Supports the Chair in setting
Board agendas, designing and
delivering Board inductions and
Board evaluations, and co-
ordinates post-evaluation action
plans, including risk review and
training requirements for the
Board
• Advises on corporate
governance matters
• Is a member of the Executive
Committee as General Counsel
Chief Executive
Debra Crew
• Develops the group’s strategic direction for
consideration and approval by the Board
• Implements the strategy agreed by the
Board
• Leads the Executive Committee
• Manages the company and the group
• Along with the Chief Financial Officer, leads
discussions with investors
• Is supported in her role by the Executive
Committee
• Is supported by the Finance Committee and
Filings Assurance Committee in the
management of financial reporting of the
company
Chair
Javier Ferrán
• Responsible for the operation, leadership and
governance of the Board
• Ensures all Directors are fully informed of
matters and receive precise, timely and clear
information sufficient to make informed
judgements
• Sets Board agendas and ensures sufficient
time is allocated to ensure effective debate to
support sound decision-making
• Ensures the effectiveness of the Board
• Engages in discussions with shareholders
• Meets with the Non-Executive Directors
independently of the Executive Directors
Chief Financial Officer
Lavanya Chandrashekar
• Manages all aspects of the group's
financial affairs
• Responsible for the management of
the capital structure of the company
• Contributes to the management of the
group's operations
• Along with the Chief Executive, leads
discussions with investors
• Is supported by the Finance Committee
and Filings Assurance Committee in
the management of the financial
affairs and reporting of the company
• Is a member of the Executive
Committee
Diageo Annual Report 2024
91
Enabling our
Growth Ambition
Achieving Diageo's Growth Ambition is
dependent on our Board and Executive
Committee providing effective leadership for
long-term sustainable success, despite
challenges in the external environment.
Highlights of fiscal 24
• Shaping Diageo's future through our business transformation
projects, across our supply chain and systems infrastructures,
and the strategy refresh which led to creation of the Growth
Ambition.
• Announcing changes in key Board roles to build our strong
leadership during the next few months and into the second
half of fiscal 25.
• Refocusing our culture on our core values and behaviours to
embed agility and maintain our highly engaged, talented
and diverse workforce.
Read more on pages 104, 107 and 108
Diversity
Diageo has a long-standing commitment to being an inclusive
and diverse organisation, including at the most senior
leadership levels. Our diverse Board composition has enabled
Diageo to be ranked as one of the best performing FTSE 100
companies in terms of female representation, as recognised by
the FTSE Women Leaders Review, and has met the Parker
Review's target as to ethnic minority representation. As an
example, three of the Board's most critical roles, Chief
Executive, Chief Financial Officer and Senior Independent
Director, are held by women.
Read more on pages 120-121
Building our leadership
During the year, the Nomination Committee and Board has
been creating the leadership required at Board and Executive
Committee levels to continue growing Diageo's business,
including enabling smooth transitions in key roles including
that of the Board Chair, Audit Committee Chair and Chief
Financial Officer.
Board composition
ò Chair
ò Executive directors
ò Non-executive directors
Purpose, values and culture
The Board has a critical role in monitoring the degree to which
culture and values are embedded within the company. A key
part of this is the Board’s workforce engagement programme
which, during fiscal 24, enabled Non-Executive Directors,
usually in pairs, to engage directly with over 500 colleagues
from 12 markets and all functions, through eight virtual and
seven in-person focus group sessions. Subjects being discussed
varied broadly with a separate session being held on executive
remuneration and reward policy. Attendee sentiment was also
captured through a confidential survey following each session.
See pages 106-107 for details of the feedback received
Strategy refresh
Recognising the scale of Diageo's growth over the past several
years and informed by shorter term external challenges, the
Chief Executive has undertaken a review of Diageo's strategy
during fiscal 24. This review has led to the launch of the Growth
Ambition to focus priorities and drive future growth, which was
approved by the Board at the Annual Strategy Conference in
April 2024.
Read more on page 104
GOVERNA NCE AT A GLANCE
90
Diageo Annual Report 2024
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Position
Board skills and competencies
Key external appointments
Karen Blackett
Key strengths: Brings expertise in
marketing, media and the
creative industries, as well as
broad experience in public policy
and strategic initiatives through a
number of different government,
industry and public bodies
Current external appointments: Chancellor,
University of Portsmouth; Founding Trustee, BEO
(Black Equity Organisation); Non-Executive
Director, Creative UK
Previous relevant experience: UK President, WPP plc;
UK Race Equality Business Champion, HM
Government; Business Ambassador, Department for
International Trade, HM Government; Chairwoman,
MediaCom UK & Ireland; Chief Executive Officer,
GroupM UK, MediaCom UK; Chief Operations
Officer, MediaCom EMEA; Marketing Director,
MediaCom; UK Country Manager, WPP plc; Non-
Executive Director, The Pipeline
Non-Executive Director
Nationality: British
Appointed: Non-Executive
Director: June 2022
Valérie Chapoulaud-
Floquet
Key strengths: Brings strong
experience and expertise in the
luxury consumer goods sector,
having spent her career in the
industry working in a number of
international markets, including
developed and emerging
markets, and as a former CEO in
the premium drinks industry
Current external appointments: Non-Executive
Director, Lead Independent Director and Chair of
Governance Committee, Danone S.A.; Non-
Executive Director, Acné Studios A.B., Agrolimen
S.A., Nextstage S.C.A.; Vice Chair, Sofisport
Previous relevant experience: Chief Executive
Officer, Rémy Cointreau S.A.; President and CEO
for the Americas, Louis Vuitton, LVMH Group;
President and CEO for North America, Louis
Vuitton, LVMH Group; President South Europe,
Louis Vuitton, LVMH Group; President & CEO,
Louis Vuitton Taiwan, LVMH Group; President,
Luxury Product Division USA, L’Oréal Group; Non-
Executive Director, Jacobs Holding AG
Non-Executive Director
Nationality: French
Appointed: Non-Executive
Director: January 2021
Sir John Manzoni
Key strengths: Has strong
commercial executive experience
as a former CEO in the energy
sector and non-executive board-
level experience, including in the
alcoholic beverage industry, as
well as more recent expertise in
public policy and government
affairs
Current external appointments: Chair, SSE plc;
Chair, Atomic Weapons Establishment; Non-
Executive Director, KBR Inc
Previous relevant experience: Chief Executive of
the Civil Service and Permanent Secretary of the
Cabinet Office, HM Government; President and
Chief Executive Officer, Talisman Energy; Chief
Executive, Refining & Marketing, BP p.l.c.; Chief
Executive, Gas & Power, BP p.l.c.; Non-Executive
Director, SABMiller plc
Non-Executive Director
Nationality: British
Appointed: Non-Executive
Director: October 2020
Alan Stewart
Key strengths: Has a strong
background in financial,
investment banking and
commercial matters, with
particular expertise in consumer
retail industries, as well as board
and committee-level experience
at industry institutions
Current external appointments: Non-Executive
Director and Chair of Audit Committee, Burberry
Group plc; Partner, Altair Advisory LLP
Previous relevant experience: Chief Financial Officer,
Tesco PLC; Non-Executive Director, Tesco Bank;
Chief Financial Officer, Marks & Spencer Group plc,
AWAS; Non-Executive Director, Games Workshop
plc; Group Finance Director, WH Smith PLC; Chief
Executive, Thomas Cook UK; Non-Executive Director
and Chair of the Remuneration Committee, Reckitt
Benckiser Group plc
Non-Executive Director
Nationality: British
Appointed: Non-Executive
Director: September 2014
(Appointed Chair of the
Audit Committee: January
2017)
Ireena Vittal
Key strengths: Brings a wealth of
FMCG experience from a career
in executive consulting with a
focus on consumer sectors and
emerging markets, including
India, as well as broad
experience in non-executive
board roles in the UK and India
Current external appointments: Non-Executive
Director, Compass plc, Asian Paints Limited; Non-
Executive and Lead Independent Director, Godrej
Consumer Products Limited; Director and
Member, UrbanClap Technologies India Private
Limited; Advisory Board Member, Russell
Reynolds Associates
Previous relevant experience: Head of Marketing
and Sales, Hutchinson Max Telecom; Partner,
McKinsey and Company; Non-Executive Director,
Wipro Limited, Housing Development Finance
Corporation Limited, Titan Company Limited,
Tata Global Beverages Limited, GlaxoSmithKline
Consumer Healthcare
Non-Executive Director
Nationality: Indian
Appointed: Non-Executive
Director: October 2020
Board
committees
Audit Committee
Executive
Committee
Nomination
Committee
Remuneration
Committee
Chair of the
committee
Diageo Annual Report 2024
93
BOA RD OF DIRECTORS
92
Diageo Annual Report 2024
Position
Board skills and competencies
Key external appointments
Javier Ferrán
Key strengths: Brings extensive
board-level experience from the
drinks and consumer products
industry, including at chief
executive level, and has a wealth
of experience in consumer goods
through his venture capital
activities to draw from in his role
as Chair and leader of the Board
Current external appointments: Chair,
International Consolidated Airlines Group, S.A.
Previous relevant experience: Non-Executive
Director and Senior Independent Director,
Associated British Foods plc; Non-Executive
Director, Coca-Cola European Partners plc;
Member, Advisory Board of ESADE Business
School; President and CEO, Bacardi Limited;
Non-Executive Director, SABMiller plc
Chair
Nationality: Spanish
Appointed: Chair and Chair
of the Nomination
Committee: January 2017
(Appointed Chair Designate
and Non-Executive Director:
July 2016)
Debra Crew
Key strengths: Has broad
experience in various consumer
products sectors at board, chief
executive and management
leadership levels, as well as over
five years' experience in non-
executive and executive roles at
Diageo
Current external appointments: Non-Executive
Director, Stanley Black & Decker, Inc.
Previous Diageo roles: Interim Chief Executive;
Chief Operating Officer; President, North
America; Non-Executive Director, Diageo plc
Previous relevant experience: Non-Executive
Director, Newell Brands, Mondelēz International
Inc.; President and CEO, Reynolds American, Inc;
President, PepsiCo North America Nutrition,
PepsiCo Americas Beverages, Western Europe
Region; various positions with Kraft Foods, Nestlé,
S.A., and Mars
Chief Executive
Nationality: American
Appointed: Chief Executive
and Executive Director: June
2023
Lavanya
Chandrashekar
Key strengths: Brings broad
financial expertise, commercial
skills and strong consumer goods
experience to manage the
group’s affairs relating to
financial controls, accounting,
tax, treasury and investor
relations
Previous Diageo roles: Chief Financial Officer,
Diageo North America and Global Head of
Investor Relations
Previous relevant experience: VP Finance, Global
Cost Leadership and Supply Chain, Mondelēz
International; VP Finance, North America,
Mondelēz International; VP Finance, Eastern
Europe, Middle East and Africa, Mondelēz
International; various senior finance roles at
Procter & Gamble
Chief Financial Officer
Nationality: American
Appointed: Chief Financial
Officer and Executive
Director: July 2021
Susan Kilsby
Key strengths: Brings wide-
ranging corporate governance
and board-level experience
across a number of industries,
including a consumer goods
sector focus, with particular
expertise in mergers and
acquisitions, corporate finance
and transaction advisory work
Current external appointments: Non-Executive
Chair, Fortune Brands Innovations, Inc.; Non-
Executive Director and Chair of Corporate
Responsibility Committee, Unilever PLC; Non-
Executive Director and Chair of Talent and
Remuneration Committee, COFRA Holding AG;
Member and Chair of Remuneration Committee, the
Takeover Panel
Previous relevant experience: Senior Independent
Director and Chair of Remuneration Committee, BHP
Group Plc, BHP Group Limited; Senior Independent
Director, BBA Aviation plc; Chair, Shire plc; Chair,
Mergers and Acquisitions EMEA, Credit Suisse; Non-
Executive Director, Goldman Sachs International,
Keurig Green Mountain, L’Occitane International,
Coca-Cola HBC, NHS England
Senior Independent
Director
Nationality: American/
British
Appointed: Senior
Independent Director:
October 2019 (Appointed
Non-Executive Director: April
2018 and Chair of the
Remuneration Committee:
January 2019)
Melissa Bethell
Key strengths: Has extensive
international corporate and
financial experience, including in
relation to private equity,
financial sectors, strategic
consultancy and advisory
services, as well as having strong
non-executive experience at
board and committee levels
across a range of industries,
including retail, consumer goods
and financial services
Current external appointments: Non-Executive
Director, Tesco PLC, Exor N.V.; Senior Advisor and
Director of investee companies, Atairos Europe
Previous relevant experience: Managing Director
and Senior Advisor, Private Equity, Bain Capital;
Non-Executive Director, Atento S.A., Worldpay
plc, Samsonite S.A.
Non-Executive Director
Nationality: American/
British
Appointed: Non-Executive
Director: June 2020
Board
committees
Audit Committee
Executive
Committee
Nomination
Committee
Remuneration
Committee
Chair of the
committee
A
E
N
R
A
E
N
R
N
E
E
A N R
A N R
A
N
R
A
N
R
A
N
R
A
N
R
A
N
R
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Position
Key external appointments
1
Ewan Andrew
Current external appointments: Member, Scotch Whisky Association Council, Scottish
Business Climate Collaboration Board, One Planet Business for Biodiversity Board,
Gartner Executive Advisory Board
Previous Diageo roles: Supply Director, International Supply Centre; Senior Vice
President, Supply Chain & Procurement, Latin America and Caribbean; Senior Vice
President Manufacturing & Distilling, North America; various supply chain,
operational management and procurement roles
President, Global Supply Chain & Procurement
and Chief Sustainability Officer
Nationality: British
Appointed: September 2019
2
Alvaro Cardenas
Previous Diageo roles: Managing Director, Andean Region; Director, End-to-End
Global Commercial Processes; Finance Director, South East Asia Region, PUB
(Paraguay, Uruguay and Brazil) Region, Andean Region, Colombia
President, Latin America and Caribbean
Nationality: Colombian
Appointed: January 2021
3
Cristina Diezhandino
Previous Diageo roles: Global Category Director, Scotch & Managing Director,
Reserve Brands; Managing Director, Caribbean and Central America; Marketing &
Innovation Director, Diageo Africa; Category Director, Scotch Portfolio & Gins; Global
Brand Director, Johnnie Walker
Previous relevant experience: Corporate Marketing Director, Allied Domecq Spain;
marketing roles, Unilever HPC US, UK and Spain
Chief Marketing Officer
Nationality: Spanish
Appointed: July 2020
4
Sally Grimes
Current external appointments: Director, Continental Grains Company
Previous relevant experience: Chief Executive Officer, Clif Bar & Company; Group
President, Prepared Foods, Tyson Foods; President, International & Chief Global
Growth Officer, Tyson Foods; President, Gourmet Food Group and Chief Innovation
Officer, Hillshire Brands Company
Chief Executive Officer, North America
Nationality: American
Appointed: October 2023
5
John Kennedy
Previous Diageo roles: President, Europe and India; President, Europe and Western
Europe; Chief Operating Officer, Western Europe; Marketing Director, Australia;
General Manager for Innovation, North America; President and Chief Executive
Officer, Diageo Canada; Managing Director, Diageo Ireland
Previous relevant experience: Brand management roles, GlaxoSmithKline, Quaker Oats
President, Europe
Nationality: American
Appointed: January 2024
6
Daniel Mobley
Previous Diageo roles: Corporate Relations Director, Europe
Previous relevant experience: Regional Head of Corporate Affairs, India & South Asia,
Regional Head of Corporate Affairs, Africa, Group Head of Government Relations,
Standard Chartered; extensive government experience including in HM Treasury and
Foreign & Commonwealth Office
Global Corporate Relations Director
Nationality: British
Appointed: June 2017
7
Hina Nagarajan
Current external appointments: Non-Executive Director, BP p.l.c.
Previous Diageo roles: CEO-Designate, United Spirits Limited; Managing Director,
Africa Regional Markets
Previous relevant experience: Managing Director, China & SVP North Asia, Reckitt
Benckiser; General Manager, Malaysia & Singapore, Reckitt Benckiser; CEO & MD
Mary Kay India; senior marketing and general management roles, ICI Paints India
and Nestlé India
Managing Director and CEO of United Spirits
Nationality: Indian
Appointed: July 2021
8
Dayalan Nayager
Previous Diageo roles: President, Africa; Managing Director, Great Britain and
Justerini & Brooks, Ireland and France, Global Travel; Regional Director, Global Travel
Europe; Commercial Director, South Africa; Customer Marketing Director, South
Africa; Key Account Director, South Africa
Previous relevant experience: Various positions, Heinz, Mars
President, Africa and Chief Commercial Officer
Nationality: South African/British
Appointed: July 2022
9
John O'Keeffe
Previous Diageo roles: President, Asia Pacific & Global Travel; President, Africa &
Beer; CEO and Managing Director, Guinness Nigeria; Global Head, Innovation;
Global Head, Beer and Baileys; Managing Director, Russia and Eastern Europe;
various management and marketing positions
President, Asia Pacific, Global Travel and India
Nationality: Irish
Appointed: July 2015
10
Louise Prashad
Previous Diageo roles: Global Talent Director; Talent & OE Director, Africa; HR
Director, Europe, West Latin America and Caribbean, Global Functions; Talent and
Learning Director UK, Ireland and North America; HR Director Great Britain; Global
Supply; Global Commercial
Previous relevant experience: various HR roles, Stakis Group and Hilton Hotels
Chief HR Officer
Nationality: British
Appointed: January 2022
11
Tom Shropshire
Current external appointments: Member of the Court (Non-Executive Director), The
Bank of England; Trustee, New York University School of Law; Member of the Steering
Committee, The Parker Review; Interim Chair, Charity Projects Limited (Comic Relief)
Previous relevant experience: Partner & Global US Practice Head, Linklaters LLP
General Counsel & Company Secretary
Nationality: American/British
Appointed: July 2021
Diageo Annual Report 2024
95
1
2
3
4
5(1)
6
7
8
9
Debra Crew and Lavanya
Chandrashekar are also members of
the Executive Committee.
Their biographies can be found on
page 92.
10
11
(1)
John Kennedy, who had previously been a member of the Executive Committee, most recently as President, Europe and India, from July 2016 until December 2022 when he left the
company. He rejoined the company and was reappointed to the Executive Committee as President, Europe in January 2024.
EXECUTIVE COMMITTEE
94
Diageo Annual Report 2024
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
• Chair and Chief Executive: The Code requires these roles to be
separate. There is no corresponding requirement for US companies.
Diageo has a separate Chair and Chief Executive.
• Non-Executive Director meetings: NYSE rules require Non-
Management Directors to meet regularly without management
present and independent directors to meet separately at least once a
year. The Code requires Non-Executive Directors to meet without the
Chair present at least annually to appraise the Chair’s performance.
During the year, Diageo has complied with these requirements with
independent Non-Executive Directors, including the Chair, meeting
without the Executive Directors present five times and independent
Non-Executive Directors meeting without the Chair or Executive
Directors present twice.
• Board committees: Diageo has a number of Board committees that
are similar in purpose and constitution to those required by NYSE
rules. Diageo’s Audit, Remuneration and Nomination Committees
consist entirely of independent Non-Executive Directors. Under NYSE
standards, companies are required to have a nominating/corporate
governance committee, which develops and recommends a set of
corporate governance principles and is composed entirely of
independent directors. The terms of reference for Diageo’s
Nomination Committee, which comply with the Code, do not contain
such a requirement. In accordance with the requirements of the
Code, Diageo has disclosed on pages 105-106 the results and means
of its annual evaluation of the Board, its Committees and the
Directors, and it provides extensive information regarding the
Directors’ compensation in the Directors’ remuneration report on
pages 122-147.
• Code of ethics: NYSE rules require a Code of Business Conduct and
Code of Ethics to be adopted for directors, executive officers and
employees and disclosure of any waivers for executive directors or
officers. Diageo has adopted a Code of Business Conduct for all
Directors, officers and employees, as well as a Code of Ethics for
Senior Financial Officers in accordance with the requirements of
SOX. See page 115 for further details.
• Compliance certification: NYSE rules require chief executives to
certify to the NYSE their awareness of any NYSE corporate
governance violations. Diageo is exempt from this as a foreign
private issuer but is required to notify the NYSE if any executive
officer becomes aware of any non-compliance with NYSE corporate
governance standards. No such notification was necessary during
the period covered by this report.
Structure and division of responsibilities
The Board is committed to the highest standards of corporate
governance and risk management, which is demonstrated in its
established corporate governance framework, illustrated on page 91.
This includes the three Board Committees (Audit Committee,
Nomination Committee and Remuneration Committee), as well as
management committees which report to the Chief Executive or Chief
Financial Officer (Executive Committee, Finance Committee, Audit &
Risk Committee and Filings Assurance Committee). There is a clear
separation of the roles of the Chair, the Senior Independent Director
and the Chief Executive which has been clearly established, set out in
writing and approved by the Board. A copy of this is available at
https://www.diageo.com/en/our-business/corporate-governance. No
individual or group dominates the Board’s decision-making processes.
Further details on the Board Committees can be found in the separate
reports from each committee on pages 111-147, and details of the
Executive Committee can be found on pages 94-95.
Board skills and experience
Having an appropriate mix of experience, expertise, diversity and
independence is essential for Diageo's Board. Such diverse attributes
enable the Board as a whole to provide informed opinions and advice
on strategy and relevant topics, thereby discharging its duty of
oversight. The Board skills matrix helps to identify the experience and
expertise of existing Directors, required skill sets or competencies, and
the strategic requirements of the company. The key strengths and
relevant experience of each Director are set out on pages 92 and 93,
and a matrix of the Board’s current skills and experience is set out
below.
Banking and corporate finance
Commercial matters
Consumer products
Corporate governance
Emerging markets
Finance
Food and beverages
Government and public policy
General management
M&A
Media
Sales and marketing
Strategy
Sustainability
Technology
Transaction advisory
Independence
The Code requires the Board to state its reasons for concluding that a
director is independent notwithstanding the existence of certain
relationships or circumstances which are likely to impair or appear to
impair the director's independence. A non-exhaustive list of such
circumstances is set out in provision 10 of the Code and include,
amongst other things, the fact that a director has served on the board
for more than nine years. As noted in last year's annual report, Alan
Stewart, who was first appointed to the Board in September 2014 and
has therefore exceeded nine years on the Board, agreed to extend the
term of his appointment to enable a smooth transition of the role of
Chair of the Audit Committee. As announced on 20 February 2024,
Julie Brown will be joining the Board and succeeding Alan as Chair
of the Audit Committee with effect from 5 August 2024. Accordingly,
Alan will retire from the Board immediately prior to the 2024 AGM
and not stand for re-appointment. The Board considered the matter
of Alan's independence in light of this extension and concluded that,
notwithstanding his serving for more than nine years, he continues to
make high-quality contributions to Board and committee meetings,
providing effective and constructive challenge to management and
demonstrating objective and independent judgement. In light of this
assessment, originally made in July 2023 and recently confirmed
by the Board, the Board has determined that Alan Stewart
remains independent.
Board and Committee attendance
Directors’ attendance record at the last AGM, scheduled Board
meetings and Board Committee meetings, for the year ended 30 June
2024 is set out in the table shown on page 89. Directors are expected
to attend all meetings of the Board and its Committees and the AGM,
but if unable to do so they are encouraged to give their views to the
Chair of the meeting in advance. The 2023 AGM was held as a
combined physical and electronic meeting via a live webcast with all
Directors attending either physically or by video link. For Board and
Board Committee meetings, attendance is expressed as the number of
meetings attended of the number that each Director was eligible to
attend. The 2024 AGM is scheduled to be held on 26 September 2024.
Diageo Annual Report 2024
97
Board of Directors
Composition of the Board
The Board comprises the Non-Executive Chair, two Executive Directors,
the Senior Independent Director, and six independent Non-Executive
Directors. The biographies of all Directors are set out in this Annual
Report on pages 92 and 93.
Inclusion and diversity
The Board sees championing inclusion and diversity as one of the key
enablers for achieving Diageo’s ambition. It is also a core principle of
the company’s global Human Rights Policy which applies to all
employees, subsidiaries and third-party contractors and which has
been implemented as part of our Code of Business Conduct
programme. Our objective is to maintain and sustain an inclusive and
diverse business, across all levels, functions and geographies, in order
to create a better working environment and a better performing
business. As part of this, the Board has adopted a written Board
Diversity Policy alongside Diageo’s Code of Business Conduct and
associated global policies, which set out Diageo’s broader commitment
to inclusion and diversity. Diageo strongly supports diversity within its
Board of Directors, including gender, ethnicity, age and professional
diversity, as well as diversity of thought. The Board is comprised of
individuals from a diverse range of skills, industries, backgrounds and
nationalities, which enables a broad evaluation of all matters
considered by the Board and contributes to a culture of collaborative
and constructive discussion. The Board’s objective, as set out in its
Diversity Policy, is that it shall include no less than 40% female
representation (with the ultimate goal being parity between males and
females on the Board) and at least one Director from a minority ethnic
group. As at 24 July 2024, women make up 70% of the Board and
there are four Directors (40%) who self-disclose as being from minority
ethnic groups. Further information about diversity at Board and senior
executive levels can be found on page 121 and in the 'Our people and
culture' and 'Champion inclusion and diversity' sections of the Strategic
Report on pages 55-56 and 59-60 respectively. The Board's Diversity
Policy is available at https://www.diageo.com/en/our-business/
corporate-governance/board-diversity.
Outside interests and conflicts
The Board has adopted guidelines for dealing with conflicts of interest,
with Directors' outside interests being regularly reviewed and
responsibility for authorising conflicts of interest reserved for the Board.
In the case of a potential conflict, the Nomination Committee considers
the circumstances, appropriate controls and protocols, and makes a
recommendation to the Board. The Board confirmed that it was not
aware of any situations that may or did give rise to conflicts with the
interests of the company, other than those that may arise from
Directors’ other appointments as disclosed in their biographies.
Duties of the Board
The Board manages overall control of the company’s affairs with
reference to the formal schedule of matters reserved for the Board for
decision. The schedule was last reviewed in July 2024 and is available
at https://www.diageo.com/en/our-business/corporate-governance.
In order to fulfil their duties, procedures are in place for Directors to
seek both independent advice and the advice and services of the
Company Secretary, who is responsible for advising the Board on all
governance matters. The Board considers a number of factors when
making decisions, including the potential impact of those decisions on
various stakeholder groups and on the company's ‘Spirit of Progress‘
and other non-financial targets, including in respect of environmental
sustainability. Further information on the Board and the Audit
Committee's roles in climate risk governance can be found on page 61.
The terms of reference of Board Committees are reviewed regularly,
most recently in July 2024, and are available at
https://www.diageo.com/en/our-business/corporate-governance.
Corporate governance requirements
In January 2024, the Financial Reporting Council (FRC) published a
new version of the UK Corporate Governance Code, which will apply
to companies with a premium listing on the London Stock Exchange,
including Diageo, for financial periods starting on or after 1 January
2025. Until such time, the principal corporate governance rules
applying to Diageo for the year ended 30 June 2024 are contained in
the 2018 UK Corporate Governance Code (the Code) and the UK
Financial Conduct Authority (FCA) Listing Rules, which require us to
describe, in our Annual Report, our corporate governance from two
points of view: the first dealing generally with our application of the
Code’s main principles and the second dealing specifically with non-
compliance with any of the Code’s provisions. The two descriptions
together are designed to give shareholders a picture of governance
arrangements in relation to the Code as a criterion of good practice. A
copy of the Code is publicly available on the website of the FRC,
www.frc.org.uk. Diageo’s statement as to compliance with the Code
during the year ended 30 June 2024 can be found on page 89.
Diageo must also comply with corporate governance rules contained in
the FCA Disclosure Guidance and Transparency Rules and certain
related provisions in the Companies Act 2006 (the Act). Diageo is also
listed on the New York Stock Exchange (NYSE), and as such is subject
to the applicable rules of this exchange and jurisdiction. For example,
Diageo is subject to the listing requirements of the NYSE and the rules
of the US Securities and Exchange Commission (SEC), as they apply to
foreign private issuers. Compliance with the provisions of the US
Sarbanes-Oxley Act of 2002 (SOX), as it applies to foreign private
issuers, is continually monitored.
Compliance with US corporate governance rules
Under applicable SEC rules and the NYSE’s corporate governance
rules for listed companies, Diageo must disclose any significant ways in
which its corporate governance practices differ from those followed by
US companies under NYSE listing standards. Diageo believes the
following to be the significant areas in which there are differences
between its corporate governance practices and NYSE corporate
governance rules applicable to US companies. This information is also
provided on the company’s website at www.diageo.com.
• Basis of regulation: UK listed companies are required to include in
their annual report a narrative statement of (i) how they have
applied the principles of the Code and (ii) whether or not they have
complied with the best practice provisions of the Code. NYSE listed
companies must adopt and disclose their corporate governance
guidelines. Certain UK companies are required to include in their
annual report statements as to (i) how directors have complied with
Section 172 of the Act, which requires directors to promote the
success of the company for the benefit of the members as a whole,
having regard to the interests of stakeholders and (ii) how directors
have engaged with and taken account of the views of the
company’s workforce and other stakeholder groups. Diageo
complied throughout the year with the best practice provisions of the
Code and the disclosure requirements noted above.
• Director independence: The Code requires at least half the Board
(excluding the Chair) to be independent Non-Executive Directors, as
determined by affirmatively concluding that a Director is
independent in character and judgement and determining whether
there are relationships and circumstances which are likely to affect,
or could appear to affect, the Director’s judgement. The Code
requires the Board to state its reasons if it determines that a director is
independent notwithstanding the existence of relationships or
circumstances which may appear relevant to its determination. NYSE
rules require a majority of independent directors, according to the
NYSE’s own 'brightline' tests and an affirmative determination by the
Board that the Director has no material relationship with the listed
company. Diageo’s Board has determined that, in its judgement and
without taking into account the NYSE brightline tests, all of the Non-
Executive Directors are independent. As such, currently eight of
Diageo’s ten Directors are independent. Further details of this
determination in relation to Alan Stewart, Non-Executive Director and
Chair of the Audit Committee, are set out on page 97.
CORPORA TE GOVERNANCE REPORT
96
Diageo Annual Report 2024
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Appointment and re-appointment at AGMs
The Chair has confirmed that the Non-Executive Directors standing for
re-appointment at this year’s AGM continue to perform effectively, both
individually and collectively as a Board, and that each Non-Executive
Director demonstrates commitment to their roles and continues to
provide constructive challenge, strategic guidance and offer specialist
advice, as well as holding management to account. As can be seen
from the attendance records set out on page 89, Directors’ attendance
levels have been consistently high throughout the year ended 30 June
2024. Two proposed Directors, Julie Brown and Nik Jhangiani, will also
stand for appointment. Further details, including biographies, are set
out in the Notice of Meeting for this year's AGM.
Board activities
Details of the main areas of focus of the Board and its Committees during the year include those summarised below:
Areas of focus
Strategic outcomes
Stakeholders
Strategic
matters
• Held a two-day Annual Strategy Conference (ASC) focusing on key strategic
matters, including implementation of strategic transformation programmes, regional
reviews of North America and Asia Pacific, whisky strategy, developments in the
group's ESG programme including ’Spirit of Progress’
• Regularly reviewed the group’s performance against the strategy
• Received reports on the financial performance of the group as against the annual
plan
• Reviewed the group’s governance frameworks for reputation management, tax
strategy and policy
• Received reports on the macroeconomic environment, socio-political matters and
emerging trends
• Carried out deep dives into key strategic topics including its operations, portfolio
and footprint in North America and Africa, its digital marketing strategy, and its
global travel business
Operational
matters
• Reviewed and approved the group's three-year plan and annual funding plan,
insurance, banking and capital expenditure requirements
• Regularly reviewed and approved the group’s M&A and business development
activities, reorganisations and various other projects
• Reviewed the group's internal culture and values, including in respect of diversity
and inclusion, values and behaviours
• Approved capital expenditure investments, and various significant procurement,
systems and other contracts, having taken into consideration financial, operational,
sustainability and other ESG related factors
• Reviewed the company’s capital allocation, funding and liquidity positions, and
those of its pension schemes
• Reviewed and approved the company’s return of capital proposals, including
interim and final dividends and share buyback programme
• Approved new roles and appointments to the Board, including a new future Chair
of the Board, a new Chief Financial Officer and a new Chair of the Audit Committee
of the Board
• Acting through the Nomination Committee, reviewed the company’s succession
planning and talent strategy
ESG matters
• Supervised conduct of double materiality assessment, reviewed progress in relation
to the group's ’Spirit of Progress’ programme and refreshed the programme in light
of the initial double materiality assessment results
• Received reports on workforce engagement over the year
• Received regular investor reports
• Received regular updates on ESG matters and progress towards ‘Spirit of Progress‘
targets
• Engaged an external facilitator to carry out evaluation of the Board’s performance,
reviewed results and agreed action points
• Reviewed schedule of matters reserved for the Board and terms of reference of its
Committees
Assurance
and risk
management
• Received reports in relation to material legal matters, including disputes, regulatory
and governance developments, and areas of legal or regulatory risk
• On the recommendation of the Audit Committee, approved the company’s risk
footprint, including reviewing and updating the principal risks
• On the recommendation of the Audit Committee, approved the company’s filings,
financial and non-financial reporting including interim and preliminary results
announcements, US filings and Annual Report
Strategic outcomes key
Stakeholders key
Efficient growth
Credibility and trust
People
Customers
Communities
Government
and Regulators
Consistent value creation
Engaged people
Consumers
Suppliers
Investors
Diageo Annual Report 2024
99
CORPORA TE GOVERNANCE REPORT continued
98
Diageo Annual Report 2024
July 2023 – Board and Committee
meetings – London, UK
<
Review by Audit Committee of fiscal
23 reporting, external audit,
preliminary results announcement,
annual report and accounts, as well
as internal audit, controls and
business integrity matters
<
Review by Audit Committee of non-
financial disclosures, including TCFD
compliant reporting
<
Nomination Committee and
Remuneration Committee meetings,
focusing on executive reward cycle
<
Board meeting, focusing on fiscal 23
full year performance and reporting,
finance and governance matters,
'Spirit of Progress' programme, and
workforce engagement activities
Fiscal 24 Board activities timeline
During fiscal 24, there were several
scheduled in-person meetings of the
Board and its Committees as well as a
number of ad hoc, out-of-cycle
meetings held by video-conference
and electronic approvals. During the
year, most physical Board and
Committee meetings were held at
Diageo’s office in London although the
Board met in Chicago in October
2023. The Annual General Meeting
was held in London in September
2023, enabling shareholders to
engage directly with the Board. In April
2024, the Board meeting was
preceded by the Annual Strategy
Conference, a multi-day conference at
which the Executive Committee and
the Board review and discuss business
strategy areas and initiatives, from
which the annual cycle of strategic
topics for consideration by the Board
over the next 12 months is determined.
<
Strategic and operational
matters
<
Risk mitigation, audit and
assurance
<
Environmental, social and
governance matters
<
Talent and people
management
October 2023 – Board and
Committee meetings – Chicago,
Illinois, USA
<
Audit Committee meeting, with a
focus on principal and emerging risk
reviews
<
Nomination Committee and
Remuneration Committee meetings
<
Multi-day board meeting, focusing
on latest performance, North
America business and operations,
including customer and on-premises
visits and a production facility tour,
Africa strategic review, digital
marketing, and values, behaviours
and culture
September 2023 – Board and
Committee meetings and AGM –
London, UK
<
Nomination Committee meeting
<
Board meeting, focusing on latest
performance, reputation
management and strategy, and
various supply chain contract
approvals
<
Annual General Meeting, engaging
with shareholders and investors with
presentation and Q&A session, and
voting on resolutions
December 2023 – Board and
Committee meetings – London, UK
<
Audit Committee meeting, with a
focus on principal and emerging risk
reviews, internal audit, controls and
business integrity matters, and
preparation for half year results
review
<
Nomination Committee meeting
<
Board meeting, focusing on latest
performance, global travel, business
development, inclusion and diversity,
and board evaluation feedback
January 2024 – Board and
Committee meetings – London, UK
<
Audit Committee meeting, focusing
on half year reporting and interim
results review, as well as internal
audit, controls and business integrity
matters
<
Nomination Committee and
Remuneration Committee meetings
<
External speaker on cyber security
preparedness
<
Board meeting, focusing on fiscal 24
half year performance and reporting,
finance matters, workforce
engagement activities, and supply
chain contract approvals
April 2024 – Annual Strategy
Conference, Board and Committee
meetings – London, UK
<
Annual Strategy Conference,
focusing on business transformation,
key regional strategies, innovation,
whisky, and business planning
<
Board review and approval of
materiality assessment results and
refresh of ’Spirit of Progress’
programme
<
Audit Committee meeting, with a
focus on principal and emerging risk
reviews, internal audit, controls and
business integrity matters
<
Nomination Committee meeting,
focusing on Executive Committee
succession planning, and
Remuneration Committee meeting
<
Board meeting, focusing on finance
matters, business development,
reputation management, supply
chain footprint and approvals
June 2024 – Committee meetings –
London, UK
<
Audit sub-committee meeting,
focusing on progress in relation to
audit and year end reporting
<
Review of preparation of non-
financial reporting and disclosures,
including TCFD compliant reporting
<
Remuneration Committee meeting,
focusing on executive reward cycle
CVC
EG
CVC
EP
EG
CT
EP
CVC
CT
EG
CT
CVC
EP
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Customers
• Our customers are a broad
range of businesses, large
and small, on-trade and off-
trade, retailers, wholesalers
and distributors, digital and
e-commerce
• We want to nurture mutually
beneficial relationships to
deliver joint value and great
consumer experiences
What we believe matters most to them
• A portfolio of leading brands that meets evolving consumer
preferences
• Identification of opportunities that offer profitable growth
• Insights into consumer behaviour and shopper trends
• Trusted product quality
• Innovation, promotional support and merchandising
• Availability and reliable supply and stocking
• Technical expertise
• Joint risk assessment and mitigation
• Sustainability and societal credentials
How the Board seeks to engage
• Regular review of innovation pipeline and inorganic
opportunities to ensure a broad portfolio at multiple price
points
• Review of supply chain footprint to ensure efficient delivery
of products to customers
• Direct engagement with key customers during market visits
Reporting to the Board
• Regular performance updates by the
Chief Executive, including customer and
route-to-consumer concerns
• Deep dive reviews on key regions or
markets, such as Great Britain and
North America, including consideration
of key customer relationships and ways
of working
Upcoming priorities
• Scheduling face-to-face meetings for
Directors to meet representatives of key
customers during market visits and
throughout Board calendar
• Enhancing relationships between the
company and its customers through
engagement opportunities
Suppliers
• Our suppliers, service
providers and agencies are
experts in their fields
• We rely on them to deliver
high-quality products and
market responsibly
• We collaborate with them to
improve our collective
impact, ensure sustainable
and resilient supply chains,
and make positive
contributions to society
What we believe matters most to them
• Strong, mutually beneficial partnerships
• Strategic alignment and growth opportunities
• Fair contract and payment terms
• Collaboration to realise innovation
• Consistent performance measures
• Joint risk assessment and mitigation
• Sustainability and societal credentials
How the Board seeks to engage
• Periodic review of supply chain footprint in key markets to
ensure resilience and flexibility, monitoring environmental
impacts and efficiencies
• Review and approval of material supply and procurement
contracts including for critical raw materials
• Supporting management in improving supplier relationships
through fair contract and payment terms, compliance with
Diageo's 'Partnering with Suppliers Standard' and working
collaboratively to mitigate environmental impacts and
achieve ESG goals
Reporting to the Board
• Terms of material contracts with
suppliers are reviewed by the Board
• Periodic updates provided to the Board
in relation to supply chain agility
programme rollout
• Proposals put to the Board include
summaries of potential implications for
suppliers as a key stakeholder group
Upcoming priorities
• Continued focus on rollout of supply
chain agility programme
• Monitoring impact of supply chain
disruption on operations
• Supervision of initiatives to improve
sustainability and supply chain
resilience
Communities
• We aim to create long-term
value for the communities in
which we live, work, source
and sell
• We can help build thriving
communities and strengthen
our business through
empowering people,
increasing access to
opportunities and
championing inclusion and
diversity
What we believe matters most to them
• Impact of our operations on the local economy
• Access to skills development, employment and supplier
opportunities
• Inclusion, diversity and tackling inequality in all forms
• Responsible use of natural resources, biodiversity and
sustainability
• Transparency and engagement
How the Board seeks to engage
• Setting targets and monitoring progress on broader societal
matters, including promoting positive drinking, inclusion and
diversity
• Considering the environmental and social consequences for
communities of its key decisions, including encouraging
inclusion and diversity, equal employment opportunities,
skills development and support for communities and
through wider value chains
Reporting to the Board
• Reports provided to Board on progress
made in relation to 'Spirit of Progress'
targets
• Proposals put to the Board include
summaries of potential implications for
local communities
• Reports on macroeconomic and socio-
political events provided to Board by
management
Upcoming priorities
• Enabling acceleration of key aspects of
'Spirit of Progress' targets, including in
respect of positive drinking and water
stewardship
• Increased focus on carbon reduction
initiatives
Stakeholder and why we engage
Diageo Annual Report 2024
101
Stakeholder engagement
We aim to maintain open and positive dialogue
with all our stakeholders, considering their key
interests in our decision-making and
communicating with them on a regular basis.
This dialogue helps us build trust and respect
and make choices as a business that help shape
the role we play in society.
The development of strong and positive relationships between Diageo
and its external stakeholders is an intrinsic part of our purpose and
culture. Our stakeholders include not only business partners such as
suppliers and customers, our people and workforce, but also
government, consumers and the wider communities in which we
operate. As noted in the company’s statement on Section 172 of the
Companies Act 2006 set out on page 9, in making their decisions and
in discharging their duties to promote the success of the company, the
Directors must have regard to the interests of its stakeholders. We have
summarised below why our stakeholders are important to us, what we
believe their principal interests are and how the Board and company
seeks to engage and respond.
Stakeholder and why we engage
Our people
•
People are at the core of our
business
•
We aim to build a trusting,
respectful and inclusive culture
where people feel engaged and
fulfilled
•
We want our people to be treated
with dignity at work and their
human rights respected
What we believe matters most to them
• Prioritisation of health, safety and well-being
• Learning and development opportunities
• Purpose, culture and benefits
• Contributing to the growth of our brands and
performance
• Promotion of inclusion and diversity
• Sustainability and societal credentials
How the Board seeks to engage
• Active dialogue maintained throughout the year as
part of the Board's ongoing workforce engagement
programme
• Direct engagement through visits to offices,
production and supply chain sites during the year
• Indirect engagement through feedback from works
councils, employee and workforce forums,
community groups, Your Voice and pulse surveys
and townhall meetings
Reporting to the Board
• Regular reports from workforce
engagement activities
• Feedback through employee surveys,
including annual group-wide Your Voice
survey
• Sessions on different aspects of culture,
values and behaviours at Board meetings
led by Chief HR Officer
Upcoming priorities
• Maintaining focus on simplifying internal
processes, including upgrading and
transforming business operations and
systems
• Continuing workforce engagement
activities including as part of business
transformation implementation and
change management
Consumers
• Understanding our consumers is
critical for our business’s long-term
growth
• Consumer motivations, attitudes
and behaviours form the basis of
our business strategy, brand
marketing and innovation
• We want consumers to enjoy our
products responsibly and for them
to ‘drink better, not more’
What we believe matters most to them
• Choice of brands for different occasions, including
no- and lower-alcohol
• Innovation in heritage brands and creation and
nurturing of new brands
• Responsible marketing
• Great experiences
• Product quality
• Sustainability and societal credentials
• Price
How the Board seeks to engage
• Monitoring consumer behaviours, motivations and
insights
• Responding to and anticipating emerging
consumer trends as part of strategic sessions,
including the Annual Strategy Conference
• Regular review of business development
opportunities, including active brand portfolio
management
• Review of innovation pipeline as part of the Annual
Strategy Conference
Reporting to the Board
• Regular performance updates by the Chief
Executive, including on key consumer
trends
• Papers prepared by strategy team on
evolving consumer behaviours globally
and in key regions
• Regular updates by Business Development
and Innovation teams on organic and
inorganic opportunities and portfolio
choices
Upcoming priorities
• Ongoing review of portfolio and category
participation opportunities
• Developing pipeline of innovation informed
by consumer insights
• Enhancing marketing effectiveness through
detailed understanding of consumer
motivation, globally and by region or
market
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Engaging with investors and shareholders
Diageo's Investor Relations (IR) team support the Chief Executive, Chief
Financial Officer and other members of the Board and Executive Committee
with arranging a programme of engagement events, attendance at analyst
conferences, meetings and calls with a wide variety of shareholders, investors
and analysts. The IR team monitor Diageo's share price performance and
trading patterns, review analyst research notes and recommendations, peer
group and other sector news, providing regular reports to the Board and
Executive Committee. During fiscal 24, there have been over 400 meetings or
calls between investors and management, including the Chief Executive,
Chief Financial Officer or other members of the Executive Committee and IR
team. A key example of how the company engages with investors is the
Capital Markets Event held in November 2023 at which Diageo's Executive
Committee highlighted the company's strategic priorities, showcased case
studies of strategy being put into action, including in relation to the
opportunities for whisky in India, innovation in Guinness and the rollout of
tequila into new markets. These engagement events allow investors to get a
more detailed understanding of our market dynamics and opportunities and
how Diageo looks to grow its business, while also allowing management to
have a direct dialogue with investors.
Fiscal 24 investor activity timeline
August 2023
September 2023
October 2023
November 2023
December 2023
• Announcement of
Diageo's Preliminary
Results for fiscal 23 on 1
August 2023
• Roadshow by the CEO
and CFO in the UK and
US
• Annual General
Meeting held on 28
September 2023
• IR team held a number
of one-to-one meetings
and conference calls
with various investors
• IR team had meetings
with investors on an
individual and group
basis
• Trading update
announcement
• Capital Markets Event
hosted in New York by
CEO, CFO and
Executive Committee
members
• CEO, CFO and other
Executive Committee
members had various
meetings and calls with
investors
January 2024
February 2024
March and April 2024
May 2024
June 2024
• Announcement of
Diageo's Interim Results
for fiscal 24 on 30
January 2024
• Roadshow by CEO and
CFO in London, New
York and Boston
• CEO and CFO
presented at the
CAGNY conference
• The CEO, CFO and IR
team met with several
investors, individually
and in groups
• Roadshow hosted by
Barclays with CFO and
IR team in San
Francisco and Los
Angeles
• CFO attended Deutsche
Bank Conference in
Paris
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Stakeholder and why we engage
Governments and
regulators
• The regulatory environment is
critical to the success of our
business
• We share information and
perspectives with those who
influence policy and regulation
to enable them to understand
our views on areas that can
impact public health and our
business
What we believe matters most to them
• Compliance with applicable laws and regulations
• Contribution to national and local economic development
and public health priorities
• International trade, excise, regulation and tackling illicit
trade
• Tackling harmful drinking and the impact of responsible
drinking initiatives
• Climate change and water sustainability agendas, including
carbon reduction, human rights, environmental impacts,
sustainable agriculture, biodiversity and support for
communities
How the Board seeks to engage
• Indirect engagement through periodic updates from the
Chief Executive and corporate relations executives
• Review of macroeconomic and geopolitical developments
as part of strategy sessions
• Updates on regulatory developments, including in relation to
non-financial reporting, corporate governance and public
policy
Reporting to the Board
• Reports on socio-political events and
issues periodically provided to the
Board
• Developments in regulatory matters,
including governance and reporting
obligations, are included in biannual
reports to the Board prepared by
management
Upcoming priorities
• Monitoring developments in regulation
and best practice in respect of non-
financial reporting requirements, corporate
governance and audit regime
• Supporting management's advocacy in
relation to key public policy matters
including water stewardship, positive
drinking, inclusion and diversity
Investors
• We want to enable equity
and debt investors to have
an in-depth understanding of
our strategy, our operational,
financial and holistic
performance, so that they
can more accurately assess
the value of our business and
the opportunities and risks of
investing in it
What we believe matters most to them
• Strategic priorities, opportunities and risks
• Financial performance
• Corporate governance
• Leadership credentials, experience and succession
• Executive remuneration policy
• Shareholder returns
• Environmental, inclusion and diversity, and social
commitments and progress
How the Board seeks to engage
• Regular engagement between key investors and Chief
Executive and Chief Financial Officer through Investor
Relations programme of events
• Participation in investor conferences such as the Consumer
Analyst Group of New York meeting (CAGNY)
• Hosting investor events such as the Capital Markets Event
held in New York in November 2023
• Attendance at the Annual General Meeting in September
2023, including responding to questions from shareholders
Reporting to the Board
• Monthly reports compiled by Investor
Relations team provided to the Board,
providing details on engagement
sessions with investors and key trends
• Chief Executive reporting investor
sentiment to the Board as part of
regular updates at Board meetings,
including feedback following
participation at analyst and investor
conferences
Upcoming priorities
• Continued proactive engagement with
investors through structured programme
of engagement activities over the year
• Preparing for the Annual General
Meeting to be held in September 2024
• Engaging directly with investors through
post-results announcement roadshows
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ADDITIONAL INFORMATION
Wider stakeholder engagement
Diageo has ambitious goals across a variety of social and
environmental targets and has a long track record of working with
stakeholders to achieve these goals. Our ambition to be one of the
best performing, most trusted and respected consumer products
companies in the world can only be achieved through engagement
and partnership with our stakeholders. The Board and its members
have engaged directly and indirectly with a variety of its key
stakeholders during fiscal 24 in order to respond to stakeholder
considerations in making its decisions and determining the company’s
strategy and goals. These include the following activities:
• In October 2023, the Board met and engaged with customers and
retailers in Chicago, touring shops and stores. During these
meetings and visits, Directors discussed with customers and their
staff what trends were emerging and how they were impacting
sales, stock and inventory levels and consumer choice. Similarly,
when meeting in April 2024 in London, the Board heard the views of
senior executives from Diageo's largest on-trade customers, grocery
and wholesale customers in the United Kingdom. Feedback
received from customers in different markets is also reported to the
Board by the Chief Executive in her regular performance summaries.
Diageo partners with its customers to analyse the performance of its
portfolio and marketing investment as well as market trends and
consumer activity, in order to enhance the company's consumer
insights tools which enhance its innovation, product development
and marketing initiatives.
• Directors, both individually and collectively, have visited a number
of different Diageo offices and production sites during the year. Our
Chair, Chief Executive and Chief Financial Officer travel regularly to
different sites around the world, but our Non-Executive Directors also
visit Diageo locations. For example, in October 2023 Non-Executive
Directors visited the company's packaging facility and plant in
Plainfield, Illinois, as well as its newly opened Guinness Open Gate
brewery and tap room in Chicago. A number of Non-Executive
Directors have also visited Diageo's tequila operations and agave
farms in Mexico over the course of the year. These visits enabled the
Board to get a deeper understanding of the company's production
processes and facilities, as well as the impact of brand homes on
brand equity and consumer choice. Engaging directly with
employees through these visits, as well as the regular workforce
engagement sessions, is an important means of providing insights
as to the complexity of managing distribution and logistics routes,
inventory management and demand forecasting, informing
strategic decision-making and supply chain efficiency.
• The Board has a well-established workforce engagement
programme, in which each Non-Executive Director is involved in
regular engagement sessions with different parts of the global
workforce over the course of the year, both virtual and in person.
Through these sessions, Non-Executive Directors gain insights into
the company’s culture which are then fed back to the company’s
engagement teams and used to shape our approach to people.
See pages 106-107 for this year’s workforce engagement statement
which includes further details of how the programme has operated
during the year.
• Board members, and in particular the Chief Executive and Chief
Financial Officer, participate in an extensive programme of regular
meetings, calls and other engagement activities with investors and
analysts, co-ordinated by the Investor Relations function. See page
103 for a timeline summarising this programme, which includes
highlights from fiscal 24 including the company's Capital Markets
Event hosted in its New York office in November 2023 and the
company's participation at the annual conference of the Consumer
Analyst Group of New York held in Florida in February 2024.
Materials from these sessions are available on https://
www.diageo.com/en/investors/results-reports-and-presentations.
Further information on our stakeholders, what we think is important to
them and how the Board engages and responds to them can be
found on pages 100-104. Case studies summarising how stakeholder
considerations were taken into account by the Board during fiscal 24,
as required by Section 172 of the Companies Act, in respect of three of
its principal decisions are set out on page 104.
Executive direction and control
Executive Committee
The Executive Committee, appointed and chaired by the Chief
Executive, supports her in discharging her responsibility for
implementing the strategy agreed by the Board and for managing the
company and the group. It consists of the individuals responsible for
the key operational and functional components of the business: North
America, Europe, Africa, Latin America and Caribbean, Asia Pacific,
India, Supply Chain and Procurement and Corporate. The Executive
Committee focuses its time and agenda to align with the Growth
Ambition and how to achieve Diageo’s financial and non-financial
performance objectives. Performance metrics have been developed to
measure progress. There is also focus on the company’s reputation. In
support, monthly performance delivery calls, involving the managing
directors of each market, focus on current performance. Committees
appointed by the Chief Executive and intended to have an ongoing
remit, including the Audit & Risk Committee, Finance Committee and
Filings Assurance Committee, are shown (with their remits) at https://
www.diageo.com/en/our-business/corporate governance.
Performance evaluation
The effectiveness of the Board and its Committees is vital to the overall
success of the Group. The last externally facilitated evaluation of the
Board had been carried out in 2020. After internal evaluations
conducted in 2021 and 2022, in accordance with Provision 21 of the
Code, another externally facilitated evaluation was conducted during
2023. In line with the UK Corporate Governance Code, in August 2023
the Board instructed Dr Tracy Long of Boardroom Review Limited
(BRL), an independent professional consultancy which specialises in
board reviews and evaluations, to conduct an externally facilitated
evaluation. Dr Long and BRL have no connection with Diageo or
its directors.
The purpose of the evaluation was to conduct a comprehensive review
and evaluate how the Board and its Committees operate as measured
against current best practice corporate governance principles and in
accordance with the Code guidance. The review encouraged candid
reflections from the Board in order to build on strengths, identify
challenges and consider recommendations.
The evaluation was conducted through a series of one-to-one
interviews with each Director as well as a number of key executives
and third parties who interact frequently with the Board, an
information review and observations of meetings. Dr Long attended
and observed Board and Committee meetings during September and
October 2023, including private meetings between Non-Executive
Directors at which no Executive Directors or management were
present. A report was then prepared for discussion with individual
Directors and the Board as a whole.
The findings of the evaluation indicate that the Board is considered to
be well governed and effective. A particular key strength of the Board
is in its composition, expertise and performance as well as the contents
of its meetings. Diversity, inclusion, trust and transparency are other
key strengths the Board is actively committed to ensuring it reflects its
consumer and global marketplace.
A summary of the key findings and recommendations was presented
by Dr Long to the Board in December 2023, following which the Chair
and Company Secretary determined areas of focus for approval by
the Board.
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Principal Board decisions
Below are some examples of the principal decisions taken by the Board during fiscal 24 as well as summaries of some of the matters referred to in
Section 172 of the Companies Act 2006 which were taken into consideration by the Board.
Creation of our Growth Ambition
Decision made
Supported by the group strategy team and Executive Committee, the Chief Executive has carried out a review and assessment of our strategy in
light of the evolving external environment, resulting in the identification of strategic imperatives and priorities to enable future growth. This
overview, which was presented to and approved by the Board, led to the creation of Diageo’s Growth Ambition, further details of which are set
out on pages 14-15.
Stakeholder considerations
Diageo’s strategy has been to consistently and steadily gain share and build global brands despite various challenges and dynamic external
factors, such as Covid-19, the cost of living crisis, consumer trends and stakeholder expectations. In recent years, the macroeconomic, geopolitical
and societal environment has continued to be volatile seeing a period of accelerated change in many respects, including digitalisation and
technological advances, while other longer-term trends, such as premiumisation, have broadly continued, albeit in a less consistent manner. The
Growth Ambition has at its core the interests and demands of consumers, which vary considerably by market, and, by extension, customers. The
review also considered the interests and needs of Diageo’s employees and broader workforce, who need the systems, processes, structures and
capabilities to enable growth by responding to and leading consumer trends appropriately. The review also considered the interests of
shareholders, aiming to create value, which can be reinvested in our brands and business, and returned to shareholders.
’Spirit of Progress’ review and refinement
Decision made
Diageo’s ambitious global ESG action plan, ‘Spirit of Progress’, was launched in 2020, having been approved by the Board, with the aim to make
a positive impact on people and the planet and to help create a more inclusive and sustainable world. Approaching the mid-point of the overall
programme, during fiscal 24 management undertook a review of the action plan’s current status and recommended a refinement and focus of
resources on those targets which address our highest risks and in respect of which we can have the greatest impact. The Board approved the
review and resulting refinement of these targets and priority areas.
Stakeholder considerations
Diageo has a longstanding commitment to carrying on its business in a sustainable and resilient way, given the importance of environmental and
social responsibility and the impact that the Company has on its different stakeholder groups. For example, Diageo’s workforce want to work for
a company that values the environment and community in which it operates, encourages inclusion of a diverse range of people and builds
respect, engagement and fulfillment. Investors and shareholders benefit from business practices which are sustainable and result in consistent
holistic performance, balancing resource and capital allocation over time. The review, which is described in more detail on pages 49-50,
considered the underlying targets of the programme’s three priority areas and the degree to which progress had been made against them, the
reasons why significant progress had been made against certain targets but not against other targets, and the preliminary results of
management's double materiality assessment. The review also included consideration of various external factors and uncertainties which impact
our ability to achieve certain targets, how stakeholder approaches and expectations developed over time, and areas where Diageo could have a
disproportionate impact through additional resource and focus. As a result of the review, Diageo will focus its efforts on those areas and targets
which address our highest risks and in respect of which we can have the greatest impact, recognising the continuing importance of sustainability
to our stakeholders.
Appointment of future Board Chair
Decision made
The Board approved the appointment of Sir John Manzoni, an existing Non-Executive Director, as Chair of the Board effective on or around 5
February 2025, succeeding Javier Ferrán, who will be standing down in his ninth year on the Board.
Stakeholder considerations
The Board considered Sir John Manzoni’s record since joining the Board in 2020, having made high-quality contributions to Board and
committee meetings, providing effective and constructive challenge to management and demonstrating objective and independent judgment.
The Board considered that Sir John facilitated constructive Board relations in a manner which was consistent with the Board’s transparent and
open culture, and had supported the current Chair in instilling appropriate values, behaviours and culture in the Board and senior management.
Sir John has extensive leadership experience across a number of complex and fast-changing sectors, in the UK and globally, including in
executive and non-executive capacities within the private sector as well as in the UK civil service. His experience in the public sector, working with
government, civil service and regulators, would be particularly beneficial to Diageo. Sir John’s current appointments and commitments were also
noted, including his roles on other company boards, in light of the commitments and demands of the role, as was the fact that he was
independent on appointment, as required by the Code, and remained independent. Overall, the Board concluded that Sir John was the most
suitable candidate and that his appointment as Chair would be of benefit to the company, its shareholders and wider stakeholders.
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• While high workloads and complex systems and processes were
highlighted as barriers that can at times prevent colleagues from
operating in the most efficient way, improvements in collaboration
and connectivity through technology, as well as an overall cultural
shift underway, were praised. Investment being made in digital,
data and analytical capabilities is seen positively, and colleagues
look forward to these investments improving workload and
liberating burdensome processes.
These themes were also reflected in this year’s engagement results
seen in the global employee survey, Your Voice, which remains top
quartile and above external benchmarks with 81% engagement levels
and 89% pride in working for Diageo.
Insights gathered from workforce engagement sessions held by the
Board, alongside broader listening tools such as the Your Voice survey,
annual employee engagement and pulse surveys, have helped the
company to listen and respond to the perspectives of our employees,
as well as identify specific areas to further enhance our employee
experience.
Purpose, values and culture
The Board is responsible for establishing Diageo’s purpose, values and
culture and for monitoring how embedded that culture is within our
business. Diageo has a long-established purpose and set of values
which resonate strongly with our employees, as indicated by the
Board's engagement sessions with Diageo's workforce and our
employee surveys. We are very conscious that Diageo must operate
with the highest standards of governance, doing business the right
way, from grain-to-glass. This principle is embedded in our Code of
Business Conduct and global policies, aligned with our 'Spirit of
Progress' goals, and reflected in our ways of working. We are pleased
that we have a strong reputation for inclusion and diversity which
reflects our values, attracts the best talent and enables our people
to succeed.
There are a number of ways in which the Board monitors and assesses
culture, including:
Site visits
Directors are encouraged to visit the group’s offices, production
facilities and sites in different markets and regions so that they can get
a better understanding of the business and interact with employees
and the wider workforce. During fiscal 24, Board meetings have been
held in the company's headquarters in London on a number of
occasions, enabling Directors to meet and interact with employees,
including with members of the local management team for Great
Britain. The Board has also met in Chicago where they met members
of the North America executive team and visited our spirits production
facility at Plainfield, Illinois. Various Directors have also travelled to
other locations, including our tequila operations in Mexico. These site
visits enable Directors to meet and discuss issues with local
management and workforce members, to observe Diageo’s safety
and sustainability processes working in practice and to assess how
effectively Diageo’s culture is communicated and embedded across a
variety of geographies, functions and roles. As part of the Board's
workforce engagement programme, Non-Executive Directors regularly
hold in-person and virtual meetings, townhalls, focus groups and
question and answer sessions with Diageo employees in different
locations over the course of the year.
Employee surveys
The Board receives reports from the Chief HR Officer on the results of
the company’s global annual ‘Your Voice’ survey, including levels of
employee engagement, employee perceptions of Diageo’s purpose
and of their line managers (including net promoter scores), and any
themes raised. The survey results also give visibility of areas on which
management must continue to focus. Results of this year's 'Your Voice'
survey are described on page 55.
SpeakUp allegation reporting
Regular reports are provided by the Business Integrity team to the
Audit Committee, providing information and data on reported
allegations of breaches of the Code of Business Conduct and other
group policies, including those received through our confidential and
independent whistleblowing service SpeakUp. These reports also
include analyses of emerging trends, investigation status reports and
closure rates, and summaries of actions taken. These reports enable
the Directors to gain an understanding of common issues and action
planning, as well as providing insights into how embedded Diageo’s
purpose, values and culture are across its markets and functions.
For more details of the SpeakUp service, see pages 53 and 114.
Workforce engagement programme
Insights drawn from the Board’s annual programme of workforce
engagement are used by the Board to monitor and assess the culture
of the company, with recommendations being fed back to
management regularly with workforce engagement being discussed
at Board meeting sessions twice a year. Over the past few years, the
engagement programme has enabled all Non-Executive Directors to
participate by directly engaging with employees from a variety of
regions, functions and levels in the business. During fiscal 24, Karen
Blackett has carried out the role of Non-Executive Director with
responsibility for workforce engagement. For more information on
workforce engagement, see page 106.
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Key recommendations
Actions for focus in 2024/25
General feedback
• Continue to ensure Board members feel well integrated into the
Board and company
• Increase lines of communication between management and
Board members
• Ensure focus on diversity continues
• Consider opportunities for more engagement between Board
members and the workforce
Board composition and succession
• Nomination Committee to tailor induction programmes for
specific new Non-Executive Directors depending on their
background and experience
• Enhance the succession planning transition process to identify
potential new Board members with relevant sector experience
• Continue to review the balance of skills, expertise and
knowledge of the Board
• Continue to increase focus on communication channels with
brokers, shareholders and other stakeholders
• Focus recruitment and talent pipeline on key areas for additional
expertise
• Enhance and align technology with the growth agenda and with
testing various assumptions
People and culture
• Continue external talent search for executive and senior leader
roles as well as focus on the development of internal talent
• Continue to promote and protect the company’s corporate
culture and values
• Ensure regular structured engagement between Nomination
Committee members and high potential internal candidates
• Continue to review the talent pipeline of executives and senior
management
• Review and track high potential candidates both internally and
externally
Strategy and risk
• Review and track key strategic decisions and investments
focusing on medium and longer-term issues as well as emerging
trends
• Enhance the group risk appetite statement, including in relation
to description of risk appetite for principal risks
• Continue to maintain strategic focus and to monitor the
changing business landscape including wider external
competition and consumers
• Allocate appropriate time and resources during Board
discussions to ensure the right challenge and support is provided
on strategic and operational risk reviews
• Continue to focus on the company’s approach to ESG and
effective stakeholder engagement as well as shareholder
communication
Progress made against 2023/24 actions
Good progress has been made against the actions identified following
last year’s internally facilitated performance evaluation:
•
There has been an increased focus on Board and management
succession planning and ensuring a pipeline of high-quality,
diverse talent.
•
The Board has continued to improve the direct channels of
communication between management and Board members.
•
The Board has continued to develop and enhance induction
process for new Directors and ensures high-quality pre-read
materials, action closure and time allocation for Board meetings.
Workforce Engagement statement
At Diageo, we believe that our people are critical to our company’s
success, and that creating an inclusive culture and an environment
where colleagues can freely express their views and feel listened to is
key to sustaining high levels of engagement and performance, as well
as ensuring Diageo remains a great place to work. To understand our
colleagues’ experiences, we gather their feedback through both
formal and informal channels. Diageo’s Workforce Engagement
programme is an important way for the Board to hear employees' and
other colleagues' insights on key topics, including culture, strategy, and
ways of working. It is also a valued opportunity for teams to have
direct access to Board members.
In fiscal 24, Karen Blackett took over accountability as the designated
Non-Executive Director for workforce engagement from Javier Ferrán.
Karen, alongside all Non-Executive Directors, held fifteen sessions
across the year, engaging with 539 colleagues from all regions,
functions, and organisational levels below senior leadership. Sessions
have taken place both virtually and face to face, in line with Board
members’ travel, and have been highly engaging. Board members
have valued the openness of conversations and the opportunity to
gather insights on many positive aspects of Diageo’s culture, as well as
areas for improvement.
The key themes emerging from these workforce engagement
discussions are:
• Diageo’s culture continues to be a source of pride and a strong
advantage for the business, characterised as ambitious, progressive
and collaborative, as well as high quality and accessibility of
leadership. Diageo’s leading approach to inclusion and diversity,
and the richness and growth this brings, were positive highlights in
these discussions.
• Diageo’s unique purpose and values are highlighted frequently as
reasons colleagues join and remain at Diageo, as well as Diageo’s
commitment to its 'Spirit of Progress' agenda and embedded
approach to doing business the right way.
• Confidence and belief in Diageo’s diverse brand portfolio are key
drivers of motivation for employees. Improved consumer and
customer connectivity and high standards of execution in activating
on our brands were highlighted as strengths, while the need to
accelerate the speed of innovation to market was frequently cited as
an area for improvement.
• The high calibre of talent across the business is also seen as a
strength, and colleagues spoke positively about diversity in
leadership and opportunities to further their learning and career
development. Colleagues also highlighted the value Diageo’s
Employee Resource Groups bring to the business and expressed an
appetite for greater access and visibility of these important groups.
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Additional information
Internal control and risk management
An ongoing process has been established for identifying, evaluating and
managing risks faced by the group. This process, which complies with the
requirements of the Code, has been in place for the full financial year and
up to the date the consolidated financial statements were approved and
accords with the guidance issued by the FRC in September 2014, entitled
‘Guidance on Risk Management, Internal Control and Related Financial
and Business Reporting’. The Board confirms that, through the activities of
the Audit Committee described below, a robust assessment of the principal
and emerging risks facing the company, including those that would
threaten its business model, future performance, solvency or liquidity, has
been carried out. These risks and their mitigations are set out above in the
section of this Annual Report dealing with principal and emerging risks on
pages 77-85.
The Board acknowledges that it is responsible for the company’s
systems of internal control and risk management and for reviewing
their effectiveness. The Board confirms that, through the activities of the
Audit Committee described in its report, it has reviewed the
effectiveness of the company’s systems of internal control and risk
management. During the year, the Audit Committee considered the
nature and extent of the risks that the Board was willing to take to
achieve its strategic goals and reviewed the existing internal statement
of risk appetite, which had been updated this year by the Executive
Audit & Risk Committee, following which the Audit Committee made a
recommendation to the Board which was then approved. The Audit
Committee reviews the company's principal risks regularly throughout
the year in accordance with a schedule proposed by management
with each such risk being reviewed by management in the Audit &
Risk Committee or other management steering groups prior to it being
considered by the Audit Committee. The Board also regularly reviews
emerging and disruptive risks as part of its Annual Strategy
Conference, held this year in April in London, from which a number of
topics are identified for more detailed review by either the Board or the
Audit Committee over the following 12 months. The company has in
place internal control and risk management systems in relation to the
company’s financial reporting process and the group’s process for the
preparation of consolidated accounts. Further, a review of the contents
of the company's public filings and disclosures, including its
consolidated financial statements and non-financial disclosures, is
completed by management through the Filings Assurance Committee
to ensure that the contents of the company's interim and preliminary
results announcements, Annual Report and Form 20-F appropriately
reflect the non-financial and financial position and results of the group.
Further details of this are set out in the Audit Committee report on
pages 111-117.
Viability statement
In accordance with the Code, the Board has also considered the
company’s longer-term viability, based on a robust assessment of its
principal and emerging risks. This was done through the work of the
Audit Committee which recommended the Viability statement to the
Board. For further information about how the Board has reviewed the
long-term prospects of the group, see page 86.
Going concern
Management prepared 18 month cash flow forecasts which were also
sensitised to reflect severe but plausible downside scenarios taking into
consideration the group's principal risks. In the base case scenario,
management included assumptions for mid-single digit net sales
growth, slightly growing operating margin and global TBA market
share growth. In light of the ongoing geo-political volatility, the base
case outlook and severe but plausible downside scenarios
incorporated considerations for a prolonged global recession, supply
chain disruptions, higher inflation and further geo-political
deterioration. Even under these scenarios, the group’s liquidity is still
expected to remain strong. Mitigating actions, should they be required,
are all within management’s control and could include reductions in
discretionary spending such as acquisitions and capital expenditure,
lower level of A&P and investment in maturing stock, as well as a
temporary suspension or reduction in its return of capital to
shareholders (dividends or share buybacks) in the next 12 months, or
drawdowns on committed facilities. Having considered the outcome of
these assessments, the Directors are comfortable that the company is
a going concern for at least 12 months from the date of signing the
group's consolidated financial statements.
Political donations
The group has not given any money for political purposes in the
United Kingdom during the year. Our US based subsidiary, Diageo
North America, Inc. made contributions solely at its own discretion to
non-UK political candidates and committees in the United States,
where it is common practice to do so. Contributions of approximately
$1.1 million (2023: $1.0 million) were made by Diageo North America,
Inc. during the financial year to US state and local candidates and
committees, consistent with applicable laws. Additionally, our
Australian based subsidiary made contributions, solely at its own
discretion, totalling approximately $0.01 million.
The US contributions reflect no endorsement of a particular political
party, and contributions were made with the aim of promoting a better
understanding of our business and our views on commercial matters,
as well as a generally improved business environment.
Diageo Annual Report 2024
109
How the Board monitors culture
Workforce engagement sessions
All Non-Executive Directors participate in
the Board's workforce engagement
programme, meeting and engaging
directly with groups of employees. We
aim to provide the Board with a greater
understanding of the views of colleagues
on Diageo’s strategy, performance,
values, governance, culture, working
environment or any other topic of
importance to workers, and to inform the
Board on any related decision-making.
For further information on this year's
workforce engagement programme and
the emerging themes, see page 106.
Employee Resource Groups
Diageo has a network of employee
resource groups (ERGs) which create
connections and community within our
employee and workforce population,
both in regions and globally. For
example, the Spirited Women Network
and our Rainbow Network operate in a
number of markets internationally. The
ERGs provide communities of support
and enable management to understand
better concerns of diverse groups within
our workforce. Feedback from the ERGs is
used to assist the Board in monitoring the
culture within Diageo.
Your Voice surveys
Diageo's annual global employee
engagement survey, Your Voice,
provides employees with an opportunity
to feedback their experience of working
at Diageo, what was working well and
what could be improved. The survey,
which takes the form of a questionnaire
with the ability to provide commentary,
is conducted and managed by a third
party provider in multiple languages. All
responses are treated confidentially with
the results being reported back to
management, enabling them to create
action plans per team. Key themes and
feedback is also reported to the Board.
How the Board
assesses
Diageo's culture
Site visits
Directors regularly visit Diageo's offices
and production sites as part of the
Board's annual cycle of meetings. In
addition to the head office in London,
Directors visit other Diageo locations,
offices and sites during the course of the
year for meetings and for familiarisation
visits. For example, during fiscal 24 a
number of Non-Executive Directors visited
Diageo's production facilities, offices and
agave farms in Mexico, meeting and
engaging with employees and workforce
members and to experience different
aspects of the business and operations.
Town hall and focus group
meetings
Non-Executive Directors participate in
both virtual and physical town hall
sessions and smaller focus group sessions
during the year, as part of the Board's
workforce engagement programme.
Attendees are invited from particular
markets and functions, including
contractors, temporary and remote
workers, often in non-leadership roles. The
scope of topics discussed is relatively
broad, covering culture and aspects of
working at Diageo.
Remuneration engagement
The Chair of the Remuneration Committee
meets with a focus group of employees to
discuss Diageo's approach to executive
pay annually. The focus group is
comprised of cross-market and functional
employee representatives. Through this
engagement, we aim to both deepen
employees' understanding of the ways in
which executive pay decisions are made
and receive feedback and views from
employees on the company's approach to
executive remuneration in the context of
broader reward and pay policy within
the group.
CORPORA TE GOVERNANCE REPORT continued
108
Diageo Annual Report 2024
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Ensuring integrity across the business
Dear Shareholder
On behalf of the Audit Committee, I am
delighted to present the Committee’s report
for the year ended 30 June 2024.
The purpose of this report is to describe how the Audit Committee has
carried out its responsibilities during the year. The role of the Audit
Committee is to monitor and review the integrity of financial
information and reporting, and to provide assurance to the Board that
the company's internal controls and risk management processes,
including its internal audit, business integrity and compliance
processes, are appropriate and regularly reviewed. The Audit
Committee also oversees the work of the external auditor, monitors its
independence, approves its remuneration and recommends its
appointment. The Committee is also responsible for reviewing the
company's principal and emerging risks, which it carried out over the
course of the year through a series of risk review deep dives.
During fiscal 24, the Committee undertook an external audit services
tender process as the current auditors had been in role since fiscal 16.
Further details are set out on pages 112-113.
The Committee has also kept under regular review the company's cyber
security risk management processes, governance systems and capabilities,
in light of continuing risks in respect of cyber threats. See page 117 for
further details.
This report also describes areas of significant and particular focus for the
Committee over the year. During fiscal 24 this included regularly
monitoring progress of the company's multi-year programme to improve its
internal processes and upgrade its financial systems and technology. This
programme has been designed to enhance Diageo's business resilience
and controls environment through simplifying and standardising the
group's ways of working, improving access to data, and enhancing
reporting through implementation of a new cloud-based enterprise
resource planning platform. Strategic business transformation has been
identified as a new principal risk this year. The Committee has also
increased its focus on the company's demand forecasting capabilities,
stock in trade and inventory levels monitoring processes and controls,
particularly in light of reduced demand in certain regions such as Latin
America and Caribbean.
As part of the company's year end reporting processes, the Committee has
reviewed and challenged management's approach, analysis and
recommendations, taking into account the views of the external auditor, in
order to conclude on its Annual Report and financial statements. In
addition, the Committee has considered and reviewed the group's
principal and emerging risks on a rolling basis throughout the course of the
year. Further information is provided on pages 114-115.
Having chaired the Committee since 2017, I will be stepping down from the
role shortly and am delighted that Julie Brown has been appointed as my
successor, effective from 5 August 2024. I believe that the Committee has
an open and constructive relationship with management and the external
auditors, whom I thank for their assistance over the year. I also thank my
fellow Committee members for their diligence and engagement. The
Committee remains committed to continuing to discharge its duties in an
effective and diligent manner during fiscal 25.
Alan Stewart
Chair of the Audit Committee
Role and composition of the Audit Committee
The role of the Audit Committee is fully described in its terms of
reference, which are available at https://www.diageo.com/en/our-
business/corporate-governance. The members of the Audit
Committee are independent Non-Executive Directors being Alan
Stewart (Committee Chair), Melissa Bethell, Karen Blackett, Valérie
Chapoulaud-Floquet, Susan Kilsby, Sir John Manzoni and Ireena Vittal.
The Chair of the Board, the Chief Financial Officer, the General
Counsel & Company Secretary, the Group Controller, the Head of
Global Audit & Risk (GAR), the Chief Business Integrity Officer, the
General Counsel Corporate, the Group Chief Accountant and the
external auditor regularly attend meetings of the Committee. The Audit
Committee met privately with the external auditor, the Chief Business
Integrity Officer and the Head of GAR regularly during the year.
During the course of the year, the Committee met five times and
constituted subcommittees to manage the external audit tender
process and to review progress of the year end audit and reporting
processes. Details of attendance of all Board and Committee meetings
by Directors are set out on page 89.
AUDIT COM M ITTEE REPORT
Diageo Annual Report 2024
111
Directors' responsibilities in respect of the Annual Report,
Form 20-F and financial statements
The Directors are responsible for preparing the Annual Report, the
information filed with the SEC on Form 20-F and the group and parent
company financial statements in accordance with applicable law and
regulation. Company law requires the Directors to prepare financial
statements for each financial year. Under company law, the Directors
have prepared the group consolidated financial statements in
accordance with UK-adopted international accounting standards and
the parent company financial statements in accordance with United
Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards, comprising FRS 101 ‘Reduced Disclosure
Framework’, and applicable law). In preparing the group consolidated
financial statements, the Directors have also elected to comply with
International Financial Reporting Standards issued by the International
Accounting Standards Board (IFRSs as issued by IASB).
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair view
of the state of affairs of the group and parent company and of the
profit or loss of the group and parent company for that period. In
preparing the financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable UK-adopted international accounting
standards, IFRSs issued by IASB have been followed for the group
financial statements and United Kingdom Accounting Standards,
comprising FRS 101 ‘Reduced Disclosure Framework’ and applicable
law have been followed for the parent company financial
statements, subject to any material departures disclosed and
explained in the financial statements;
• make judgements and accounting estimates that are reasonable
and prudent; and
• prepare the financial statements on the going concern basis unless
it is inappropriate to presume that the group and company will
continue in business.
The Directors are responsible for safeguarding the assets of the group
and parent company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities. The
Directors are also responsible for keeping adequate accounting
records that are sufficient to show and explain the group’s and parent
company’s transactions and disclose with reasonable accuracy at any
time the financial position of the group and parent company and
enable them to ensure that the financial statements and the Directors’
Remuneration Report comply with the Companies Act 2006. The
Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the company’s
website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation in
other jurisdictions.
Directors’ confirmations
The Directors consider that the Annual Report and financial
statements, taken as a whole, is fair, balanced and understandable
and provides the information necessary for shareholders to assess the
group’s and parent company’s position and performance, business
model and strategy. Each of the Directors, whose names and functions
are listed on pages 92-93 confirm that, to the best of their knowledge:
• the group consolidated financial statements, which have been
prepared in accordance with UK-adopted international accounting
standards, IFRSs issued by IASB, give a true and fair view of the
assets, liabilities, financial position and profit of the group;
• the parent company financial statements, which have been
prepared in accordance with United Kingdom Accounting
Standards, comprising FRS 101 ‘Reduced Disclosure Framework’ and
applicable law, give a true and fair view of the assets, liabilities,
financial position and profit of the parent company; and
• the Strategic Report includes a fair review of the development and
performance of the business and the position of the group and
parent company, together with a description of the principal risks
and uncertainties that it faces.
In accordance with section 418 of the Companies Act 2006, each of
the Directors who held office at the date of the approval of the
Directors’ report confirm that, so far as the Director is aware, there is no
relevant audit information of which the group’s and parent company’s
auditors are unaware, and each Director has taken all the steps that
they ought to have taken as a Director in order to make themselves
aware of any relevant audit information and to establish that the
group's and parent company’s auditors are aware of that information.
The responsibility statement was approved by a duly appointed and
authorised committee of the Board of Directors on 29 July 2024.
CORPORA TE GOVERNANCE REPORT continued
110
Diageo Annual Report 2024
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
A timeline summary of the key steps taken is set out below.
Audit tender process
April 2023
Review of the audit market including firms outside
the ‘Big 4’ professional consultancy firms to
determine their minimum capability and capacity
requirements.
May to
June 2023
Constituted a sub-committee of the Audit
Committee and identified shortlisted firms for
interview.
September
to October
2023
Determined list of assessment criteria, created and
opened data room to share information, and carried
out series of management meetings with each
shortlisted firms.
October to
November
2023
Presentation to the Audit Committee followed by
the submission of formal requests for proposal
from the shortlisted firms.
December
2023
Review of proposals from firms, consideration by
Audit Committee and recommendation to the
Board.
In December 2023, a sub-committee of the Audit Committee reviewed
of the final presentations and responses to the Request for Proposal
submitted by each of the shortlisted firms and based its decision on a
combination of audit approach, team continuity in key roles and
understanding Diageo’s business and risks. The sub-committee refined
the shortlisted firms from four to three and presented a
recommendation to the Audit Committee and subsequently to the
Board. The recommendation comprised a preferred firm and an
alternative firm. After careful thought and consideration, the Board
decided to reappoint PwC as the external auditor. Feedback was
given to all participating firms as part of the tender process.
Since the conclusion of the audit for the year ended 30 June 2023,
Scott Berryman has been lead audit partner with responsibility for
signing the Diageo plc audit opinion on behalf of PwC. Scott will
remain as such for the year ending 30 June 2025 onwards. The Board
will propose the reappointment of PwC at the AGM to be held in
September 2024.
External auditor effectiveness and quality
The Audit Committee assesses the ongoing effectiveness and quality of
the external auditor and audit process through a number of methods,
commencing with identification of appropriate risks by the external
auditor as part of its detailed audit plan presented to the Audit
Committee at the start of the audit cycle. These risks were reviewed by
the Committee and the work performed by the auditor was used to
test management’s assumptions and estimates relating to such risks.
The effectiveness of the audit process in addressing these matters was
assessed through reports presented by the auditor to the Audit
Committee which were discussed by the Committee at both the half-
year, in January, and year end, in July. Following completion of the
audit process, feedback on its effectiveness was provided during
review meetings with the company’s management and finance team,
who also completed questionnaires on their experience of the audit.
Both management and the auditor provided their assessments of
auditor effectiveness and quality to the Audit Committee for
consideration at its meeting in December. The auditor assessment is
undertaken based on the requirements of the Code as well as
guidance issued to audit committees by the FRC in April 2016 and
Minimum Standards for Audit Committees published by the FRC in
May 2023, as well as the NYSE listing rule 303A.07. It includes
consideration of the findings of the FRC's Audit Quality Review team
which published its 2022/23 Audit Quality Inspection and Supervision
report on PwC in July 2023, periodic regulatory review carried out by
the US Public Company Accounting Oversight Board (PCAOB) and the
Quality Assurance Department of the Institute of Chartered
Accountants in England and Wales, as well as benchmarking of the
auditor as against its peers. The assessment also takes into
consideration PwC's annually published Transparency Report which
sets out how the firm upholds its professional responsibilities and seeks
to ensure delivery of quality in its services. The results of the survey
conducted during fiscal 24 indicated a consensus view that overall
performance is solid. Consistent strong feedback was received in
relation to solid auditor independence and quality control, strong
professional expertise and business knowledge, and solid quality
communication between PwC and management. Areas where
continued focus was required remained consistent with the prior year
assessment including timely review and feedback on audit matters,
better alignment in internal communication, resource continuity and
use, pro-activity in driving efficiencies, provision of best practice
examples of processes and controls, and transparency on audit
activities throughout the year. It was concluded that the relationship
between the auditor and management was strong and open. The
auditor team communicated openly and clearly those areas which
they considered significant and their views on such matters. Senior
members of the PwC team had been very visible throughout the
business and strengthened relationships with management.
During the external audit, the auditor challenged management on its
approach taken as to brand impairment testing, including discussing
and reviewing management's plans and strategies for future growth of
the brands as against recent performance and forecasts. The auditor
also challenged management as to other judgemental matters such
as pension obligation valuations and uncertain tax positions, assessing
management's analysis as to these potential exposures and
disclosures in the Annual Report. The auditor also challenged
management while preparing the Annual Report in relation to whether
there was sufficient balance in the Strategic Report and as to
disclosures of critical accounting policies and practices, including
those relating to impairment of goodwill and indefinite life intangible
assets, pensions valuation and uncertain tax positions. The Audit
Committee assessed these challenges, discussing them with
management and the auditor, and seeking additional information and
evidence from management in support of these assessments.
External auditor independence
The group has a policy on auditor independence and on the use of
the external auditor for non-audit services, which is reviewed annually,
most recently in July 2024. Under the auditor independence policy,
any member of the PwC global network shall provide to the company,
its subsidiaries or any related entity only permissible services, subject to
the approval of the Audit Committee after it has properly assessed
through its governance process the threats to independence and the
safeguards applied in accordance with the FRC Ethical Standard, SEC
auditor independence rules and US Public Company Accounting
Oversight Board rules. These services are set out in full in the policy
and are generally those which the external auditor is best placed to
provide, which may include reporting required by law or regulation to
be performed by the auditor and services where the services are
closely linked to audit work and where the auditor's understanding of
the group is relevant to the services. Any FRC permissible service to be
provided by the auditor, regardless of the size of the engagement,
must be specifically approved by the Audit Committee or its
nominated delegate (being the Chair of the Audit Committee) based
on a defined scope of pre-approved services. The policy explicitly
specifies the auditor independence review and approval mechanism
process by the Committee for permissible engagements above the
specified threshold of £100,000. Fees paid to the auditor for audit,
audit-related and other services are analysed in note 4(b) to the
consolidated financial statements. The nature and level of all services
provided by the external auditor are factors taken into account by the
Audit Committee when it reviews annually the independence of the
external auditor. During the year, no non-assurance related services
were provided by the external auditor to the company, its subsidiaries
or any related entity other than personal tax services provided to two
Non-Executive Directors and the provision of services in connection
with the issuance of senior notes by a group company.
Diageo Annual Report 2024
113
Reporting and financial statements
During the year, the Audit Committee reviewed the interim results
announcement, including the interim financial statements, the Annual
Report and associated preliminary results announcement and Form
20-F, focusing on key areas of judgement and complexity, critical
accounting policies, disclosures (including those relating to contingent
liabilities, climate change and principal risks), viability and going
concern assessments, provisioning and any changes required in these
areas or policies. The Audit Committee has also focused in particular
on the company’s approach to assurance and internal approvals
processes. Under the supervision of the Audit Committee,
management has again sought to refine our non-financial reporting in
order to enhance consistency and intelligibility throughout the Annual
Report, while also complying with the recommendations of the Task
Force on Climate-related Financial Disclosures.
This year the Committee has continued to regularly review progress of
the company's transformation project to improve Diageo’s internal
processes and upgrading its financial systems and technology,
monitoring progress against the project's targets and timeline,
including its controls framework and reporting capabilities.
The company has in place internal control and risk management
systems in relation to the company’s financial and non-financial
reporting process including the group’s process for the preparation of
consolidated financial statements. A review of the consolidated
financial statements and the draft Annual Report is completed by the
Filings Assurance Committee (FAC) to ensure that the financial position
and results of the group are appropriately reflected therein. In addition
to reviewing draft financial statements for publication at the half and
full year, the FAC is responsible for examining the company’s financial
and non-financial information and disclosures, the effectiveness of
internal controls relating to financial and non-financial reporting and
disclosures, legal and compliance issues and determining whether the
company’s disclosures are accurate and adequate. This year
additional focus has been given to the adequacy of regional inventory
monitoring processes, especially in Latin America and Caribbean. The
FAC comprises senior executives such as the Chief Executive, the Chief
Financial Officer, the General Counsel & Company Secretary, the
General Counsel Corporate & Deputy Company Secretary, the Group
Controller, the Group Chief Accountant, the Head of Investor
Relations, the Head of GAR and the Chief Business Integrity Officer.
The company’s external auditor also attends meetings of the FAC.
Presidents of each region and their finance directors attend the FAC on
request. The Audit Committee reviewed the work of the FAC and a
report on the conclusions of the FAC process was provided to the
Audit Committee by the Chief Financial Officer.
Diageo has carried out an evaluation, under the supervision and with the
participation of management, including the Chief Executive and Chief
Financial Officer, of the effectiveness of the design and operation of
Diageo's disclosure controls and procedures (as defined in the US
Securities Exchange Act Rule 13a-15(e)) as of the end of the period covered
by this Annual Report. Based upon that evaluation, Diageo's Chief
Executive and Chief Financial Officer concluded that, as of 30 June 2024,
Diageo's disclosure controls and procedures were effective.
As part of its review of the company's Annual Report and associated
disclosures, the Audit Committee has considered whether the report is 'fair,
balanced and understandable' and provides the information necessary for
shareholders to assess the company's position, performance, business
model and strategy, as required by Principle N of the Code. In doing so, the
Committee has noted the guidance issued by the FRC on this subject as well
as best practice recommendations from external advisors. The Committee
has considered factors such as whether the report includes descriptions of
the business model, strategy and principal risks which are sufficiently clear
and detailed to enable users to understand their importance to the
company, whether the report is consistent throughout with the narrative
reflecting the financial statements and understanding of directors during the
year, that information is presented fairly, without omission of material
information and not in a manner which might mislead users.
The Committee has also considered the presentation of GAAP and
non-GAAP measures to ensure appropriate prominence is given to
GAAP measures and that non-GAAP measures are presented
consistently and can be clearly reconciled. The Audit Committee has
also considered the governance and processes undertaken by
management in drafting, developing and reviewing the contents of the
Annual Report, which have been designed to ensure the robustness
and adequacy of the information contained in it, including review by
and input from senior executives, the company's advisors and through
the work of the FAC. On this basis, the Audit Committee
recommended to the Board that it could make the required statement
that the Annual Report is 'fair, balanced and understandable'.
SEC correspondence
The Committee reviewed a comment letter addressed to the company
which had been received in March 2024 from the SEC following its
review of the company's Form 20-F for fiscal 23. The letter raised a
question as to the presentation of non-GAAP line items in a table
expressed to be the company's summary income statement. The
company responded by proposing to rename and reformat the
contents of the relevant table in future filings, following which the
SEC confirmed that it had completed its review. The Committee notes
that Diageo remains responsible for the accuracy and adequacy of
its disclosures.
External auditor
During the year, the Audit Committee reviewed the external audit
strategy and the findings of the external auditor from its review of the
interim results and its audit of the consolidated financial statements.
The Audit Committee reviews annually the appointment of the auditor
(taking into account the auditor’s effectiveness and independence and
all appropriate guidelines) and makes a recommendation to the
Board accordingly. Any decision to open the external audit to tender is
taken on the recommendation of the Audit Committee, as was the
case in 2023. There are no contractual obligations that restrict the
company’s current choice of external auditor.
PwC first became Diageo’s external auditor in fiscal 16 following a
tender process carried out in 2015. PwC's re-appointment for fiscal 24
was approved by shareholders at the 2023 AGM.
External audit tender process
At the recommendation of the Audit Committee and as the company
is required to have a mandatory audit tender after 10 years by the
Statutory Auditors and Third Country Auditors Regulations 2016, an
audit services tender process was undertaken during fiscal 24 to
provide sufficient time for an adequate transition in the event that a
new audit firm was selected. In undertaking this tender, the company
has complied with the provisions of The Statutory Audit Services for
Large Companies Market Investigation (Mandatory Use of
Competitive Tender Processes and Audit Committee Responsibilities)
Order 2014 for the year ended 30 June 2024.
In determining the process for the audit services tender, management
took into consideration and followed the FRC's guidance on audit
tendering, with the Audit Committee making robust decisions to ensure
that the requirements of the FRC's minimum standard for audit
committees were met. Included in the process were a review of each
firm's most recent FRC Audit Quality Review reports, a consideration of
potential conflicts of interest and independence checks, and
identification of key individuals with appropriate skills and experience
to act as potential lead partners. Clear and objective criteria for
assessing success were determined and agreed.
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S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Senior financial officers’ code of ethics and
dealing code
In accordance with the requirements of SOX and related SEC rules,
Diageo has adopted a code of ethics covering its Chief Executive,
Chief Financial Officer, and other senior financial officers. During the
year, no waivers were granted in respect of this code of ethics. The full
text of the code of ethics is available at https://www.diageo.com/en/
our-business/corporate-governance/compliance. Both the Audit &
Risk Committee and the Audit Committee regularly review the strategy
and operation of the Business Integrity programme through the year.
The company has also adopted a dealing code setting out
requirements in relation to dealings in Diageo securities by Directors,
Executive Committee members and certain other employees, which
is designed to ensure compliance with applicable insider trading
and market abuse regulations, in particular the UK Market
Abuse Regulation.
Management’s report on internal control over financial
reporting
Management, under the supervision of the Chief Executive and Chief
Financial Officer, is responsible for establishing and maintaining
adequate control over the group’s financial reporting. The Filings
Assurance Committee supports the Chief Executive and Chief
Financial Officer in ensuring the accuracy of the company’s financial
reporting, filings and disclosures. As summarised on page 112, prior to
interim reporting and preliminary reporting each year, the Filings
Assurance Committee examines the company’s financial information
and processes, the effectiveness of its controls in respect of financial
reporting, and the contents of its disclosures.
Management has assessed the effectiveness of Diageo’s internal
control over financial reporting (as defined in Rules 13(a)-13(f) and
15(d)-15(f) under the United States Securities Exchange Act of 1934)
based on the framework in the document ‘Internal Control –
Integrated Framework’, issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO) in 2013. Based on
this assessment, management concluded that, as at 30 June 2024,
internal control over financial reporting was effective. During the
period covered by this report, there were no changes in internal
control over financial reporting that have materially affected or are
reasonably likely to materially affect the effectiveness of internal
control over financial reporting. The same independent registered
public accounting firm which audits the group’s consolidated financial
statements has audited the effectiveness of the group’s internal control
over financial reporting, and has issued an unqualified report thereon,
which is included in the integrated audit report which is included in the
company’s Form 20-F to be filed with the SEC.
'Financial expert', recent and relevant financial experience
The Board has satisfied itself that the membership of the Audit
Committee includes at least one Director with recent and relevant
financial experience and has competence in accounting and/or
auditing and in the sector which the company operates, and that all
members are financially literate and have experience of corporate
financial matters. For the purposes of the Code and the relevant rule
under SOX, Section 407, the Board has determined that Alan Stewart
is independent and may be regarded as an Audit Committee financial
expert, having recent and relevant financial experience, and that all
members of the Audit Committee are independent Non-Executive
Directors with relevant financial and sectoral competence. See pages
92-93 for details of relevant experience of Directors.
Committee activities
Details of the main areas of focus of the Audit Committee during the year include those summarised below:
Areas of focus
Strategic outcome
Corporate
reporting
• Half and full year external reporting updates
• Interim and preliminary results review and approval
• Annual Report and consolidated financial statements, Form 20-F review and approval
• Implications of group functional and presentation currency change on reporting
Internal
controls
• GAR updates
• Business Integrity updates including breach and reporting update
• Controls testing update and Section 404 assessment
• Implications on controls environment of systems and process changes
• Business transformation projects monitoring
• Inventory and stock in trade monitoring controls review and enhancements
External audit
and assurance
• Report on external audit at half and full year periods
• Insights and observations on reporting review
• Auditor independence and non-audit work reviews
• Auditor independence policy review
• Review of management representation letters
• Appointment of auditor and review of terms of engagement and fees
• Auditor performance and effectiveness review and assessment
• Commencement of auditor tender process
• Audit regime reform and approach to assurance
Risk
management
• Principal and emerging risk reviews and tracking
• Risk updates, including group risk footprint and risk appetite review and approvals
• Business ethics and integrity, human rights, anti-counterfeit, geo-political volatility and business
interruption, business transformation, stock in trade, cyber security and IT resilience, climate change
and sustainability, and international taxation risk reviews
Key
Strategic outcomes
Efficient growth
Credibility and trust
Consistent value
creation
Engaged people
Diageo Annual Report 2024
115
Internal audit, controls assurance and risk
The company’s internal GAR team undertakes an annual audit and
risk plan by delivering a series of internal assurance and audit
assignments across a variety of markets, processes, business units and
functions. On the conclusion of each assignment, GAR issues a report
on its findings which may also include an overall rating as to the status
of the market, process or function being audited, detailed reasons for
the rating and actions to be taken within a specific timetable. The
Audit Committee receives regular reports from the Head of GAR on
the latest reports issued.
This year GAR has undertaken a number of audits including both
market and functional audits as well as of certain of the group's end-
to-end processes and procedures. The Audit Committee assesses the
effectiveness of GAR by reviewing its annual audit plan at the start of
the financial year, monitoring its ongoing quality throughout the year,
and assessing completion rates and feedback provided following
completion of the annual audit plan. Having carried out this
assessment, the Audit Committee is of the view that the quality,
experience and expertise of GAR is appropriate for the business. The
company operates a global controls assurance programme for
financial reporting controls in each market and function, which
monitors compliance with and effective operation of the company’s
controls framework. The Audit Committee receives regular reports on
the status of the controls assurance plan, actions taken to enhance
controls design and effectiveness, awareness training provided to
employees, testing results and trends analysis derived from the
company’s integrated risk management system. The Committee also
reviewed and approved changes to the principal risk descriptions and
risk footprint, as well as receiving regular presentations and reviews of
the status of its principal and emerging risks. This year, these reviews
have covered areas including business ethics and integrity, human
rights, anti-counterfeit, geo-political volatility and business interruption,
business transformation, stock in trade, cyber security and IT resilience,
climate change and sustainability, and international taxation. A new
principal risk in relation to strategic business transformation was
identified this year.
Business Integrity programmes
Diageo is committed to conducting its business responsibly and in
accordance with all laws and regulations to which it's business activities are
subject. We hold ourselves to the principles in our Code of Business
Conduct, which is embedded through a comprehensive training and
education programme for all employees. Our employees are expected to
act in accordance with our values, the Code of Business Conduct and in
compliance with applicable laws and regulations. The Audit Committee
monitors compliance with the company’s ethical standards through the
Business Integrity framework, which helps enhance and protect all aspects
of the company’s business. Regular reports are provided to the Audit
Committee by the Chief Business Integrity Officer on progress in providing
guidance, training and tools for all levels in the business, completion rates
for training modules, launch and rollout of new programmes or policies,
monitoring use of whistleblowing mechanisms and investigating allegations
of breaches.
Our Code of Business Conduct, available in 19 languages, sets out
what Diageo stands for as a company and how Diageo operates,
enabling all employees to understand what is required of them in
working for Diageo. Annual training on the Code of Business Conduct
and associated policies is mandatory for all managers and their direct
reports globally, encompassing over 24,000 eligible employees during
the year ended 30 June 2024. Training is delivered in an easily
accessible e-learning format, with classroom training delivered to
those employees who do not have regular access to a computer. The
Code of Business Conduct and other global policies are available at
https://www.diageo.com/en/our-business/corporate-governance.
Third-party risk is also managed through our Know Your Business
Partner programme, which is designed to help the company evaluate
the risk of doing business with a third party before entering and during
a contractual relationship. Business partners are assessed for potential
risks including economic sanctions, bribery and corruption, money
laundering, facilitation of tax evasion, data privacy, human rights and
other reputational issues.
Employees and third-party business partners are encouraged to raise
concerns about potential breaches of the Code of Business Conduct or
policies, either to line managers, legal or HR colleagues, risk,
compliance and Business Integrity teams or to SpeakUp, a confidential
whistleblowing mechanism. SpeakUp is a global service administered
by an independent provider, accessible online or by telephone. Where
legally permitted, it can be used anonymously and reports kept
confidential. Allegations are investigated by independent Diageo
teams, with progress being monitored by the Business Integrity team.
When allegations are substantiated, appropriate disciplinary and
corrective actions are taken. The Audit Committee receives and
reviews regular reports on allegations, including trends information,
root cause analysis and investigation closure rates. Since all of
Diageo's Non-Executive Directors attend the Audit Committee, all Non-
Executive Directors who make up the Board routinely review the
findings of the company's whistleblowing processes in accordance
with the UK Corporate Governance Code.
During the year ended 30 June 2024, 759 allegations of breaches
were reported which is an increase on prior years. The substantiation
rate of allegations confirmed as breaches is 34% (versus 33% in fiscal
23). As of the end of fiscal 24, 70 people exited the business as a result
of breaches of our Code of Business Conduct or policies (fiscal 23: 57
people). The number of leavers for fiscal 23 has been restated due to a
number of open cases from fiscal 23 being concluded this year. At the
end of fiscal 24, we had 223 open cases, which may lead to more
people exiting the business. See below a summary of reported and
substantiated breaches over the past three years.
Reported and substantiated breaches
2022
635
433
156
54
2023
629
417
192
57
2024
759
523
170
70
ò Reported
ò Reported through SpeakUp
ò Substantiated breaches
ò Code-related leavers
A UDIT COM M ITTEE REPORT continued
114
Diageo Annual Report 2024
CT
EP
CT
CT
CVC
CVC
CT
CVC
EG
CT
CVC
EG
EG
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Cyber Security Risk Management
Cyber security risk management is an integral part of Diageo’s overall group risk management programme and aligned to Diageo’s risk
management framework, with cyber security risk forming a central part of the principal risk ‘Cyber and IT resilience’ as set out on page 81. Our
cyber security risk management programme is aligned to industry best practices and provides a framework for handling cyber security threats and
incidents across the global organisation, including threats and incidents associated with the use of IT applications and services provided by IT and
non-IT third parties. Our programme is designed to work across all Diageo functions, markets, and entities. This framework includes steps for
assessing the severity of a cyber security threat, identifying the source of a cyber security threat including whether the cyber security threat is
associated with a third-party service provider, implementing cyber security countermeasures and mitigation strategies and informing management
and our Board of material cyber security threats and incidents. Our cyber security team also engages third-party security experts for industry
benchmarking analysis, risk assessments and conducting system enhancements and support when necessary. Our cyber security team is
responsible for assessing our cyber security risk management programme and we engage third parties for such assessments approximately every
one to two years. In addition, our cyber security processes includes a training and awareness outreach programme that provides training to all
employees annually and more frequent targeted training across functions, markets, and entities.
The Board has overall responsibility for our risk management, including in respect of cyber security, oversight of which has been delegated to the
Audit Committee. The Audit Committee is responsible for ensuring that management has processes in place designed to identify and evaluate
cyber security risks to which the company is exposed and implement processes and programmes to manage cyber security risks and mitigate
cyber security incidents. The Audit Committee also reports material cyber security risks to the Board. Management is responsible for identifying,
considering and assessing material cyber security risks on an ongoing basis, establishing processes to ensure that such potential cyber security risk
exposures are monitored, putting in place appropriate mitigation measures and maintaining cyber security programmes. Our cyber security
programmes are under the direction of our Chief Information Security Officer (CISO) who receives reports from our cyber security team and
monitors the prevention, detection, mitigation, and remediation of cyber security incidents. Our CISO and dedicated personnel are certified and
experienced information systems security professionals and information security managers with many years of relevant industry experience and
accredited certifications. Management, including the CISO and our cyber security team, regularly update the Audit Committee on the company’s
cyber security programmes, material cyber security risks and mitigation strategies and provide cyber security reports on a half-yearly basis that
cover, among other topics, assessments of the company’s cyber security programmes, developments in cyber security and updates to the
company’s cyber security programmes, security risk footprint with risk appetite, and mitigation strategies.
During fiscal 24, we did not identify any cyber security threats that have materially affected or are reasonably likely to materially affect our business
strategy, results of operations, or financial condition. However, despite our efforts, we cannot eliminate all risks from cyber security threats, or
provide assurances that we have not experienced an undetected cyber security incident. For more information about these risks, please see the
section on ‘Our Principal Risks and Risk Management’ on pages 77-85.
Diageo Annual Report 2024
117
Significant issues and judgements
Significant issues and judgements that were considered in respect of the 2024 financial statements are set out below. Our consideration of issues
included discussion of the key audit matters as outlined in the appendix to the independent auditors’ report.
Matter considered
How the Audit Committee addressed the matter
The nature and size of any one-off items
impacting the quality of the earnings and
cash flows.
The Audit Committee assessed whether the related presentation and disclosure of those items in
the financial statements were appropriate based on management’s analysis, and concluded that
they were.
Items that were to be presented as
exceptional. Refer to note 3 of the Financial
Statements.
The Audit Committee assessed whether the reporting of those items as exceptional, was in line
with the group’s accounting policy, and that sufficient disclosure was provided in the financial
statements, and concluded that they were.
Whether the carrying value of assets, in
particular intangible assets, was supportable.
Refer to notes 6, 9, 10 and 13 of the Financial
Statements.
The Audit Committee reviewed the methodology applied in conducting impairment reviews and
the result of management's impairment assessments that were performed during the year. The
Committee was provided with information about the carrying amounts and the key assumptions
incorporated in management’s estimate of discounted cash flows of significant assets that are
sensitive to key assumptions. The Committee reviewed the key assumptions used in the
impairment testing, including management’s cash flow forecasts, growth rates and the discount
rate used in value in use calculations and agreed they were appropriate. The Committee agreed
with management’s judgements and conclusions, whereby the previous impairment charge of
$379 million in respect of Shui Jing Fang brand has been reversed, while Chase brand and
related goodwill and fixed assets, certain brands in the US ready to drink portfolio, and some
smaller other brands and investments in associates have been impaired by $170 million in the
year ended 30 June 2024, out of which $155 million was reported as exceptional operating
charge. The Committee agreed that the recoverable amount of the company’s other assets was in
excess of their carrying value and that appropriate disclosure was provided with respect to assets
impaired, and whose value is more sensitive to changes in assumptions.
The group’s more significant tax exposures
and the appropriateness of any related
provisions and financial statement
disclosures. Refer to page 80 of 'Our
principal risks and risk management' and
note 7 of the Financial Statements.
The Audit Committee agreed that disclosure of tax risk appropriately addresses the significant
change in the international tax environment, and that appropriate provisions and other disclosure
with respect to uncertain tax positions were reflected in the financial statements.
The appropriateness of the valuation of post-
employment liabilities, and the recognition of
any surplus. Refer to note 14 of the Financial
Statements.
The measurement of post-employment liabilities is sensitive to changes in long-term interest rates,
inflation and mortality assumptions. Having reviewed management’s papers setting out key
changes to actuarial assumptions, the Audit Committee agreed that the assumptions used in the
valuation are appropriate. The Committee reviewed management’s assessment of the economic
benefit available as a refund of the surplus or as a reduction of contribution and the key
judgements made in respect of the surplus restriction and concluded that those judgements were
appropriate. The Committee reviewed and concluded that sufficient disclosures were provided in
the financial statements.
Significant legal matters impacting the group.
Refer to note 19 of the Financial Statements.
The Committee agreed that adequate provision and/or disclosure have been made for all
material litigation and disputes, based on the current most likely outcomes, including the litigation
summarised in note 19 of the Financial Statements.
Functional currency of Diageo plc and
presentation currency of Diageo group.
The Audit Committee agreed that in line with reporting requirements the functional currency of
Diageo plc has changed from sterling to US dollar which is applied prospectively from fiscal 24.
This is because the group's share of net sales and expenses in the US and other countries whose
currencies correlate closely with the US dollar has been increasing over the years, and that trend
is expected to continue in line with the group's strategic focus. Diageo has also decided to change
its presentation currency to US dollar with effect from 1 July 2023, applied retrospectively, as it
believes that this change will provide better alignment of the reporting of performance with its
business exposures.
Whether the Annual Report is fair, balanced
and understandable.
The Audit Committee concluded that the Annual Report, taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the company’s
performance, business model and strategy and that there is an appropriate balance between
statutory (GAAP) and adjusted (non-GAAP) measures.
The impact of climate change on the group’s
financial reporting and financial statements.
Refer to pages 61-76 and note 1 and note 9 of
the Financial Statements.
The Audit Committee agreed that the disclosures on pages 61-76 made in response to the
recommendations of the Task Force on Climate-related Financial Disclosures are appropriate and
that the assumptions used in the financial statements are consistent with these disclosures.
A UDIT COM M ITTEE REPORT continued
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S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
capabilities of the Board should be appropriate and reflective of
Diageo’s global scale, business and operations, its strategy, portfolio,
consumer base, culture and status as a listed company. Directors
should have sufficient understanding of the company and its
operations, the markets and industry in which it participates, to
understand the key trends and developments which are relevant for
Diageo.
Recruitment and election procedures
The recruitment process for Non-Executive Directors includes the
development of a candidate profile and the engagement of a
professional search agency specialising in the recruitment of high-
calibre candidates. During the year, we have engaged executive
search companies Russell Reynolds Associates to assist with
recruitment of candidates for the role of Board Chair and Egon
Zehnder to assist with recruitment of candidates for the roles of Audit
Committee Chair and Chief Financial Officer. Neither of these firms
have any other connection with the company except that Ireena Vittal,
a Non-Executive Director, is a member of the advisory board of Russell
Reynolds Associates, although she did not hold this role at the time
that Diageo engaged Russell Reynolds Associates.
In the case of Executive Director or Executive Committee
appointments, an executive leadership assessment may be carried out
by an external professional agency. Reports on potential appointees
are provided to the Committee, which, after careful consideration,
makes a recommendation to the Board. In determining its
recommendations, the Committee has regard to a broad range of
factors including the candidate's background, skill set and experience,
their ability to express independent judgement and participate across
a broad range of topics, including on sustainability and societal
matters, their ability to devote sufficient time to the company and
whether their appointment would contribute towards the Board’s
diversity objectives which are set out in the Board Diversity Policy. This
policy, which applies to the Board and its Committees, reflects the
Board's belief that it is critical that Board membership includes a
diverse range of skills, professional and industry backgrounds,
geographical experience and expertise, gender, tenure, ethnicity and
diversity of thought.
Any new Directors are appointed by the Board and, in accordance
with the company’s articles of association, they must be elected at the
next AGM to continue in office. All existing Directors retire by rotation
and stand for re-election every year. The company’s policy is for all
Directors to attend the AGM, either physically or by video conference
as permitted by the company's articles of association. Details of
attendance of all Board and Committee meetings by Directors are set
out on page 89. The 2024 AGM is scheduled to be held on 26
September 2024.
External appointments
While the Board does not have a written policy as regards the
maximum number of other appointments that Directors should have,
before recommending new appointments to the Board, the
Nomination Committee considers other demands on candidates’ time.
As a general principle, the Committee takes the view that Non-
Executive Directors should have no more than four, and Executive
Directors no more than one, listed mandates in addition to their role as
a director of the company. However, each director's situation is
considered individually. For example, when she joins the Board, Julie
Brown will not also be a member of the Remuneration Committee or
the Nomination Committee, due to her other commitments. Once
appointed, any proposed additional external appointments are also
reviewed by the Nomination Committee to ensure that the additional
demands on a Director’s time will not impact on the Director’s ability to
perform his or her role as a Director of the company before the
additional appointment is recommended for approval by the Board.
Directors’ interests are reviewed and updated at each Board meeting.
The Board has concluded that each Non-Executive Director has
sufficient time to discharge their duties as a director of the company,
taking into consideration their external appointments and
commitments.
Board Chair succession
The Nomination Committee plays a key role in overseeing Board level
changes, considering potential candidates and making
recommendations on appointments to the Board. During fiscal 24,
Diageo announced a number of changes in Diageo's Board
membership which will take effect over the coming months including,
in particular, a future change in the Board Chair.
As the current Board Chair is approaching the maximum tenure that
the Code deems appropriate for a director to be considered to be
independent, during fiscal 23 the Nomination Committee commenced
a succession planning process to enable a smooth transition over a
reasonable timeframe. The process was led by the Nomination
Committee, chaired by the Senior Independent Director and supported
by the Chief HR Officer, with the current Board Chair and any existing
Directors who were potential candidates for the role recusing themselves
from the process and from participation in discussions on Chair
succession during Board and Committee sessions. Clear criteria for
successful candidates were developed which included key requirements
and priorities including in respect of background and experience,
attributes and behaviour, within the context of the culture, strategy and
leadership needed for the Board and company. These were discussed
and approved by the Nomination Committee and used to identify
potential candidates. During the first half of fiscal 24, a variety of
candidates were considered and interviewed by members of the
Nomination Committee.
In March 2024, the Nomination Committee recommended to the
Board that Sir John Manzoni was the most suitable candidate to
succeed Javier Ferrán as Board Chair. The Board approved this
recommendation and on 19 March 2024 announced the transition
with Javier Ferrán continuing as Chair of the Board until his retirement
in February 2025, at which point Sir John will succeed him. In addition
to Sir John's long-standing experience in beverage alcohol, having
served on the board of SABMiller plc for eleven years and having
been a member of the Diageo Board since 2020, he has an
outstanding track record of leadership across a number of complex
and fast-changing sectors in the UK and globally.
Set out below are the principal steps taken in relation to the Board
Chair succession and transition process:
During fiscal 23:
• In April 2023, the Nomination Committee authorised the Senior
Independent Director to engage an external professional executive
search agency.
• Russell Reynolds Associates (which, at the time of engagement, had
no connection with the company other than acting as an executive
search agency) was engaged to assist with the succession process.
• Key criteria for potential candidates, set out in a success profile,
were reviewed and discussed by the Nomination Committee.
During fiscal 24:
• Various external candidates were considered and shortlisted for
review by members of the Nomination Committee, together with
internal candidates, as against the success profile.
• The Nomination Committee recommended that the Board approve
the appointment of Sir John Manzoni as Diageo's next Chair, and
the Remuneration Committee approved remuneration
arrangements for the role. The Board then unanimously approved
the appointment and a regulatory announcement was released on
19 March 2024.
• Following release of the regulatory announcement, Sir John has
been undertaking a transition programme to familiarise himself with
the role of Chair and to prepare for transitioning into the role in
February 2025.
Diageo Annual Report 2024
119
Building our talent for the future
Dear Shareholder
I am pleased to provide the report of the
Nomination Committee for the year ended
30 June 2024.
The Nomination Committee has had an active year, discharging its
responsibilities to ensure adequate succession planning for Board
appointments, including the maintenance of a pipeline of strong
candidates for potential nomination to the Board, and supervising
transitions for new appointments. This year the Committee has spent
significant time looking towards the future, building on strong
foundations as Diageo continues to develop and grow its business. The
Committee has supervised the transition of key roles such as the Board
Chair, the Audit Committee Chair and the Chief Financial Officer. I
look forward to welcoming Julie Brown and Nik Jhangiani to the
Board in the near future, thanking Alan Stewart and Lavanya
Chandrashekar for their years of service. As I will also be standing
down in February 2025, being in my ninth year on the Board following
which date I will no longer be deemed to be independent under the
UK Corporate Governance Code. I congratulate Sir John Manzoni on
his appointment.
This year the Committee also managed the evaluation of the
effectiveness of the Board, its Committees, members and processes.
As required by the Code, the evaluation was facilitated by an
external consultancy firm which had been selected by the
Committee following a tender process. Further details, including
the review’s conclusions, recommendations and actions as agreed
by the Board, are set out on pages 105-106.
The Committee has continued to discharge its role in overseeing the
company's talent planning and succession for Executive Committee
members. Sally Grimes was appointed Chief Executive Officer,
Diageo North America in October 2023 and John Kennedy was
welcomed back to Diageo in January 2024 when he was appointed
President, Europe.
With these Board and Executive Committee changes, I am confident
that Diageo has the leadership required for it to continue its progress
towards fulfilling its growth ambition and to create value for its
shareholders and other stakeholders.
Javier Ferrán
Chair of the Nomination Committee
Role and composition of the Nomination Committee
The Nomination Committee is responsible for keeping under review
the composition of the Board and succession to it, reviewing
succession planning for key Executive Committee roles, and
succession planning and overall talent strategy for senior leadership
positions, including in relation to ensuring and encouraging diversity in
leadership positions. It makes recommendations to the Board
concerning appointments to the Board. More details on the role of the
Nomination Committee are set out in its terms of reference which are
available at
https://www.diageo.com/en/our-business/corporate-governance.
The Nomination Committee comprises Javier Ferrán (Committee
Chair), Melissa Bethell, Karen Blackett, Valérie Chapoulaud-Floquet,
Susan Kilsby, Sir John Manzoni, Alan Stewart and Ireena Vittal.
Succession planning
The Committee reviews the effectiveness and adequacy of succession
planning processes and the succession plans for both the Board and
Executive Committee. Succession plans are tailored for key roles,
based on merit and objective criteria, and designed to ensure
inclusion and diversity. Consideration is given to the length of tenure of
each incumbent with the aim prospectively to anticipate potential
changes to the Board or Executive Committee and address vacancies
proactively enabling smooth succession. The Board should comprise a
majority of independent Non-Executive Directors, free of conflicts of
interest, and with sufficient time to discharge their duties as Board
members. The Board has a long-standing commitment to diversity,
believing that a diverse Board enables a broad range of views to be
expressed, enhancing decision-making for the benefit of the long-term
interests of the company and its stakeholders. The composition and
NOM INA TION COMMITTEE REPORT
118
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S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Board and Executive Committee reporting on gender identity or sex
Number of Board
members
Percentage of the
Board
Number of senior
positions on the Board
(CEO, CFO, SID and
Chair)
Number in executive
management
Percentage of
executive
management
Men
3
30.0 %
1
7
54.0 %
Women
7
70.0 %
3
6
46.0 %
Not specified/prefer not to say
—
—
—
—
—
Board and Executive Committee reporting on ethnic background
Number of Board
members
Percentage of the
Board
Number of senior
positions on the Board
(CEO, CFO, SID and
Chair)
Number in executive
management
Percentage of
executive
management
White British or other White (including minority-white groups)
6
60.0 %
3
7
53.8 %
Mixed/Multiple Ethnic Groups
—
—
—
1
7.7 %
Asian/Asian British
3
30.0 %
1
3
23.1 %
Black/African/Caribbean/Black British
1
10.0 %
—
1
7.7 %
Other ethnic group, including Arab
—
—
—
1
7.7 %
Not specified/prefer not to say
—
—
—
—
—
Board
composition
Non-Executive
Director tenure
Board gender
diversity
Board ethnic
diversity
ò Chair
ò 0 – 3 years
ò Male
ò Directors of colour
ò Executive Director
ò 3 – 6 years
ò Female
ò White European
ò Non-Executive Director
ò 6 – 9 years
Executive committee nationality
22%
30%
8%
8%
8%
8%
8%
8%
ò British
ò Indian
ò American
ò Irish
ò American/British
ò South African/British
ò Colombian
ò Spanish
Board diversity data
• Directors are defined as all Non-Executive and Executive Directors
appointed to the Board. Board diversity related data are collated
directly from each Director annually using a questionnaire and are
given on a self-identifying basis.
• Directors of colour are defined in accordance with the Parker Review
definitions as those 'who identify as or have evident heritage from
African, Asian, Middle Eastern, Central and South American
regions'.
• All Board diversity data above are given as at 30 June 2024.
Diageo Annual Report 2024
121
Activities of the Nomination Committee
The principal activities of the Nomination Committee during the year
were:
• the consideration, selection and recommendation as to the
appointment of and transition plan for a new Chief Financial Officer;
• the consideration, selection and recommendation as to the
appointment of and transition plan for a new Chair of the Board;
• the consideration of the talent pipeline for potential new Non-
Executive Directors and other appointments to the Board, including
a new Chair of the Audit Committee;
• the design and conduct of the annual review of Board, Committee
and individual Director effectiveness and performance and a review
of the findings of the review and recommended actions;
• consideration and approval of the report of the Committee in the
company’s Annual Report and consolidated financial statements for
the year ended 30 June 2024;
• consideration and recommendation to the Board of proposed
changes in Directors’ outside interests and any potential conflicts of
interest; and
• a review of the succession plans for Executive Committee roles,
including potential candidates for such roles, their backgrounds and
experience, and how such candidates would contribute towards the
company's diversity objectives.
Board evaluation
As part of the annual Board evaluation, all members of the
Nomination Committee participated in an evaluation of the
Committee. Feedback indicated that the Committee was effective and
that Directors were satisfied with its performance and that its processes
were robust, transparent and effective. Further details of the evaluation
can be found on pages 105-106.
Induction and training
Our customary induction processes for newly appointed Directors
include individual meetings with Executive Committee members and
other senior executives, visits to the company’s production facilities
and offices including the company's head office in London and the
group's spirits production facilities, scotch brand homes, visitor centres
and archives in Scotland. This is supplemented by documents,
materials and information, including corporate governance guidance
materials, Diageo's Code of Business Conduct and other relevant
policy documents, historical Board and Committee papers, recent
results announcements and materials, investor relations reports,
performance data and a wide range of other internal and external
reports, presentations and analyses.
Induction programmes for new Directors are tailored to suit the
particular background and experience of the individual Director, with
the Committee advising on priorities for that individual and tracking
induction activity. These induction processes supplement existing
practices whereby a continuing understanding of the business is
developed through appropriate business engagements for Non-
Executive Directors such as visits to customers, engagements with
employees, and brand events worked into the annual cycle of Board
meetings. Training on specific areas of risk and detailed reviews of
strategic matters are provided by Executive Committee members,
other internal senior leaders and external guest speakers and
specialists through presentations, roundtable discussions and other
sessions as part of the Board’s Annual Strategy Conference and
during the year as part of Board and Audit Committee meetings. In
addition, Executive Committee members and other senior executives
are invited, as appropriate, to Board and strategy meetings to make
presentations on their areas of responsibility. All Directors are also
provided with regular briefings to ensure they are kept up to date on
relevant legal and governance developments or changes, best
practice developments and changing commercial and other risks.
Diversity
The Board has a long-standing commitment to prioritise diversity and
supports the recommendations of the FTSE Women Leaders Review
(previously the Hampton-Alexander Review) on gender diversity and
the Parker Review on ethnic diversity. The Board seeks to promote
inclusion and diversity by objectively considering candidates for Board
and Executive Committee roles on the basis of their skill set,
experience, expertise, knowledge, gender, cultural and geographical
backgrounds, ethnicity and age. The Board Diversity Policy sets out
specific objectives with parity between male and female members of
the Board being the ultimate goal in terms of gender diversity, with a
commitment to have no less than 40% female representation on the
Board, and having at least one Director reflecting ethnic diversity as
defined in accordance with the Parker Review. The Committee is
pleased to confirm that both these objectives have currently been met.
The Board Diversity Policy also sets out the Board’s support for
management’s actions to increase the proportion of senior leadership
roles held by women and by people from minority backgrounds and
other under-represented groups. As at 30 June 2024, the percentage
of women on the Executive Committee and their direct reports is 47%.
NOM INA TION COMMITTEE REPORT continued
120
Diageo Annual Report 2024
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Incentive outcomes
Achieving our ambition to be the best performing, most trusted and
respected consumer products company in the world requires the
appropriate balance of annual and long-term incentive measures and
a process to ensure that targets that are set are challenging but
achievable and aligned to shareholders' interests.
In determining the annual and long-term incentive outcomes, the
Committee reviews not only the outcomes against the performance
metrics in the plans, but also considers Diageo's wider business
performance including market share performance, financial
performance relative to our TSR peer group, and other financial and
non-financial measures. The Committee also considers the impact on
Diageo's stakeholders more broadly.
Annual incentive
The annual incentive plan (AIP) outcomes for 2024 relating to net sales
value (NSV) and operating profit (OP) were below threshold and
operating cash conversion (OCC) was close to target which led to a
payment of 16% of maximum on financials. Further detail is provided
on page 135. The Committee considered this outcome against the
business performance and concluded that the design of the AIP
worked effectively in aligning reward and performance and the
outcome was fair.
The AIP also includes individual bonus objectives (IBOs) and the
outcomes for the Executive Directors are set out in more detail on
page 135. As a result of the financial and individual performance for
fiscal 24, Debra Crew received 24.8% of maximum and Lavanya
Chandrashekar received 22.8% of maximum.
Long-term incentives
In terms of the DLTIP vesting outcomes for the three-year performance
period ending 30 June 2024, an exceptional level of delivery in the
early part of the three-year period resulted in an achievement of 8.7%
compound annual growth in NSV and therefore a vesting of 94% of
maximum. The compound annual growth in profit before exceptional
items and tax (PBET) was 6.9% which resulted in a vesting of 24% of
maximum. Free cash flow (FCF) was $9,798 million and total
shareholder return (TSR) ranked 14th in our peer group and both were
below threshold of the range.
The 2021 performance share awards also included metrics which were
in support of our ’Spirit of Progress’ action plan. The four metrics
measure an increase in water efficiency, reduction in carbon
emissions, promotion of positive drinking and building diversity
representation in leadership. Demanding three-year targets were
established for our goals in this area and the achievement across all of
these resulted in a 46% level of vesting for these non-financial
measures. The detail of the performance against these metrics is set
out on page 137 and more information on the 'Spirit of Progress' action
plan is at pages 48-76.
Overall this resulted in a final vesting outcome of 58.9% of maximum
for the 2021 performance share award for the CEO and 56.5% for the
CFO. The share option awards will not vest for either Director.
The Committee believes that the DLTIP drove the desired behaviours to
support the company’s values and strategy and that the Directors’
remuneration policy has operated as intended in 2024. The
Committee will continue to make sure the metrics and structure of the
DLTIP are appropriate in the future as the business continues to evolve.
Looking forward to 2025
The 1 October 2024 salary increase proposed for Debra Crew is
4.25% which is slightly below the expected average salary
increase budget for the wider workforce in the United Kingdom.
The salary for the newly appointed CFO will next be reviewed on 1
October 2025.
The structure and performance measures for both the annual and
long-term incentives remain unchanged for fiscal 25 for Executive
Directors. The annual incentive plan will continue to include NSV,
OP and OCC with relevant strategic IBOs for the Executive
Directors.
The long-term incentive plan measures continue to drive the key
drivers of sustainable business performance and remain
unchanged with a combination of financial metrics (NSV and PBET
growth, cumulative FCF and relative TSR) and non-financial
metrics related to our 'Spirit of Progress' action plan. The
Committee set fiscal 25 financial targets by considering a number
of factors including historical performance, consumer trends amid
ongoing macroeconomic challenges, market conditions and the
competitive landscape. These targets align with our focus on
achieving our medium-term guidance ranges.
Diageo Annual Report 2024
123
Annual statement by the Chair of the
Remuneration Committee
Dear Shareholder
I am pleased to present the Directors' remuneration report for the
year ended 30 June 2024, which contains:
•
The current Directors' remuneration policy, which was approved
at the AGM on 28 September 2023; and
•
The annual remuneration report, describing how the
Remuneration Policy has been put into practice in 2024 and will
be implemented in 2025.
This is the first year of operation of the new remuneration policy
and the new Diageo Long-Term Incentive Plan (DLTIP) approved
last year. On behalf of the Committee I would like to express my
thanks to shareholders for their overwhelming support with 95.4%
of the AGM votes cast in favour of the new Policy.
CFO transition
On 3 May 2024, we announced that Lavanya Chandrashekar will
step down from the role of Chief Financial Officer (CFO) in fiscal
25 and leave Diageo, and that Nik Jhangiani will become the new
CFO. Lavanya’s remuneration arrangements, which confirm the
Committee exercised its discretion to treat her as a good leaver for
the purposes of incentives, are set out on page 144 and Nik’s
remuneration arrangements are disclosed in the 'Looking Ahead
to 2025' section of this report (page 146). In addition to his annual
remuneration, Nik will receive compensation for incentive plan
awards forfeited from his previous employer. Full details of the
one-off compensation awards will be disclosed at the time they are
confirmed and will be reported in next year's report. Both sets of
arrangements are in accordance with the Remuneration Policy.
Performance in year
Fiscal 24 was a challenging year for Diageo and despite
macroeconomic and geopolitical headwinds, we delivered strong
full-year cash flow and improved market share. Against rapid
fluctuations in our industry, we focused on the key drivers of
operational excellence, developing insights into consumers,
resource allocation, routes to market and driving efficiencies in our
business that will set us up to take advantage of the next stage of
growth.
During the year, the company maintained its position as a global
leader in spirits and demonstrated its capabilities as one of the
world's best brand builders. Our advantaged portfolio which is
balanced across geographies and price tiers enables us to both
premiumise and attract new consumers.
Organic net sales and organic operating profit declined during fiscal
24, primarily driven by our Latin American business performance. We
delivered $0.7 billion in productivity savings across all cost categories,
gained or held share in over 75% of our net sales value in measured
markets and generated free cash flow of $2.6 billion.
Non-financial measures are a critical indicator for building a platform
for future sustainable growth and we are pleased that we have
demonstrated progress in the measures that are aligned with our
’Spirit of Progress’ action plan. These included a greenhouse gas
emission reduction of 23.8% and water efficiency improvement of
15.6%, both compared to fiscal 20 baseline and strong performance
in the diversity of our global leadership, maintaining female
representation at 44% and increasing ethnically diverse leadership to
46%.
In this year’s report
Remuneration at a glance
125
Pay for performance at a glance
126
Remuneration Committee governance
127
Directors’ remuneration policy
128
Annual report on remuneration
134
Looking back on 2024
Single figure of remuneration table
134
Annual incentive payouts for 2024
135
Long-term incentives vesting in 2024
136
Pensions and benefits in 2024
138
Long-term incentives awarded in 2024
139
Outstanding share plan interests
140
Shareholding requirement and share interests
141
CEO total remuneration and TSR performance
142
Wider workforce remuneration and CEO pay ratio
142
Change in pay for Directors and wider workforce
144
Non-Executive Director pay
145
Looking ahead to 2025
Salary increases for the year ahead
146
Annual incentive design for the year ahead
146
Long-term incentives for the year ahead
146
DIRECTORS' REMUNERATION REPORT
122
Diageo Annual Report 2024
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Remuneration at a glance
Salary
Allowances and
benefits
Annual incentive
Long-term incentives
Shareholding
requirement
Purpose
• Supports the
attraction and
retention of the best
global talent with the
capability to deliver
Diageo’s strategy
• Provision of market-
competitive and cost-
effective benefits
supports attraction and
retention of talent
• Incentivises delivery of
Diageo’s financial and
strategic targets
• Provides focus on key
financial metrics and the
individual’s contribution
to the company’s
performance
• Rewards consistent long-term
performance in line with
Diageo’s business strategy
• Provides focus on delivering
superior long-term returns to
shareholders
• Ensures alignment between
the interests of Executive
Directors and shareholders
Key features of current policy
• Normally reviewed
annually on 1
October
• Salaries take
account of external
market and internal
employee context
• Provision of competitive
benefits linked to local
market practice
• Maximum company
pension contribution is
14% of salary, which is
aligned to the offering
for the wider workforce
in the United Kingdom
• Target opportunity is
100% of salary and
maximum is 200% of
salary
• Performance measures,
weightings and
stretching targets are set
by the Remuneration
Committee
• Subject to malus and
clawback provisions
• Executive Directors defer
a minimum of one-third
of earned bonus
payment into Diageo
shares held for three
years
• Remainder paid out in
cash after the end of the
financial year
• Annual grant of performance
shares and share options
• CEO award up to 500% of
salary
• CFO award up to 480% of
salary
(% of salary for both CEO
and CFO described in
performance share
equivalents)
• Performance measures,
weightings and stretching
targets are set annually
• Three-year performance
period plus two-year retention
period
• Subject to malus and
clawback provisions
• Number of awards granted is
based on a six-month
average share price to 30
June preceding grant date
• Minimum shareholding
requirement within five years
of appointment:
• CEO 500% of salary
• CFO 400% of salary
• Post-employment
shareholding requirement
for Executive Directors of
100% of the in-employment
requirement (or, if lower,
their actual shareholding on
cessation) to be retained in
full for two years after
leaving the company
Planned for year ending 30 June 2025
• 4.25% salary
increase for the
CEO, below the
annual salary
budgets for the wider
workforce in the
United Kingdom
• New CFO
appointment from
autumn 2024. No
salary increase in
fiscal 25
• Allowances and
benefits unchanged
from prior year
• Company pension
contributions 14% of
salary
• Size of annual incentive
award opportunity is
unchanged from prior
year. For fiscal 25,
measures are net sales
growth, operating profit
growth and operating
cash conversion, 80% in
total weighted equally,
with remaining 20% on
individual objectives
•
Performance measures are
net sales growth, relative
TSR, cumulative free cash
flow, profit before
exceptional items and tax
and ‘Spirit of Progress‘
measures
•
Size of long-term incentive
award opportunity is in line
with the policy
• No change to in-
employment shareholding
requirement
• Post-employment
shareholding in line with the
Policy
Implementation in year ended 30 June 2024
• 4% salary increase
for the CFO, slightly
below the annual
salary budgets for
the wider workforce
in the United
Kingdom and the
United States
• No increase for the
CEO in fiscal 24
following
appointment on 8
June 2023
• Allowances and benefits
unchanged from prior
year
• Company pension
contribution of 14% for
CEO and CFO. Aligned
to the UK workforce
• Payout of 16% of
maximum for the
financial elements of the
plan
• Total payout of 24.8% of
maximum for the CEO
and 22.8% for the CFO
• Vesting of 2021 performance
shares at 58.9% of maximum
for Debra Crew, and 56.5%
of maximum for Lavanya
Chandrashekar
• The 2021 share options lapsed
for both Debra Crew and
Lavanya Chandrashekar
• As at 30 June 2024, Debra
Crew's shareholding was
240% of salary (she has
until June 2028 to meet her
requirement)
• As at 30 June 2024,
Lavanya Chandrashekar's
shareholding was 100% of
salary (she had until July
2026 to meet her
requirement)
Diageo Annual Report 2024
125
In summary
Diageo's resilient performance despite a challenging consumer
environment is reflected in the incentive outcomes and the
decisions that the Committee has made. The outcomes are in line
with the company’s philosophy of delivering competitive pay in
return for high performance against the company’s strategic
objectives.
The Committee recognises that a key enabler of the strategy is the
company’s ability to attract and retain diverse and engaged talent
with a focus on our culture and values. To achieve this, we must
ensure that remuneration structures remain competitive at all
levels. Diageo is a global business with global and local market
leading brands and we therefore compete for talent in a global
marketplace. The topic of retention of high calibre talent at all
levels is one that is regularly considered by the Committee.
During 2025 Javier Ferrán will retire as Chair and we welcome Sir
John Manzoni as his successor. It has been a pleasure to work with
Javier and I wish to personally thank him for his wise counsel and
leadership of the Board. Alongside a new Chair, we will also see a
transition in CFO as I noted at the start of my statement, and I
extend my thanks to Lavanya for her hard work and support to the
Committee and look forward to working with Nik in the coming
months.
On behalf of the Committee I would like to thank all our
investors, employees and stakeholders for their continued
support and I ask that shareholders vote to approve this report
at the AGM on 26 September 2024.
Susan Kilsby
Non-Executive Director
and Chair of the Remuneration Committee
Remuneration principles
The approach to setting executive remuneration continues to be
guided by the remuneration principles set out below. The
Committee considers these principles carefully when making
decisions on executive remuneration in order to strike the right
balance between risk and reward, cost and sustainability, and
competitiveness and fairness.
The company has a strategy to grow and leverage its leaders
globally given the international nature of the business. We also need
to have the right tools in place to source talent globally and the
increasingly restrictive corporate governance environment in the
United Kingdom presents some challenges when considered against
the significantly higher pay norms in the United States and other parts
of the world, particularly given the increasing international mobility of
the senior talent pool.
Long-term value creation for shareholders and pay for
performance remains at the heart of our remuneration policy
and practices. Attracting and nurturing a vibrant mix of
international talent with a range of backgrounds, skills and
capabilities enables Diageo to grow and thrive, and ultimately to
deliver our Growth Ambition. Remuneration remains a key part
of attracting and retaining the best people to lead our global
business, balanced against the need to ensure our packages are
appropriate and fair in the business and wider employee context,
delivering market-competitive pay in return for high performance
against the company’s strategic objectives.
Delivery of business strategy
Short and long-term incentive plans reward the
delivery of our business strategy and Growth Ambition.
Performance measures are reviewed regularly and
stretching targets are set relative to the company’s
growth plans and peer group forecasted performance.
The Committee seeks to embed simplicity and
transparency in the design and delivery of executive
reward.
Creating sustainable, long-term performance
A significant proportion of remuneration is delivered in
variable pay linked to business and individual
performance, focused on consistent and responsible
drivers of long-term growth. Performance against
targets is assessed in the context of underlying
business performance and the ‘quality of earnings’.
Winning best talent
Well designed and market-competitive total
remuneration, with an appropriate balance of fixed
reward and upside opportunity, allows us to attract
and retain the best talent from all over the world in a
competitive talent market, which is critical to our
continued business success.
Consideration of stakeholder interests
Executives are focused on creating sustainable share
price growth. The requirement to build significant
personal shareholdings in Diageo, and to hold shares
acquired from long-term incentive awards for two
years post-vesting aligns executives and shareholders.
Decisions on executive remuneration are made with
consideration of the interests of the wider workforce
and other stakeholders, as well as the external climate.
DIRECTORS' REMUNERATION REPORT continued
124
Diageo Annual Report 2024
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Remuneration Committee Governance
Remuneration Committee
The Remuneration Committee consists of the following independent
Non-Executive Directors: Susan Kilsby, Melissa Bethell, Karen Blackett,
Valérie Chapoulaud-Floquet, Sir John Manzoni, Alan Stewart and
Ireena Vittal. Susan Kilsby is the Chair of the Remuneration Committee
and also the Senior Independent Director. The Chair of the Board and
the Chief Executive are invited to attend Remuneration Committee
meetings, except when their own remuneration is being discussed. The
Chief Human Resources Officer and Global Performance and Reward
Director are also invited by the Remuneration Committee to provide
their views and advice. The Chief Financial Officer may also attend to
provide performance context to the Committee during its discussions
about target setting and incentive outcomes. The Remuneration
Committee's terms of reference are available in the corporate
governance section of the company's website and on request from the
Company Secretary.
The Remuneration Committee is responsible for all executive
remuneration decisions throughout the year, which includes setting
financial targets for the annual and long-term incentive plans and the
outcomes under these plans. The Committee considered the
remuneration policy and practices in the context of the principles of
the Corporate Governance Code, as follows:
Clarity – the Committee engages regularly with executives,
shareholders and their representative bodies in order to explain the
approach to executive pay;
Simplicity – the purpose, structure and strategic alignment of each
element of pay has been laid out in the remuneration policy;
Risk – there is an appropriate mix of fixed and variable pay, and
financial and non-financial objectives. There are robust measures in
place to ensure alignment with long-term shareholder interests,
including the DLTIP post-vesting retention period, shareholding
requirement, bonus deferral into shares and malus and clawback
provisions updated for prevailing legal and regulatory requirements.
The Committee also considers the impact on behaviour of both the
measures and targets set;
Predictability – the pay opportunity under different performance
scenarios is set out in the approved Directors' remuneration policy
(page 136 of the 2023 annual report);
Proportionality – executives are incentivised to achieve stretching
targets over annual and three-year performance periods, and the
Committee assesses performance holistically at the end of each
period, taking into account underlying business performance and the
internal and external context. The Committee may exercise discretion
to ensure that payouts are appropriate; and
Alignment with culture – non-financial objectives may be incentivised
under the individual business objective element of the annual incentive
plan and ‘Spirit of Progress‘ (ESG) priorities are incentivised under the
long-term incentive plan, which reinforces the company’s purpose and
values. The design of remuneration, and the measures used, reflect
Diageo's culture.
External advisors
During the year ended 30 June 2024, the Remuneration Committee
received advice on Directors' remuneration from FIT. FIT was
appointed by the Committee in October 2022 following a review of
alternative providers and were selected on the basis of their
understanding of the company's culture and business and the
capability of their team.
The fees paid to FIT in fiscal 24 for advice provided to the Committee
were £84,671. All fees were determined on a time and expenses basis.
The Committee is satisfied that FIT's engagement partners, and the
teams that provide remuneration advice to the Committee, have no
connections with Diageo that may impair their independence. The
Committee reviewed the potential for conflicts of interest and judged
that there were appropriate safeguards against such conflicts. FIT does
not provide Diageo with any other services. FIT is a founder member of
the Remuneration Consultants Group (RCG) which is responsible for
developing and maintaining the Code of Conduct for Consultants to
Remuneration Committees of UK listed companies. FIT attended
Remuneration Committee meetings during the year and the
Committee is satisfied that the advice it has received has been
objective and independent.
Statement of voting
The following table summarises the details of votes cast in respect of
the resolutions on the Directors’ remuneration policy and the Directors'
remuneration report at the AGM on 28 September 2023. The
Committee was pleased with the level of support shown for the
Directors' Remuneration Policy and Report and appreciates the active
participation of shareholders and their representative bodies in
consulting on executive remuneration matters.
For
Against
Total votes cast
Abstentions
Directors’ remuneration policy
Total number of votes
1,663,080,546
80,098,370
1,743,178,916
1,023,145
Percentage of votes cast
95.41%
4.59%
100%
n/a
Directors' remuneration report
(excluding the policy)
Total number of votes
1,640,705,024
77,090,228
1,717,795,252
26,428,462
Percentage of votes cast
95.51%
4.49%
100%
n/a
Diageo Annual Report 2024
127
Pay for performance at a glance
The charts below show performance outcomes against targets for the long-term and annual incentive plans. Targets under both incentive
plans are set with reference to Diageo’s strategic plan and the historical and forecasted performance of Diageo and its peers.
Long-term incentives (for the period 1 July 2021 to 30 June 2024)
Organic net sales growth
Cumulative free cash flow
CAGR
Threshold
Midpoint
Maximum
Threshold
Midpoint
Maximum
5.0%
7.0%
9.0%
$10,058m
$11,273m
$12,488m
l
l
Actual 8.7%
Actual $9,798m
Organic profit before exceptional items and tax growth
Relative TSR ranking vs peer group
CAGR
Threshold
Midpoint
Maximum
Threshold
Midpoint
Maximum
6.5%
10.0%
13.5%
9th (median)
–
3rd (upper quintile)
l
l
Actual 6.9%
Actual 14th
ESG measure
Unit of measurement
Threshold
Midpoint
Maximum
Actual
Carbon reduction
Reduction in greenhouse gas emissions (cum%)
19.1%
23.1%
27.1%
19.6%
Water efficiency
Improvement in water efficiency (cum%)
6.3%
9.2%
12.1%
4.2%
Positive drinking
Number of people who confirmed changed attitudes on the
dangers of underage drinking following participation in a
Diageo supported education programme
2.3m
3.0m
3.7m
3.8m
Inclusion & diversity
% female leaders globally
44%
45%
46%
44%
% ethnically diverse leaders globally
39%
40%
41%
46%
Annual incentive (for the period 1 July 2023 to 30 June 2024)
Net sales growth
Operating profit growth
Threshold
Target
Maximum
Threshold
Midpoint
Maximum
3.1%
6.1%
9.1%
1.4%
6.4%
11.4%
l
l
Actual -0.6%
Actual -4.8%
Operating cash conversion
Threshold
Target
Maximum
95%
100%
105%
l
Actual 99.6%
Diageo's share price growth
over the period 30 June 2021 to
30 June 2024
Growth in dividend
distribution to shareholders in
year ended to 30 June 2024
(28.1)%
1.5%
Historic reward outcomes under the annual and long-term incentive plans over the past five years are shown below. Vesting outcomes
under the long-term incentive plan are shown against annualised total shareholder return for the three-year period ended in the year of
vesting (i.e. annualised TSR for the three years ended 30 June 2024 is shown against the vesting outcome for the 2021 long-term
incentive awards vesting in 2024). Outcomes against annual incentive financial measures are shown against organic operating profit
growth for each respective financial year, as disclosed in prior-year annual reports.
5-year vesting outcomes of long-term incentives
5-year history of annual incentive payouts
Executive Director vesting outcome
(% of maximum)
Annualised TSR
%
Payout
(% of maximum)
Operating profit growth
%
10%
29.3%
59.3%
98.7%
56.5%
27.5%
10%
61.5%
77.5%
0%
2020
2021
2022
2023
2024
-60%
-40%
-20%
0%
20%
40%
60%
80%
100%
(20)
(10)
0
10
20
30
ò Performance shares
ò Share options
ò Annualised total shareholder return over three-year long-term
incentive performance period
0%
100%
100%
32.5%
16%
2020
2021
2022
2023
2024
(40)%
(20)%
0%
20%
40%
60%
80%
100%
(12)
(6)
0
6
12
18
24
30
ò Annual incentive payout (financial measures
excluding individual business objectives)
ò Organic operating profit growth (% on prior year)
DIRECTORS' REMUNERATION REPORT continued
126
Diageo Annual Report 2024
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G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Annual Incentive Plan (AIP)
Purpose and link to strategy
Incentivises delivery of Diageo’s annual financial targets and the achievement of key individual objectives which are chosen to align with the
business strategy and create a platform for sustainable longer-term performance. Compulsory deferral of a minimum of one-third of any annual
incentive earned into shares for three years promotes longer-term alignment of Executive Directors' interests with shareholders’ interests.
Operation
• Performance measures, weightings and targets are set by the Remuneration Committee. Appropriately stretching targets are set by reference to
the operating plan and historical and projected performance for the company and its peer group.
• The level of award is determined with reference to Diageo’s overall financial and strategic performance and individual performance.
• A minimum of one-third of the actual earned bonus payment is normally deferred into a share award (pre-tax deferral) or owned shares (post-
tax deferral) under the Deferred Bonus Share Plan, to be held for a minimum period of three years, other than in exceptional circumstances. The
remainder of the bonus payment is paid out in cash after the end of the financial year.
• The Remuneration Committee has discretion to adjust the level of payment if it is not deemed to reflect appropriately the individual’s contribution
or the overall business performance. Any discretionary adjustments will be detailed in the following year’s annual report on remuneration.
• The Remuneration Committee has discretion to apply malus or clawback to bonus as detailed in the 'Malus and Clawback' section below.
• In the case of pre-tax deferral, notional dividends accrue on deferred bonus share awards, delivered as shares or cash at the discretion of the
Remuneration Committee at the end of the vesting period (on post-tax deferral into owned shares, actual dividends are payable).
Opportunity
For threshold performance, up to 50% of salary may be earned, with up to 100% of salary earned for on-target performance and a maximum of
200% of salary payable for outstanding performance. The maximum includes the deferred share element but excludes dividend equivalents
payable in respect of deferred share awards.
Performance conditions
Annual incentive plan awards are normally based 70%-100% on financial measures which may include, but are not limited to, measures of sales,
profit and cash, and 0%-30% on broader objectives based on strategic goals and/or individual contribution.
The Remuneration Committee has discretion to amend the performance measures in exceptional circumstances if it considers it appropriate to do
so, e.g. in cases of accounting policy changes, merger and acquisition activities or disposals. Any such amendments would be fully disclosed and
explained in the following year’s annual report on remuneration.
Diageo Long-Term Incentive Plan (DLTIP)
Purpose and link to strategy
Provides a long-term incentive to achieve key performance measures which support the company’s strategy, and to align interests with
shareholders.
Operation
• An annual grant of performance shares and/or market-price share options which vest subject to a performance test and continued employment,
normally over a period of three years.
• Measures and stretching targets are reviewed annually by the Remuneration Committee for each new award.
• The Remuneration Committee has the authority to exercise discretion to adjust the vesting outcome based on its assessment of the overall
business performance over the performance period. This may include the consideration of factors such as holistic performance relative to peers,
stakeholder outcomes and significant investment projects, for example.
• Following vesting, there is normally a further retention period of two years. Executive Directors are able to exercise an option or sell sufficient
shares to cover any tax liability when an award vests, provided they retain the net shares arising for the two-year retention period.
• Notional dividends accrue on performance share awards to the extent that the performance conditions have been met, delivered as shares or
cash at the discretion of the Remuneration Committee at the end of the vesting period.
• The Remuneration Committee has discretion to apply malus or clawback to bonus as detailed in the 'Malus and Clawback' section below.
Opportunity
• The maximum annual grants for the Chief Executive and Chief Financial Officer are 500% and 480% of salary in performance share
equivalents respectively (where a market-price option is valued at one-third of a performance share). Included within that maximum, no more
than 375% of salary will be awarded in face-value terms in options, with the balance awarded in performance shares, to any Executive Director
in any year.
• Awards vest at 20% of maximum for threshold performance and 100% of maximum if the performance conditions are met in full. The vesting
schedule related to the levels of performance between threshold and maximum, including whether or not this will include an interim stretch
performance level, will be determined by the Remuneration Committee on an annual basis and disclosed in the relevant remuneration report for
that year. There is a ranking profile for the vesting of the part of the award based on relative total shareholder return, starting at 20% of
maximum for achieving the threshold.
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Directors' remuneration policy
This section of the report sets out the details of the 2023 Directors'
remuneration policy which was approved by shareholders at the AGM on
28 September 2023 and which applied from that date. The Policy
Considerations section has been updated to reflect the anticipated
appointment of a new CFO in Autumn 2024, updated NED terms of
appointment and employee engagement leadership.
The actual current approved policy can be found on the company’s
website at https://www.diageo.com/en/our-business/corporate-
governance/remuneration-at-diageo.
As referenced in the Remuneration Committee Chair’s statement, the
Committee believes the current policy continues to support the
business strategy.
The Committee reserves the right to make minor changes to the policy,
where required for regulatory, tax or administrative reasons.
Base salary
Purpose and link to strategy
Supports the attraction and retention of the best global talent with the capability to deliver Diageo’s strategy and performance goals.
Operation
• Normally reviewed annually or following a change in responsibilities with any increases usually taking effect from 1 October.
• The Remuneration Committee considers the following parameters when reviewing base salary levels:
•
Pay increases for other employees across the group.
•
Economic conditions and governance trends.
•
The individual’s performance, skills and responsibilities.
•
Base salaries (and total remuneration) at companies of similar size and international scope to Diageo, with roles typically benchmarked against
the FTSE 30 excluding financial services companies, or against similar comparator groups in other locations dependent on the Executive
Director’s home market as well as global consumer goods companies.
Opportunity
Salary increases will be made in the context of the broader employee pay environment, and will normally be in line with those made to other
employees in the relevant markets in which Diageo operates, typically the United Kingdom and the United States, unless there is a change in role or
responsibility or other exceptional circumstances.
Benefits
Purpose and link to strategy
Provides market-competitive and cost-effective benefits as part of remuneration packages designed to attract and retain the best global talent.
Operation
• The provision of benefits typically depends on the country of residence of the Executive Director and may include but is not limited to a company car
or travel allowance, the provision of a contracted car service or equivalent, product allowance, life insurance, accidental death and disability
insurance, medical and dental cover, tax support and tax return preparation costs.
• The Remuneration Committee has discretion to offer additional allowances, or benefits, to Executive Directors, if considered appropriate and
reasonable. These may include, but are not limited to, relocation expenses, housing allowance and school fees where a Director is asked to relocate
from his/her home location as part of their appointment. Where appropriate, for example in relation to relocation benefits, the company may also
meet the tax costs associated with the benefit provision.
Opportunity
• The benefits package is set at a level which the Remuneration Committee considers:
•
provides an appropriate level of benefits depending on the role and individual circumstances;
•
is appropriate in the context of the benefits offered to the wider workforce in the relevant market; and
•
is in line with comparable roles in companies of a similar size and complexity in the relevant market.
Post-retirement provision
Purpose and link to strategy
Provides competitive post-retirement benefits which are part of remuneration packages designed to attract and retain the best global talent.
Operation
• Provision of market-competitive pension arrangements or a cash alternative based on a percentage of base salary.
Opportunity
• The maximum pension contribution, or cash alternative allowance, for Executive Directors is 14% of salary. The current CEO and CFO receive a
pension contribution of 14% of salary, in line with the UK workforce.
DIRECTORS' REMUNERATION REPORT continued
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G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Chair of the Board and Non-Executive Directors' fees
Purpose and link to strategy
• Supports the attraction and retention of world-class talent and reflects the value of the individual, their skills and experience.
Operation
• Fees for the Chair and Non-Executive Directors are normally reviewed every year.
• A proportion of the Chair’s annual fee may be used for the monthly purchase of Diageo ordinary shares, which have to be retained until the
Chair retires from the company or ceases to be a Director.
• Fees are reviewed in light of market practice in the FTSE 30, excluding financial services companies, and anticipated workload, tasks and
potential liabilities.
• The Chair and Non-Executive Directors do not participate in any of the company’s incentive plans nor do they receive pension contributions or
benefits. Their travel and accommodation expenses in connection with attendance at Board meetings (and any tax thereon) are paid by the
company.
• The Chair and the Non-Executive Directors are eligible to receive a product allowance or cash equivalent at the same level as the Executive
Directors.
• All Non-Executive Directors have letters of appointment. A summary of their terms and conditions of appointment is available at
www.diageo.com. The Chair of the Board, Javier Ferrán, was re-appointed on 6 October 2022 for a three-year term, terminable on three
months’ notice by either party or, if terminated by the company, by payment of three months’ fees in lieu of notice.
Opportunity
• Fees for Non-Executive Directors are within the limits set by the shareholders from time to time, with an aggregate limit of £1,750,000, excluding
the Chair’s fees.
Policy considerations
Performance measures
Further details of the performance measures under the fiscal 25 annual incentive plan and measures and targets for DLTIP awards to be made in
September 2024, are set out in the annual report on remuneration, on page 146. Annual incentive targets will be disclosed retrospectively in next
year’s annual report on remuneration as they are deemed by the Board to be commercially sensitive until after the end of the fiscal year.
Performance targets are set to be stretching yet achievable, and take into account the company’s strategic priorities and business environment. The
Remuneration Committee sets targets based on a range of reference points, including the corporate strategy and broker forecasts for both Diageo
and its peers.
Approach to recruitment remuneration
Diageo is a global organisation selling its products in nearly 180 countries around the world. The ability to recruit and retain the best talent from all
over the world is critical to the future success of the business. People diversity in all its forms is a core element of Diageo’s global talent strategy and,
managed effectively, is a key driver in delivering Diageo’s Growth Ambition.
The Remuneration Committee’s overarching principle for recruitment remuneration is to pay no more than is necessary to attract an Executive
Director of the calibre required to shape and deliver Diageo’s business strategy, recognising that Diageo competes for talent in a global
marketplace. The Committee will seek to align any remuneration package with Diageo’s remuneration policy, but retains the discretion to offer a
remuneration package which is necessary to meet the individual circumstances of the recruited Executive Director and to enable the hiring of an
individual with the necessary skills and expertise. However, the maximum short-term and long-term incentive opportunity will follow the policy,
although awards may be granted with different performance measures and targets in the first year. On appointment of an external Executive
Director, the Committee may decide to compensate for variable remuneration elements the individual forfeits when leaving their current employer.
In doing so, the Committee will ensure that any such compensation would have a fair value no higher than that of the awards forfeited, and would
generally be determined on a comparable basis taking into account factors including the form in which the awards were granted, performance
conditions attached, the probability of the awards vesting (e.g. past, current and likely future performance), as well as the vesting schedules.
Depending on individual circumstances at the time, the Committee has the discretion to determine the type of award (i.e. cash, shares or options),
holding period and whether or not performance conditions would apply.
Any such award would be fully disclosed and explained in the following year’s annual report on remuneration. When exercising its discretion in
establishing the reward package for a new Executive Director, the Committee will carefully consider the balance between the need to secure an
individual in the best interests of the company against the concerns of investors about the quantum of remuneration and, if considered appropriate
at the time, will consult with the company’s biggest shareholders. The Remuneration Committee will provide timely disclosure of the reward
package of any new Executive Director.
Diageo Annual Report 2024
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Diageo Long-Term Incentive Plan (DLTIP) continued
Performance conditions
The vesting of awards is linked to a range of measures which may include, but are not limited to:
• a growth measure (e.g. net sales growth, operating profit growth);
• a measure of efficiency (e.g. operating margin, cumulative free cash flow, return on invested capital);
• a measure of Diageo’s performance in relation to its peers (e.g. relative total shareholder return); and
• a measure relating to our ‘Spirit of Progress‘ (environmental, social or governance) priorities.
Measures that apply to performance shares and market-price options may differ, as is the case for current awards. Weightings of these measures
may also vary year-on-year.
The Remuneration Committee has discretion to amend the performance conditions in exceptional circumstances if it considers it appropriate to do
so, e.g. in cases of accounting policy changes, merger and acquisition activities or disposals. Any such amendments would be fully disclosed and
explained in the following year’s annual report on remuneration.
Malus and Clawback
Under the AIP and DLTIP, the Remuneration Committee has discretion to apply malus and clawback in the circumstances specified in the
applicable malus and clawback policy from time to time in place, for example:
• Material misstatement of results or an error resulting in overpayment.
• Risk failure resulting in material financial loss or any business area being the subject of a regulatory investigation or in breach of regulation.
• Employee misconduct/disciplinary action.
• Employee accountability for material reputational damage to the group which could have been avoided.
• In respect of the application of malus, deterioration in the financial situation of the group which limits the ability to fund incentive awards.
• Any other matter which, in the reasonable opinion of the Remuneration Committee, is required to be considered to comply with prevailing legal
and/or regulatory requirements.
The malus and clawback provisions may be invoked for one year following an AIP cash payment and two years following a DLTIP vesting. Where
the Remuneration Committee determines that malus and/or clawback will apply, the Remuneration Committee has discretion to determine the
basis of application and the means by which malus and/or clawback will be implemented.
The malus and clawback policy will be reviewed from time to time to ensure that the policy is compliant with any regulatory requirements, such as
the NYSE listing rules.
All-employee share plans
Purpose and link to strategy
To encourage broader employee share ownership through locally approved plans.
Operation
• The company operates tax-efficient all-employee share acquisition plans in various jurisdictions.
• Executive Directors’ eligibility may depend on their country of residence, tax status and employment company.
Opportunity
• Limits for all-employee share plans are set by the tax authorities. The company may choose to set its own lower limits.
Performance conditions
• Under the UK Share Incentive Plan, the annual award of Freeshares may be based on Diageo plc financial measures which may include, but
are not limited to, measures of sales, profit and cash.
Shareholding requirement
Purpose and link to strategy
• Ensures alignment between the interests of Executive Directors and shareholders.
Operation
• The minimum in-employment shareholding requirement is 500% of base salary for the Chief Executive and 400% of base salary for any other
Executive Directors.
• Executive Directors are normally expected to build up their in-employment shareholding within five years of their appointment to the Board.
• Shares that count towards these minimum shareholding requirements are shares beneficially held by the Executive Director and their connected
persons, including Deferred Bonus Share Plan (DBSP) shares within the three-year deferral period, on a net (if post-tax deferral)/notional net (if
pre-tax deferral) of tax basis.
• Executive Directors are restricted from selling more than 50% of shares which vest under the long-term incentive plan or deferred bonus share
plan (excluding the sale of shares to cover tax on vesting and other exceptional circumstances to be specifically approved by the Chief
Executive and/or Chair), until the shareholding requirement is met.
• In order to provide further long-term alignment with shareholders, Executive Directors will normally be expected to maintain a Diageo
shareholding of 100% of the in-employment shareholding requirement (or, if lower, their actual shareholding on cessation) for two years after
leaving the company.
• The Executive Directors enter into a deed undertaking to comply with the requirement and committing to hold the required number of shares in a
specified nominee account.
DIRECTORS' REMUNERATION REPORT continued
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S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Non-Executive Directors’ unexpired terms of
appointment
All Non-Executive Directors are on three-year terms which are
expected to be extended up to a total of nine years. The date of initial
appointment to the Board and the point at which the current letter of
appointment expires for Non-Executive Directors are shown in the
table below.
Non-Executive Directors
Date of appointment
to the Board
Current letter of
appointment
expires
Javier Ferrán
22 July 2016
AGM 2025
Susan Kilsby
4 April 2018
AGM 2024
Melissa Bethell
30 June 2020
AGM 2026
Karen Blackett
1 June 2022
AGM 2025
Valérie Chapoulaud-Floquet 1 January 2021
AGM 2024
Sir John Manzoni
1 October 2020
AGM 2026
Alan Stewart
1 September 2014
AGM 2024
Ireena Vittal
2 October 2020
AGM 2026
Payments under previous policies
The Committee reserves the right to make any remuneration payments
and payments for loss of office, notwithstanding that they are not in
line with the policy set out above, where the terms of the payment
were agreed (i) under a previous policy, in which case the provision of
that policy shall continue to apply until such payments have been
made; (ii) before the policy or the relevant legislation came into effect;
or (iii) at a time when the relevant individual was not a director of the
company and, in the opinion of the Committee, the payment was not
in consideration for the individual becoming a director of the
company.
Approach to stakeholder engagement
Shareholder engagement
The Committee is interested in the views of investors and maintains an
ongoing dialogue with a broad group of shareholders and institutional
advisors on remuneration matters. In advance of finalising our
proposed policy that was approved at the 2023 AGM, the Chair of the
Remuneration Committee consulted with the company's largest
shareholders and their representatives about the policy and the
implementation plan for fiscal 24. The responses received from
shareholders were supportive of the proposed change to enhance the
post-cessation shareholding requirement, as well as the planned
implementation for fiscal 24.
Employee engagement on executive remuneration
Karen Blackett took over accountability for global workforce
engagement sessions during the year and there were focus group
sessions led by her and other Non-Executive Directors. As part of this
engagement, there was a session where the Remuneration Committee
Chair shared information with employees about executive
remuneration, including the Directors' remuneration policy, the role of
the Remuneration Committee, executive remuneration principles and
structure and how executive pay aligns with pay for the wider
workforce. This is the first year of undertaking the engagement on
remuneration in this format and it was found to be productive and
informative by the Committee Chair and the participating employees.
Diageo also runs annual employee engagement surveys, which gives
employees the opportunity to provide feedback and express their
views on a variety of topics, including remuneration. Any comments
relating to Executive Directors' remuneration are fed back to the
Remuneration Committee.
These activities ensure that shareholder views and interests, as well as
the all-employee reward context at Diageo, are considered when
making executive remuneration decisions.
Consideration of wider workforce remuneration
When reviewing Executive Directors’ salaries, the Committee takes into
account the company’s salary budgets for key geographies and, each
year, the Committee has a session reviewing various aspects of
workforce remuneration to deepen its understanding of employee pay
arrangements. There is clear alignment in the approach to pay for
executives and the wider workforce in the way that remuneration
principles are followed, as well as the mechanics of the salary review
process and incentive plan design, which are broadly consistent
throughout the organisation. The performance measures under the
annual incentive plan and long-term incentive plan are the same for
executives and other eligible employees. The key differences are that a
larger percentage of Executive Directors' remuneration is performance
related than that of other employees and salary, benefits and incentive
participation levels vary according to role, seniority and business
priorities.
When reviewing the Directors’ remuneration policy, the Committee
considered the remuneration arrangements for the workforce globally,
as well as market practice in the FTSE 30 (excluding financial services)
and Diageo’s global consumer peer group. Given the minimal
changes proposed for the 2023 Directors’ remuneration policy,
employees were not specifically consulted on this.
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Service contracts and policy on payment for loss of office (including takeover provisions)
Executive Directors have rolling service contracts, details of which are set out below. These are available for inspection at the company’s registered
office.
Executive Director
Date of service contract
Debra Crew
28 March 2023
Lavanya Chandrashekar
13 January 2021
Notice period
The contracts provide for a period of six months’ notice by the Executive Director or 12 months’ notice by the
company, the same as would apply for any newly-appointed Executive Director. A payment may be made in lieu
of notice consisting of a sum equivalent to the base salary which the Executive Director would have received for
any notice period outstanding on the date employment ends and the cost to the company of providing
contractual benefits for this period (including pension contributions but excluding incentive plans).
If, on the termination date, the Executive Director has exceeded their accrued holiday entitlement, the value of
such excess may be deducted by the company from any sums due to them. If the Executive Director, on the
termination date, has accrued but untaken holiday entitlement, the company will, at its discretion, either require
the Executive Director to take such unused holiday during any notice period or make a payment to them in lieu of
it, provided that if the employment is terminated for cause then the Executive Director will not be entitled to any
such payment.
Mitigation
The Remuneration Committee requires (or may exercise its discretion to require) a proportion of the termination
payment to be paid in instalments and, upon the Executive Director commencing new employment, to be subject
to mitigation.
Annual Incentive Plan (AIP)
Where the Executive Director leaves for reasons including retirement, death in service, disability, ill-health, injury,
redundancy, transfer out of the group and other circumstances at the Remuneration Committee’s discretion
during the financial year, the Executive Director is usually entitled to an incentive payment pro-rated for the period
of service during the performance period, which is typically payable at the usual payment date unless the
Committee decides otherwise. Where the Executive Director leaves for any other reason, no payment or bonus
deferral will be made. The amount is subject to performance measures being met and is at the discretion of the
Committee. The Committee has discretion to determine an earlier payment date, for example, on death in
service. The bonus may, if the Committee decides, be paid wholly in cash.
2020 Deferred Bonus Share
Plan (DBSP)
Where the Executive Director leaves for any reason other than dismissal, they are entitled to retain any deferred
bonus shares, which vest in full on departure, subject to any holding requirements under the post-employment
shareholding policy. It is not considered necessary for the bonus deferral to continue to apply after leaving, since
the bonus is already earned based on performance, and there is a post-employment shareholding requirement
that ensures the Executive Director continues to be invested in the company’s longer-term interests. On a
takeover, awards vest in full. On other corporate events, the Remuneration Committee may allow awards to vest
in full.
Diageo Long-Term Incentive
Plan (DLTIP)
Where the Executive Director leaves for reasons including retirement, death in service, disability, ill-health, injury,
redundancy, transfer out of the group and other circumstances at the Remuneration Committee’s discretion
during the financial year, awards continue in effect. Awards will vest on the original vesting date with the
exception of death in service, when awards will vest on the date of death, in each case unless the Remuneration
Committee decides otherwise. When an Executive Director leaves for any other reason, all unvested awards
generally lapse immediately. The applicable retention period for vested awards continues for all leavers (other
than in cases of disability, ill-health or death in service, where the retention period will end on the date of death or
leaving employment), unless the Remuneration Committee decides otherwise. Where awards were granted in the
form of options, on vesting they are generally exercisable for 12 months (or six months for approved options).
The proportion of the award released depends on the extent to which the performance condition is met. The
number of shares is reduced on a pro-rata basis reflecting the length of time the Executive Director was employed
by the company during the performance period, unless the Remuneration Committee decides otherwise (for
example, in the case of death in service).
Where an Executive Director leaves within one month of the normal vesting date of the award, awards are not
time pro-rated, unless the Remuneration Committee decides otherwise.
On a takeover or other corporate event, awards vest subject to the extent to which the performance conditions
are met and, unless the Remuneration Committee decides otherwise, the awards are time pro-rated. Otherwise
the Committee, in agreement with the new company, may decide that awards should be swapped for awards
over shares in the new company.
Repatriation/other
In cases where an Executive Director was recruited from outside the United Kingdom and has been relocated to
the United Kingdom as part of their appointment, the company may pay reasonable repatriation costs for leavers
at the Remuneration Committee’s discretion. The company may also pay for reasonable costs in relation to the
termination, for example, tax, legal and outplacement support, where appropriate.
DIRECTORS' REMUNERATION REPORT continued
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F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Looking back on 2024
Annual incentive plan (AIP) payouts for 2024 (audited)
AIP payout for the year ended 30 June 2024
AIP payouts for the Executive Directors serving during the year are based 80% on performance against the group financial measures and 20% on
performance against Individual Business Objectives (IBOs), as assessed by the Remuneration Committee and summarised in the table below.
Group financial measures(1)
Measure
Weighting
Threshold
Target
Maximum
Actual
Payout
(% of total AIP
opportunity)
Payout opportunity (% maximum)
25%
50%
100%
Net sales value (% growth)(2)
26.67%
3.1%
6.1%
9.1%
(0.6) %
—
Operating profit (% growth)(2)
26.67%
1.4%
6.4%
11.4%
(4.8) %
—
Operating cash conversion(3)
26.67%
95.0%
100.0%
105.0%
99.6%
12.80%
Full year performance for 1 July 2023 - 30 June 2024
80.00%
12.80%
Individual business objectives
Measure (IBOs equally weighted) and target
Weighting
Result
Payout
(% of total AIP
opportunity)
Debra Crew Chief Executive
20.00 %
12.00%
Global market share performance
•
Grow or hold total trade market share in
2/3rds of total net sales in measured
markets
10.00 % We gained or held total trade market share in markets that total 75% of
our net sales in fiscal 24(6)
5.00%
Productivity improvement
•
Deliver an overall productivity
improvement in fiscal 24 of $505m across
all cost categories
10.00 % The productivity target for fiscal 24 has been exceeded as set out below:
•
By the end of fiscal 24, we delivered $698m in productivity savings
across all cost categories including supply, marketing and indirect
overheads
7.00%
Lavanya Chandrashekar Chief Financial
Officer
20.00 %
10.00%
Productivity improvement
•
Deliver an overall productivity
improvement in fiscal 24 of $505m across
all cost categories
10.00 % The productivity target for fiscal 24 has been exceeded as set out below:
•
By the end of fiscal 24, we delivered $698m in productivity savings
across all cost categories including supply, marketing and indirect
overheads
7.00%
Finance transformation
•
Implement actions to continue the
improvement of financial forecasting and
sustainable cash management
•
Deliver the agreed project milestones for
the finance technology roll out within
budget
•
Implement the new functional and
presentational currency into all areas of
management and reporting
10.00 % A summary of performance against the finance transformation
milestones for fiscal 24 is as follows:
•
Automated forecasting models built internally, rolled out and subject
to further embedding
•
Key actions completed to support the delivery of strong cash
performance
•
Initial stage of a significant programme of global technology change
underway
•
Go live of required changes to functional currency in over 50 systems,
restructuring of FX hedges and completion of reporting cycles
3.00%
Diageo Annual Report 2024
135
Annual report on remuneration
The following section provides details of how the company’s 2023 remuneration policy was implemented during the year ended 30 June 2024, and
how the Remuneration Committee intends to implement the proposed remuneration policy in the year ending 30 June 2025.
Single total figure of remuneration for Executive Directors (audited)
The table below details the Executive Directors’ remuneration for the year ended 30 June 2024.
Debra Crew(1)(8)
Lavanya Chandrashekar(1)
2024
2024
2023
2023
2024
2024
2023
2023
£ '000
$ '000
£ '000
$ '000
£ '000
$ '000
£ '000
$ '000
Fixed pay
Salary
£1,392
$1,750
£105
$126
£823
$1,034
£831
$997
Benefits (2)
£112
$140
£4
$5
£37
$47
£53
$63
Pension(3)
£193
$242
£10
$13
£112
$140
£110
$133
Total fixed pay(7)
£1,696
$2,132
£120
$145
£972
$1,221
£993
$1,193
Performance related pay
Annual incentive(4)
£690
$868
£79
$95
£379
$476
£603
$723
Long-term incentives(5)
£678
$852
£166
$199
£1,350
$1,697
£258
$309
Other incentives (6)
£3
$4
—
—
£4
$5
£3
$4
Total variable pay(7)
£1,371
$1,724
£245
$294
£1,732
$2,178
£864
$1,037
Total single figure of remuneration(7)
£3,067
$3,856
£365
$439
£2,704
$3,399
£1,857
$2,230
Notes
(1)
Exchange
rate
The amounts shown in US dollars are converted to sterling using the cumulative weighted average exchange rate for
the respective financial year. For the year ended 30 June 2024, the exchange rate was £1 = $1.26 and for the year
ended 30 June 2023 it was £1 = $1.20. Debra Crew and Lavanya Chandrashekar are paid in US dollars.
(2) Benefits
The benefits numbers include the gross value of all taxable benefits. For Debra Crew, these include flexible benefits
allowance ($22.1k), tax return preparation ($19.2k), contracted car service ($58.7k), medical and dental ($22.2k),
product allowance and life and long-term disability cover. Lavanya Chandrashekar's benefits include flexible benefits
allowance ($23.8k), travel allowance ($13.5k), product allowance and life and long-term disability cover.
(3) Pension
Pension benefits reflect the increase in the pension fund balances over the year in the Diageo North America Inc. pension
plans which are over and above the increase due to inflation. Debra Crew started to accrue benefits in the Supplemental
Executive Retirement Plan (SERP) from 1 October 2022. Lavanya Chandrashekar started accruing benefits in the SERP from 1
July 2021. The company pension contribution has been 14% of salary from 1 January 2023 for all Executive Directors, aligned
to the rate for the UK workforce.
Page 138
(4) Annual
incentive
The performance achieved under the fiscal 24 annual incentive plan resulted in an outcome of 16.0% of maximum for
the financial elements of the plan. Financial elements represented 80% of the maximum incentive opportunity. Taking
account of performance against Individual Business Objectives (IBOs), which represent 20% of the maximum
opportunity, the annual incentive payout is 24.8% of maximum for Debra Crew and 22.8% of maximum for Lavanya
Chandrashekar. In accordance with their elections to defer post-tax, one-third of the annual incentive for fiscal 24
shown in the table above for Debra Crew and Lavanya Chandrashekar will be deferred into owned shares which are
held for three years in a nominee account.
Page 135
(5) Long-
term
incentives
Long-term incentives represent the estimated gain (based on the average three-month ADR price to 30 June 2024 of
$137.77) delivered through share options and performance shares where performance conditions have been met in the
respective financial year. It also includes the value of additional shares earned in lieu of dividends on these vested
performance shares. For Debra Crew, the 2021 performance shares and share options were granted before she
became an Executive Director, and due to a slightly different vesting schedule for awards granted below the Board,
vested at 58.9% and 0.0% of maximum respectively. The long-term incentive value reflects the proportion of the three-
year period in which she was appointed as CEO. Lavanya Chandrashekar's 2021 performance shares and share
options were granted after she became an Executive Director and vested at 56.5% and 0.0% of maximum
respectively. Of the 2024 long term incentive amounts shown in the table above none are related to share price
appreciation over the fiscal 22 to fiscal 24 performance period.
For fiscal 23, long-term incentives comprise performance shares and share options awarded in 2020 that vested in
September 2023 at 98.8% and 77.5% of maximum respectively for Debra Crew and Lavanya Chandrashekar,
including dividend equivalents on performance shares. These 2020 long-term incentive amounts have been restated to
reflect the ADR share price on the vesting date of $160.19 instead of the average three-month ADR share price used in
last year’s report of $178.52.
Page 136
(6) Other
incentives
Other incentives include the grant face value of awards made under the all-employee share plans. Awards do not
have performance conditions attached.
(7) Totals
Some figures and sub-totals add up to slightly different amounts than the totals due to rounding.
(8) Other
The 2023 figures shown for Debra Crew are in respect of the period from 5 June 2023 to 30 June 2023; following her
appointment as interim CEO on 5 June 2023 and CEO and Executive Director on 8 June 2023.
DIRECTORS' REMUNERATION REPORT continued
134
Diageo Annual Report 2024
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Vesting outcome for 2021 performance share and share option awards in September 2024 (audited)
The 2021 performance share award vested at 58.9% of maximum for Debra Crew and 56.5% of maximum for Lavanya Chandrashekar. The 2021
share options lapsed having not met the threshold performance metric as detailed below:
Vesting of 2021 DLTIP(5)
Weighting
Threshold
Midpoint
Maximum
Actual
Debra Crew
vesting
(% maximum)(5)(6)
Lavanya
Chandrashekar
vesting
(% maximum)(5)(6)
Vesting if performance achieved (% maximum)(6)
20%/25% 60%/62.5%
100%
Organic net sales value growth (NSV)(1)
40.0%
5.0%
7.0%
9.0%
8.7%
37.8%
37.6%
Profit before exceptional items and tax (PBET) growth(2)
40.0%
6.5%
10.0%
13.5%
6.9%
11.7%
9.8%
Carbon reduction (ESG)
5.0%
19.1%
23.1%
27.1%
19.6%
1.5%
1.3%
Water efficiency (ESG)
5.0%
6.3%
9.2%
12.1%
4.2%
—
—
Positive drinking (ESG)
5.0%
2.3m
3.0m
3.7m
3.8m
5.0%
5.0%
Inclusion & diversity - % female leaders globally (ESG)
2.5%
44.0%
45.0%
46.0%
44.0%
0.6%
0.5%
Inclusion & diversity - % ethnically diverse leaders globally
(ESG)
2.5%
39.0%
40.0%
41.0%
46.0%
2.5%
2.5%
Vesting of performance shares (% maximum)
58.9%
56.5%
Cumulative free cash flow (FCF)(3)
50.0%
$10,058m
$11,273m $12,488m $9,798m
—
—
Relative total shareholder return(4)
50.0%
9th
—
3rd
14th
—
—
Vesting of share options (% maximum)
—
—
(1)
NSV growth is calculated at budgeted currency exchange rates, after adjustments for acquisitions and disposals and incorporates the organic treatment of hyperinflationary economies.
(2) PBET growth is presented on a constant currency basis and it excludes the impact of acquisitions and disposals. The impact of hyperinflation on operating profit is considered under the
same organic methodology as for net sales while the impact on other lines (primarily on finance charges) is excluded. This metric also includes adjustment to exclude the fair value
remeasurement of contingent considerations, earn out arrangements and biological assets and to exclude post-employment credits. Furthermore, the metric excluded the interest on
current year’s share repurchase program (SRP) and excludes the year-over-year change of M&A related interest.
(3) Cumulative FCF is based on the outcome for each of the three years within the performance period, measured before exceptional items and on an FX neutral basis by adjusting actual
outcomes back to the base year exchange rates, and incorporates the organic treatment of hyperinflationary economies. Furthermore, the cash flow impact of any material business
development activities such as share repurchase programmes, acquisitions and disposals, which were not known and planned at the beginning of the vesting period, are excluded
from the three-year performance. Note that FCF has been restated in USD following the change in functional currency.
(4) Relative total shareholder return (TSR) is measured as the percentage growth in Diageo’s share price (assuming all dividends and capital distributions are re-invested) compared to the
TSR of a peer group of 16 international drinks and consumer goods companies. TSR calculations are based on an averaging period of six months and converted to a common currency
(US dollars). Calculation is performed and provided by FIT.
(5) No discretion was exercised by the Remuneration Committee in determining the long-term incentive outcomes.
(6) At the time of grant of the 2021 awards, Debra Crew was not an Executive Director. The vesting schedule for awards granted to executives below the Board has a threshold vesting of
25% of maximum (62.5% at midpoint). Vesting at threshold for awards granted to Executive Directors is 20% of maximum (60.0% at midpoint).
Summary of performance share awards and options vesting (audited)
Award
Award Date
Awarded
(ADRs)
Vesting
(% Max)
Vesting
(ADRs)
Option price
ADR price
Dividend
equivalent
share
Estimated
value
($'000)(1)
Debra Crew (2)
Performance Shares
03/09/2021
9,663
58.9%
5,691
$137.77
494
$852
Share Options
03/09/2021
9,663
—
— $194.75
$137.77
—
—
Lavanya Chandrashekar
Performance Shares
03/09/2021 20,060
56.5%
11,333
$137.77
985
$1,697
Share Options
03/09/2021 20,060
—
— $194.75
$137.77
—
—
(1) The total long-term incentives value shown in the single figure of remuneration on page 134 is the total of performance shares and share options in the table above and is based on an
average ADR price for the last three months of the fiscal year ($137.77).
(2) The number of ADRs and the resulting value of performance share awards and options relating to Debra Crew in the table above are pro-rata figures that reflect the proportion of the
three-year performance period in which she was appointed as Chief Executive Officer. The original number of Performance Shares and Share Options awarded is shown on page 140.
The total number of Performance Shares awarded was 27,019 and 15,914 vested in total of which 5,691 is shown above. The total value of the vested award, including dividend
equivalent shares (17,297 ADRs) is $2,383,007. No share options vested.
The Committee considered Diageo’s overall business performance and value created for shareholders over the period and determined that the
outcomes were fair and appropriate; consequently no adjustment to the vesting outcomes were made. It also considered the level of difficulty of
the targets and determined that the vesting outcome was consistent with Diageo's long-term performance and returns to shareholders. No share
options were exercised by any Director during the year ended 30 June 2024.
Diageo Annual Report 2024
137
Payout
Group
(weighted 80%)
IBO
(weighted 20%)
Total
(% max)
Total
(% annual salary)
Total
(’000) USD
Debra Crew(4),(5)
12.80%
12.00%
24.80%
49.60%
$868
Lavanya Chandrashekar(4),(5)
12.80%
10.00%
22.80%
45.60%
$476
(1) Performance against the AIP measures is calculated using 2024 budgeted exchange rates and is measured on a currency-neutral basis.
(2) For AIP purposes, net sales value (NSV) growth and operating profit (OP) growth are calculated on budgeted currency exchange rates, after adjustments for acquisitions and disposals
and incorporates the organic treatment of hyperinflationary economies.
(3) For AIP purposes, operating cash conversion (OCC) is calculated by dividing cash generated from operations excluding cash inflows/outflows in respect of exceptional items,
dividends, maturing inventories and post-employment payments in excess of the amount charged to operating profit by operating profit before depreciation, amortisation, impairment
and exceptional items. The measure incorporates the organic treatment of hyperinflationary economies. The ratio is stated at the budgeted exchange rate for the year.
(4) AIP payments are calculated using base salary as at 30 June 2024, in line with the global policy that applies to other employees across the company.
(5) In accordance with the 2023 remuneration policy and their individual elections to defer post tax, one-third of Debra Crew's and Lavanya Chandrashekar's after tax AIP payout disclosed
in the table above will be deferred into Diageo shares, which will be held for three years in a nominee account. These shares will be acquired in September 2024 and the number of
shares will be disclosed in the 2025 remuneration report.
(6) Market share reflects internal estimates incorporating Nielsen, Association of Canadian Distillers, CGA, Dichter and Neira, Frontline, Intage, IRI, ISCAM, NABCA, Scentia, State
Monopolies, TRAC, Ipsos and other third-party providers.
(7) No discretion was exercised by the Remuneration Committee in determining the AIP outcome.
Long-term incentive plans (LTIPs) vesting in 2024 (audited)
Long-term incentive awards up to and including September 2023 were made under the Diageo Long-Term Incentive Plan (DLTIP), which was
approved by shareholders at the AGM in September 2014. Awards are designed to incentivise Executive Directors and senior managers to deliver
long-term sustainable performance and are subject to performance conditions measured over a three-year period. Awards are granted on an
annual basis in both performance shares and share options. Awards granted to Executive Directors vest at 20% of maximum for threshold
performance, and 100% of the award will vest if the performance conditions are met in full, with a straight-line payout between threshold and
maximum.
Share options – granted in September 2021, vesting in September 2024 (audited)
In September 2021, Debra Crew (although not an Executive Director at the time of grant) and Lavanya Chandrashekar received share option
awards over ADRs under the DLTIP, with an exercise price of $194.75. The award was subject to a performance condition assessed over a three-
year period based on the achievement of the following equally weighted performance measures:
• Relative total shareholder return (TSR) ranked against the TSR of a peer group of international drinks and consumer goods companies; and
• Cumulative free cash flow (FCF)
The vesting profile for grants to Executive Directors for relative TSR is shown below:
TSR ranking (out of 17)
Vesting (% max)
TSR ranking (out of 17)
Vesting (% max)
TSR peer group (16 companies)
1st, 2nd or 3rd
100
7th
55
AB InBev
Heineken
Pernod Ricard
4th
95
8th
45
Brown-Forman
Kimberly-Clark
Procter & Gamble
5th
75
9th
20
Carlsberg
L'Oréal
Reckitt Benckiser
6th
65
10th or below
0
The Coca-Cola Company Mondelēz International Unilever
Colgate-Palmolive
Nestlé
Groupe Danone
PepsiCo
Performance shares – awarded in September 2021, vesting in September 2024 (audited)
In September 2021, Debra Crew (although not Executive Director at the time of grant) and Lavanya Chandrashekar received performance share
awards under the DLTIP. Awards vest after a three-year period subject to the achievement of three performance conditions outlined below:
• Organic net sales value (NSV) growth (weighted 40%);
• Profit before exceptional items and tax (PBET) growth (weighted 40%); and
• ESG measures (water efficiency, carbon reduction, positive drinking, and diversity & inclusion) weighted 20%.
Notional dividends accrue on awards and are paid out either in cash or shares on the number of shares which vest.
DIRECTORS' REMUNERATION REPORT continued
136
Diageo Annual Report 2024
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Long-term incentive awards made during the year ended 30 June 2024 (audited)
On 4 September 2023, Debra Crew and Lavanya Chandrashekar received awards of performance shares and market-priced share options under
the DLTIP based on a percentage of base salary as outlined below. The three-year period over which performance will be measured is 1 July 2023
to 30 June 2026.
The performance measures and targets for awards granted in September 2023 are outlined below. Net sales value and profit before exceptional
items and tax are key levers for driving top and bottom line growth. The free cash flow measure was selected because it represents a robust
indicator of cash performance consistent with typical external practice and is a key strategic priority. Total shareholder return, the only relative
performance measure under the plan, provides good alignment with shareholder interests and increases the leverage based on share price
growth. Finally, the environmental, social and governance (ESG) measure (20% of total performance share award), which was introduced in 2020,
reinforces the stretching and strategically important goals under Diageo's 10-year ‘Spirit of Progress’ action plan to help create an inclusive and
sustainable world. The definitions for the ESG measures were set out on page 152 of the annual remuneration report for fiscal 23.
Performance shares
Share options
2023 DLTIP
Organic net sales
value (CAGR)
Organic profit
before exceptional
items and tax
(CAGR)
Greenhouse gas
reduction
Water efficiency
index
Positive drinking
% Female
leaders
% Ethnically
diverse leaders
Cumulative free
cash flow(1)
Relative TSR
Weighting
40%
40%
5%
5%
5%
2.5%
2.5%
50%
50%
Target range
4.0% - 8.0% 4.5% - 11.5% 17.9% - 25.9% 3.7% - 8.3% 2.8m - 4.2m
47% - 49%
44% - 46%
$9,400m -
$12,600m
9th - 3rd and
above
(1)
The cumulative free cash flow targets are shown in USD following the change to functional currency from fiscal 24. More details can be found on this on pages 166-167.
20% of DLTIP awards will vest at threshold, with vesting in a straight line up to 100% if the maximum level of performance is achieved. As
explained in the remuneration policy, one performance share is deemed equal in value at grant to three share options.
Executive Director
Date of grant
Plan
Share type
Awards made
during the year
Exercise
price
Face value
$'000
Face value
(% of salary)
Debra Crew
04/09/2023
DLTIP - share options
ADR
36,971
$166.67
$6,563
375 %
Debra Crew
04/09/2023
DLTIP - performance shares
ADR
36,971
$6,563
375 %
Lavanya Chandrashekar
04/09/2023
DLTIP - share options
ADR
21,182
$166.67
$3,760
360 %
Lavanya Chandrashekar
04/09/2023
DLTIP - performance shares
ADR
21,182
$3,760
360 %
The proportion of the awards outlined above that will vest is dependent on the achievement of performance conditions and continued
employment, and the actual value received may be nil. The vesting outcomes will be disclosed in the 2026 annual remuneration report.
In accordance with the plan rules, the number of performance shares and share options granted under the DLTIP was calculated by using the
average closing ADR price for the last six months of the preceding financial year ($177.50). This price is used to determine the face value in the
table above. In accordance with the plan rules, the exercise price was calculated using the average closing ADR price of the three days preceding
the grant date ($166.67).
Diageo Annual Report 2024
139
Pensions and benefits in the year ended 30 June 2024
Benefits provisions for the Executive Directors are in accordance with the information set out in the Directors’ remuneration policy.
Pension arrangements (audited)
Debra Crew and Lavanya Chandrashekar are members of the Diageo North America Inc. Supplemental Executive Retirement Plan (SERP) with an
accrual rate of 14% of base salary during the year ended 30 June 2024. The SERP is an unfunded, non-qualified supplemental retirement
programme. Under the plan, accrued company contributions are subject to quarterly interest credits. Under the rules of the SERP, they can
withdraw the balance of the plan six months after leaving service or age 55, if later and the balance may be withdrawn in either a lump sum or five
equal annual instalments, depending on the size of the balance.
Debra Crew and Lavanya Chandrashekar participated in the US Cash Balance Plan and the Benefit Supplemental Plan (BSP), until 30 September
2022 and June 2021 respectively, and have accrued benefits under both plans. The Cash Balance Plan is a qualified funded pension arrangement.
Employer contributions were 10% of pay capped at the Internal Revenue Service (IRS) limit. The BSP is a non-qualified unfunded arrangement;
notional employer contributions were 10% of pay above the IRS limit. Interest (notional for the BSP) is credited quarterly on both plans.
In the event of death in service, a lump sum of six times base salary is payable for Debra Crew and Lavanya Chandrashekar.
The table below shows the pension benefits accrued by each Executive Director as at year end. The accrued US benefits for Debra Crew and
Lavanya Chandrashekar are one-off cash balance amounts.
30 June 2024
30 June 2023
Executive Director
US benefit value
$'000
US benefit value
$'000
Debra Crew(1)
1,245
958
Lavanya Chandrashekar(2)
689
520
(1) Debra Crew's US benefits reflect an increase of $287,000 over the year to 30 June 2024. This increase reflects $253,000 which is due to additional pension benefits earned over the
year (of which $242,000 is over and above the increase due to inflation - and is reported in the total single figure of remuneration table on page 134); and, $34,000 which is due to
interest earned over the year on her deferred US benefits.
(2) Lavanya Chandrashekar's US benefits reflect an increase of $169,000 over the year to 30 June 2024. This increase reflects $159,000 which is due to additional pension benefits earned
over the year (of which $140,000 of which is over and above the increase due to inflation – and is reported in the total single figure of remuneration table on page 134); and $10,000 of
which is due to interest earned on her deferred US benefits.
The Normal Retirement Age applicable to each Director’s benefits depends on the pension scheme, as outlined below.
Executive Director
UK benefits
(DPS)
US benefits
(Cash Balance
Plan)
US benefits
(BSP)
US benefits
(SERP)
Debra Crew
n/a
65
6 months after leaving service, or age 55 if later
6 months after leaving service, or age 55 if later
Lavanya Chandrashekar
n/a
65
6 months after leaving service, or age 55 if later
6 months after leaving service, or age 55 if later
DIRECTORS' REMUNERATION REPORT continued
138
Diageo Annual Report 2024
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Directors’ shareholding requirement and share interests (audited)
The beneficial interests of the Directors who held office during the year ended 30 June 2024 (and their connected persons) in the ordinary shares
(or ordinary share equivalents) of the company are shown in the table below.
Ordinary shares or equivalent(1),(2)
24 July 2024
30 June 2024
(or date of
cessation, if
earlier)
30 June 2023
(or date of
appointment if
later)
Shareholding
requirement
(% salary)(3)
Shareholding at
30 June 2024
(% salary)(3)
Shareholding requirement met
Chair
Javier Ferrán(5)
314,830
314,498
310,468
Executive Directors
Debra Crew(4)(5)
122,736
122,736
260
500%
240%
No - to be met by June 2028
Lavanya Chandrashekar (4),(5),(6)
30,412
30,406
17,901
400%
100%
No - to be met by July 2026
Non-Executive Directors
Susan Kilsby(5)
2,600
2,600
2,600
Melissa Bethell
2,668
2,668
2,668
Valérie Chapoulaud-Floquet
2,154
2,154
2,098
Sir John Manzoni
3,007
3,007
2,929
Lady Nicola Mendelsohn(8)
N/A
5,000
5,000
Alan Stewart(7)
7,550
7,550
7,354
Ireena Vittal
—
—
—
Karen Blackett
702
702
—
Notes
(1) Each person listed beneficially owns less than 1% of Diageo’s ordinary shares. Ordinary shares held by Directors have the same voting rights as all other ordinary shares.
(2) Any change in shareholding between the end of the financial year on 30 June 2024 and the last practicable date before publication of this report, being 24 July 2024, is outlined in the
table above.
(3) Both the shareholding requirement and shareholding at 30 June 2024 are expressed as a percentage of base salary on 30 June 2024 and calculated using a three-month average
share price for period ending 30 June 2024 of £27.22. For the purposes of the shareholding requirement any vested but unexercised share options are reflected on an estimated net of
tax basis.
(4) The total share interests shown above include 2023 Deferred Bonus Plan Shares for Debra Crew (109 ADRs) and Lavanya Chandrashekar (754 ADRs).
(5) Javier Ferrán, Debra Crew, Lavanya Chandrashekar and Susan Kilsby have share interests in ADRs (one ADR is equivalent to four ordinary shares). The share interests in the table are
stated as ordinary share equivalents.
(6) The figure as at 30 June 2023 for Lavanya Chandrashekar reflects the correction of an error in last year's report which had omitted her interests in 1,698 ADRs (equivalent to 6,792
ordinary shares) awarded as a proportion of her annual incentive outcome for the year ended 30 June 2022. The value of this award had been correctly reflected in the single total
figure of remuneration disclosures in the 2022 and 2023 Directors' Remuneration Reports and was disclosed to shareholders at the time of the award.
(7) The figure as at 30 June 2023 for Alan Stewart has been corrected from 7,269 shares to 7,354 shares. The correction reflects additional shares acquired via an automatic dividend
reinvestment plan.
(8) Lady Mendelsohn resigned from the Board on 28 September 2023 and therefore no details are included for the shareholding after her date of cessation.
Relative importance of spend on pay
The graphs below illustrate the relative importance of spend on pay (total remuneration of all group employees) compared with distributions to
shareholders (total dividends plus the share buyback programme but excluding transaction costs), and the percentage change from the year
ended 30 June 2023 to the year ended 30 June 2024. There are no other significant distributions or payments of profit or cash flow.
Distributions to shareholders
(13.7)%
Staff pay
5.4%
3,242
3,755
2024
2023
2,314
2,196
2024
2023
Diageo Annual Report 2024
141
Outstanding share plan interests (audited)
Plan name
Date of award
Performance
period
Year of
vesting
Award
calculation
share price
Exercise
price
Number of
shares/
options at 30
June 2023(1)
Granted
Vested/
exercised
Dividend
equivalent
shares
released
Lapsed
Number of
shares/
options at 30
June 2024(1)
Debra Crew
DLTIP - Share Options(4)
Sep 2021
2021-2024 2024
$194.75
27,019
27,019
ADR
DLTIP - Share Options
Sep 2022 2022-2025 2025
$176.95 26,629
26,629 ADR
DLTIP - Share Options
Sep 2023 2023-2026 2026
$166.67
36,971
36,971
ADR
Total unvested share options subject to performance in Ordinary shares(2)
362,476 ORD
DLTIP - Share Options(3)
Sep 2020 2020-2023 2023
$133.88
30,076
23,308
6,768
23,308
ADR
Total vested but unexercised share options in Ordinary shares(2)
93,232 ORD
DLTIP - Performance Shares
Sep 2020 2020-2023 2023 $143.63
30,076
29,715
2,101
361
— ADR
DESAP - Performance Shares(5)
Sep 2020 2020-2023 2023 $143.63
19,494
20,622
1,362
234
— ADR
Total vested shares subject to performance in Ordinary shares(2)
— ORD
DLTIP - Performance Shares(4)
Sep 2021
2021-2024 2024 $174.97
27,019
27,019 ADR
DLTIP - Performance Shares
Sep 2022 2022-2025 2025 $195.29
26,629
26,629 ADR
DLTIP - Performance Shares
Sep 2023 2023-2026 2026 $177.50
36,971
36,971 ADR
DESAP - Performance Shares(5)
Mar 2022 2023-2025 2026 $197.06
8,796
8,796 ADR
DESAP - Performance Shares(5)
Mar 2022 2024-2026 2027 $197.06
8,930
8,930 ADR
DESAP - Performance Shares(5)
Mar 2022 2025-2027 2028 $197.06
8,930
8,930 ADR
Total unvested shares subject to performance in Ordinary shares(2)
469,100 ORD
DESAP - Restricted Stock Unit(5)
Mar 2022
2027 $197.06
8,796
8,796
ADR
DESAP - Restricted Stock Unit(5)
Mar 2022
2028 $197.06
8,930
8,930 ADR
DESAP - Restricted Stock Unit(5)
Mar 2022
2029 $197.06
8,930
8,930
ADR
Total unvested shares not subject to performance in Ordinary shares(2)
106,624 ORD
Lavanya Chandrashekar
DLTIP - Share Options(3)
Sep 2018
2018-2021
2021
$140.89
3,832
3,832
3,832
ADR
DLTIP - Share Options(3)
Sep 2018
2018-2021
2021
$140.89
1,064
1,064
1,064
ADR
Total vested but unexercised share options in Ordinary shares(2)
19,584 ORD
DLTIP - Share Options(4)
Sep 2021
2021-2024 2024
$194.75 20,060
20,060 ADR
DLTIP - Share Options
Sep 2022 2022-2025 2025
$176.95
18,512
18,512
ADR
DLTIP - Share Options
Sep 2023 2023-2026 2026
$166.67
21,182
21,182
ADR
Total unvested share options subject to performance in Ordinary shares(2)
239,016 ORD
DLTIP - Performance Shares
Sep 2020 2020-2023 2023 $143.63
1,827
1,805
127
22
— ADR
Total vested shares subject to performance in Ordinary shares(2)
— ORD
DLTIP - Performance Shares
Sep 2021
2021-2024 2024 $174.97
20,060
20,060 ADR
DLTIP - Performance Shares
Sep 2022 2022-2025 2025 $195.29
18,512
18,512 ADR
DLTIP - Performance Shares
Sep 2023 2023-2026 2026 $177.50
21,182
21,182
ADR
Total unvested shares subject to performance in Ordinary shares(2)
239,016 ORD
DLTIP - Restricted Stock Units(6)
Sep 2020 2020-2023 2023 $143.63
2,635
2,635 2,635
— ADR
Total unvested shares not subject to performance in Ordinary shares(2)
— ORD
(1) For unvested awards, this is the number of shares/options initially awarded. For exercisable share options, this is the number of outstanding options. All share options have an expiry
date of 10 years after the date of grant.
(2) ADRs have been converted to ORDs (one ADR is equivalent to four ordinary shares) for the purpose of calculating the total number of vested and unvested shares and options.
(3) The total number of share options granted under the DLTIP in September 2018 and 2020 showing as outstanding as at 30 June 2024 are vested but unexercised share options.
(4) Performance shares and share options granted under the DLTIP in September 2021 and due to vest in September 2024 are included here as unvested share awards subject to
performance conditions, although the awards have also been included in the single figure of remuneration table on page 134, since the performance period ended during the year
ended 30 June 2024.
(5) The performance shares awarded to Debra Crew in 2020 and vested in 2023 under the Diageo Exceptional Stock Award Plan (DESAP) were granted in recognition of equity which was
forfeited on joining Diageo in 2020 and had the same performance measures and targets as the 2020 DLTIP performance shares. Debra Crew was granted a number of performance
shares and restricted stock units under the DESAP in March 2022 for incentive and retention purposes. The DESAP performance shares will vest based on a performance hurdle of
winning or holding market share in at least 2/3rs of total NSV in measured markets over the respective three-year performance periods (F23-F25 for awards due to vest in September
2026, F24-F26 for awards due to vest in September 2027 and F25-F27 for awards due to vest in September 2028). The DESAP restricted stock units vest subject to continued employment
up to the vesting date.
(6) Lavanya Chandrashekar was granted a number of restricted stock units prior to her appointment as CFO and joining the Board.
DIRECTORS' REMUNERATION REPORT continued
140
Diageo Annual Report 2024
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Remuneration Committee review of wider workforce pay
Each year, the Remuneration Committee has a detailed session reviewing wider workforce remuneration. In fiscal 24, the review focused on the
prior year’s annual reward cycle outcomes, including base pay competitive positions, retaining talent in a global market, the level of differentiation
across our reward programmes, gender pay analysis, and how we connect performance and reward programmes. The Committee also
considered the challenges of attracting and retaining critical talent in a global marketplace at all levels as well as the all-employee reward priorities
for the coming year. Information on wider workforce reward is also provided as required throughout the year to enable the Committee to consider
the broader employee context when making executive remuneration decisions, for example the annual salary increase budgets by country.
Supporting our employees
We focus on all aspects of the wellbeing of our employees. We monitor the cost-of-living in all our geographies using a formal monitoring process
and have implemented actions as required, typically by awarding off-cycle salary increases in high-inflation geographies. We have provided
financial education to all employees to support them in managing their personal finances more effectively. Our global group of wellbeing
champions work with regional and market teams to drive wellbeing initiatives locally, coming together each quarter for a global connect. Over
fiscal 24, activations have included mental health first aider training, external speakers on wellbeing topics such as men's health, menopause,
resilience, nutrition as well as holding masterclasses in activities to support wellbeing.
In fiscal 24 we rolled out Celebrate, our global recognition platform, to over 50 countries having been initially piloted in NAM and the UK. We now
have the majority of the Diageo workforce covered by the programme and have seen 90,000 recognition moments to 17,000 employees. The
programme supports embedding a culture of speed and agility and enables leaders and peers to recognise actions in the moment.
We continue to innovate with benefit policies that support and demonstrate our commitment to diversity and inclusion. In fiscal 24 we introduced a
Carers Leave policy in the UK which provides all employees with two weeks paid leave per year to care, or arrange care, for dependents. This
supports the attraction and retention of the best talent through a market leading policy, and by supporting flexibility and wellness. We will be
working on a wider roll out across fiscal 25.
Fiscal 24 saw the launch of a new Employee Resource Group (ERG) for neurodiverse colleagues (PRISM) which complements the other ERGs in
place supporting all colleagues. PRISM amplifies the voice of the neurodivergent community and is involved in our business supporting areas such
as brand mobilisation. These practices reflect our progressive culture, where our policies are a hallmark of our business and differentiates our
employee value proposition.
CEO pay ratio
In accordance with The Companies (Miscellaneous Reporting) Regulations 2018, the table below sets out Diageo’s CEO pay ratios for the year
ended 30 June 2024. These CEO pay ratios provide a comparison of the Chief Executive’s total remuneration based on Debra Crew's total single
figure of remuneration, converted into sterling, with the equivalent remuneration for the employees paid at the 25th (P25), 50th (P50) and 75th (P75)
percentile of Diageo’s workforce in the United Kingdom. Also shown are the salary and total remuneration for each quartile employee.
Year
Method
25th percentile pay ratio
Median pay ratio
75th percentile pay ratio
2024(1)
Option A
69:1
51:1
40:1
2024
Total pay and benefits
£44,668
£60,620
£77,388
2024
Salary
£39,229
£50,720
£59,850
2023(2)(3)
Option A(4)
231:1
177:1
137:1
2022(3)
Option A(4)
146:1
114:1
90:1
2021
Option A(4)
127:1
100:1
79:1
2020
Option A(4)
50:1
38:1
31:1
2019
Option A(4)
265:1
208:1
166:1
(1) Debra Crew's total single figure of remuneration figure (see page 134 for details) in fiscal 24 used in the calculation of the CEO pay ratio includes pro-rata long-term incentive plan
awards proportionate to the duration of her appointment as CEO.
(2) 2023 CEO pay ratios comprise the sum of both Sir Ivan Menezes' and Debra Crew's total single figure of remuneration converted to sterling.
(3) 2023 and 2022 CEO pay ratios have been updated to reflect the value of the updated prior year single figure of remuneration which incorporates long-term incentives based on the
actual share price at vesting, rather than the average share price in the last three months of the financial year which had been used for the original disclosure.
(4) Only people employed in the United Kingdom and with the same number of contractual working hours throughout the full 12-month period have been included in the calculation.
Inclusion of employees outside of this group would require a complex simulation of full-time annual remuneration based on a number of assumptions and would not have a meaningful
impact on the ratio.
Methodology
Consistent with the approach for Diageo’s disclosure in previous years, the methodology used to identify the employees at each quartile for 2024 is
Option A, as defined in the regulations. We believe this is the most robust and accurate approach, and is in line with shareholder expectations.
Total full-time equivalent remuneration for employees reflects all pay and benefits received by an individual in respect of the relevant year and has,
other than where noted below, been calculated in line with the methodology for the ‘single total figure of remuneration’ for the Chief Executive
(shown on page 134 of this report). The total remuneration calculations were based on data as at 30 June 2024. Actual remuneration was
converted into the full-time equivalent for the role and location by pro-rating earnings to reflect full-time contractual working hours and these
figures were then ranked to identify the employees sitting at the percentiles. To ensure that the total remuneration for the selected median, 25th and
75th percentile employee is sufficiently representative of those positions, we calculated the total remuneration for a number of employees above
and below each of the selected median, 25th and 75th percentile UK employees and used the median value. In light of financial performance
outcomes being signed off close to the publication of the Annual Report, the Diageo Group business multiple, which is applicable to the majority of
UK employees, has been used to calculate all payments under the annual incentive, although some employees may receive a variation on this
multiple in practice. Pension values for each employee are not calculated on an actuarial basis as for the Chief Executive, but rather as the notional
cost of the company’s pension contribution during the financial year, according to the relevant section of the pension scheme for each individual.
This approach allows meaningful data for a large group of people to be obtained in a more efficient way.
Diageo Annual Report 2024
143
CEO total remuneration and TSR performance
The graph below show the total shareholder return for Diageo plc and the FTSE 100 Index since 30 June 2014 and demonstrates the relationship
between pay and performance for the Chief Executive, using current and previously published single total remuneration figures. The FTSE 100 Index
has been chosen because it is a widely recognised performance benchmark for large companies in the United Kingdom.
Total shareholder return -
value of hypothetical £100 holding
Chief Executive total remuneration
(includes legacy LTIP awards) (£'000)
June 2014
June 2015
June 2016
June 2017
June 2018
June 2019
June 2020
June 2021
June 2022
June 2023
June 2024
80
120
160
200
240
280
320
360
400
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Ivan
Menezes(1)
£'000
F15
Ivan
Menezes(1)
£'000
F16
Ivan
Menezes(1)
£'000
F17
Ivan
Menezes(1)
£'000
F18
Ivan
Menezes(1)
£'000
F19
Ivan
Menezes(1)
£'000
F20
Ivan
Menezes(1)
£'000
F21
Ivan
Menezes(1)
£'000
F22
Ivan
Menezes(1)
£'000
F23
Debra
Crew(1)(2)
£'000
F23
Debra
Crew(1)(2)
£'000
F24
Chief Executive total
remuneration(2)
3,888
4,156
3,399
8,995
11,776
2,273
6,019
7,343
10,582
403
3,067
Annual incentive(3)
44.0%
65.0%
68.0%
70.0%
61.0%
0.0%
93.8%
93.8%
37.3%
35.4%
24.8%
Share options(3)
0.0%
0.0%
0.0%
60.0%
73.1%
27.5%
10.0%
61.5%
77.5%
77.5%
0.0%
Performance shares(3)
33.0%
31.0%
0.0%
70.0%
89.3%
10.0%
29.3%
59.3%
98.7%
98.8%
58.9%
(1) To enable comparison, Ivan Menezes’ and Debra Crew's single total figure of remuneration has been converted into sterling using the average weighted exchange rate for the relevant
financial year. The figure represented in the graph for fiscal 23 is the combined single figure total for Ivan Menezes and Debra Crew.
(2) The single total figure of remuneration for Debra Crew in fiscal 23 and fiscal 24 includes pro-rata long-term incentive plan awards proportionate to the duration of her appointment as
CEO.
(3) % of total maximum opportunity.
Remuneration for the wider workforce and CEO pay ratio
Alignment of Executive pay with the wider workforce
There is clear alignment in the approach to pay for executives and the wider workforce in the way that remuneration principles are followed, as
well as the mechanics of the salary review process and incentive plan design, which are broadly consistent throughout the organisation. There is a
strong focus on performance-related pay, and the performance measures under the annual incentive plan and long-term incentive plan are the
same for executives and other eligible employees. The reward package for Executive Directors is consistent with that of the senior management
population, however, a much higher proportion of total remuneration for the Executive Directors is linked to business performance, compared to
the rest of the employee population.
The structure of our reward packages is based on the principle that it should enable Diageo to attract and retain the best talent globally within our
broader industry. It is driven by local market practice, as well as the level of seniority and accountability, reflecting the global nature of our
business. Diageo is committed to fostering an inclusive and diverse workplace, and creating a culture where every individual can thrive. Reflective
of this, pay parity and consistency of treatment for all employees are critical to the reward practices across the organisation. The reward framework
is regularly reviewed to ensure employees are rewarded fairly and appropriately, in line with the business strategy, performance outcomes,
competitive market practice and our diversity and inclusion agenda.
During the year, the Remuneration Committee Chair explained to employees the Directors' remuneration policy, the role of the Committee,
executive remuneration principles and structure and sought their feedback on wider reward matters as part of the workforce engagement sessions.
In 2024 this was a new format and was viewed by the Committee Chair, and the employees who participated, to be a productive and informative
discussion.
DIRECTORS' REMUNERATION REPORT continued
142
Diageo Annual Report 2024
ò Diageo
ò FTSE 100
ò Chief Executive
total
remuneration
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Lavanya’s unvested Long-Term Incentive Plan (LTIP) awards (granted in 2021, 2022 and 2023) will continue and vest (subject to the extent that the
relevant performance conditions, assessed at the time of vesting, are satisfied and subject to time pro-rating to reflect the period employed during
the performance period) on the original vesting dates. To the extent they vest, options granted in 2021 will be exercisable until 3 March 2026 (the
Committee having exercised discretion to slightly extend the normal exercise period), options granted in 2022 will be exercisable until 2 September
2026 and options granted in 2023 will be exercisable until 4 September 2027. Regarding already vested but unexercised options granted in 2018,
the Committee exercised its discretion to allow these to be exercisable within 18 months (instead of the default 12 months) of leaving and lapse
thereafter. All LTIP awards will continue to be subject to their respective two-year post-vesting holding periods. No further LTIP awards will be
granted. Shares held under the Share Incentive Plan will be treated in accordance with the rules of that plan. The company’s Malus and Clawback
Policy will continue to apply.
As permitted under the Remuneration Policy, Lavanya will receive a contribution of up to a maximum of £25,000 excluding VAT towards legal fees
incurred in connection with agreeing her departure terms. She will also receive up to a maximum annual amount of £20,000 plus VAT per year for
fees incurred in connection with UK and US tax return submissions for three years following her departure. Finally, in relation to repatriation from
the UK to the US, flights and shipping of possessions will be provided in accordance with the company’s Global Mobility Policy, as well as a net
sum of £114,500 to cover disturbance costs in connection with her repatriation to the US.
Non-Executive Directors
Fee policy
Javier Ferrán’s fee as non-executive Chair was increased by 4.5% (from £670,000 to £700,000) on 1 October 2023. The Chair’s fee is
appropriately positioned against our comparator group of FTSE 30 companies excluding financial services. The Executive Directors and the Chair
approved an increase in the base fee for Non-Executive Directors of 3.8% (from £104,000 to £108,000), effective 1 October 2023.
2024
2023
Per annum fees
£'000
£'000
Chair of the Board
700
670
Non-Executive Directors
Base fee
108
104
Senior Non-Executive Director
35
30
Chair of the Audit Committee
35
35
Chair of the Remuneration Committee
35
35
Single total figure of remuneration for Non-Executive Directors (audited)
Fees £'000
Taxable benefits £'000(1)
Total £'000(2)
2024
2023
2024
2023
2024
2023
Chair
Javier Ferrán
692
665
4
1
696
666
Non-Executive Directors
Melissa Bethell
107
103
5
2
112
105
Karen Blackett
107
103
5
1
112
104
Valérie Chapoulaud-Floquet
107
103
13
10
120
113
Susan Kilsby
176
168
14
11
190
179
Sir John Manzoni
107
103
4
2
111
105
Lady Nicola Mendelsohn(3)
26
103
1
1
27
104
Alan Stewart
142
138
4
1
146
139
Ireena Vittal
107
103
10
10
117
113
(1) Taxable benefits include a product allowance and expense reimbursements relating to travel, accommodation and subsistence in connection with attendance at Board meetings during
the year, which are deemed by HMRC to be taxable in the United Kingdom. The amounts in the single total figure of remuneration table above include any tax gross-ups on the benefits
provided by the company on behalf of the Directors. Non-taxable expense reimbursements have not been included in the single figure of remuneration table above.
(2) Some figures add up to slightly different totals due to rounding.
(3) Lady Mendelsohn resigned from the Board at the 2023 AGM on 28 September 2023.
Diageo Annual Report 2024
145
Points to note for the year ended 30 June 2024
The median remuneration and resulting pay ratio for 2024 are consistent with the pay and progression policies for Diageo’s UK employees as a
whole and reflect the impact of performance-related pay on total remuneration for the year. As the Chief Executive has a larger proportion of her
total remuneration linked to business performance than other employees in the UK workforce, the ratio has decreased versus last year due to
proportionate reduction in incentive outcome for the CEO for 2024 versus 2023.
Change in pay for Directors compared to wider workforce
The table below shows the percentage change in Directors’ remuneration and average remuneration of employees on an annual basis. Given the
small size of Diageo plc’s workforce, data for all employees of the group has also been included.
2024
2023
2022
2021
2020
Salary
Bonus
Benefits
Salary
Bonus
Benefits
Salary
Bonus
Benefits
Salary
Bonus
Benefits
Salary
Bonus
Benefits
Plc employee average(1)
6.2% (44.8) % 10.0%
9.0% (61.3) %
(7.2) %
11.1% 25.8%
10.5%
5.1% N/A(5)
38.8%
7.5% (100.0) %
9.0%
Average global
employee(2)
11.1% (17.6) %
3.1% 12.9% (41.6) %
17.0%
6.4% 38.4%
11.7%
—
278.8% 12.6%
5.3%
(67.8) %
6.9%
Executive Directors(3)
Debra Crew(5)
N/A(5)
N/A(5)
N/A(5) N/A(5)
N/A(5)
N/A(5) N/A(5) N/A(5)
N/A(5) N/A(5)
N/A(5)
N/A(5) N/A(5)
N/A(5) N/A(5)
Lavanya Chandrashekar
3.8% (34.1) % (22.1) %
2.3 % (58.8) % (89.4) % N/A(5) N/A(5)
N/A(5) N/A(5)
N/A(5)
N/A(5) N/A(5)
N/A(5) N/A(5)
Non-Executive Directors(4)
Melissa Bethell
3.6%
_
218.4%
3.0%
—
10.1%
2.3%
—
16.0% N/A(5)
—
—
—
—
—
Karen Blackett (5)
3.6%
_
4231.3% N/A(5)
—
N/A(5) N/A(5)
—
N/A(5)
—
—
—
—
—
—
Valérie Chapoulaud-
Floquet
3.6%
_
159.0%
3.0%
—
108.5%
—
—
—
N/A(5)
—
—
—
—
—
Javier Ferrán (Chair)
4.1%
_
132.9%
2.3%
—
(22.4) %
8.3%
—
28.8%
—
—
—
—
—
—
Susan Kilsby
4.5%
_
182.7%
2.6%
—
125.7%
3.8%
—
300.0% 9.6%
—
(87.7) % 37.3%
—
68.9%
Sir John Manzoni
3.6%
_
241.5%
3.0%
—
20.0%
—
—
—
—
—
—
—
—
—
Lady Nicola Mendelsohn
N/A(5)
_
N/A(5)
3.0%
—
—
2.3%
—
—
3.2%
—
—
3.3%
—
—
Alan Stewart
2.7%
_
252.8%
3.2%
—
—
4.7%
—
—
2.4%
—
—
2.5%
—
—
Ireena Vittal
3.6%
_
689.2% 3.0%
—
734.0%
—
—
—
—
—
—
—
—
—
(1)
Around 15 UK-based employees are employed by Diageo plc. Their remuneration has been calculated in line with the approach used for the CEO pay-ratio calculation and the
average year-on-year change has been reported. Only those employed during the full financial year have been included in calculations.
(2)
Calculated by dividing staff cost related to salaries, bonus and benefits by the average number of employees on a full-time equivalent basis, as disclosed in note 4c to the financial
statements under staff costs and average number of employees on page 174, but reduced to account for the inclusion of Executive Directors in reported figures. The salary, bonus and
benefits cost data used for calculation are subsets of the Wages and salaries figure disclosed in this note. The salary data used for this calculation has been adjusted to exclude costs
related to severance payments which are included in staff costs, and last year’s disclosure has been updated in line with this for consistency. In line with the approach for Directors, the
bonus values used for the calculation reflect the bonus earned in relation to performance during the relevant financial year.
(3)
Calculated using the data from the single total figure of remuneration table on page 134 in US dollars, reflecting payment currency for Debra Crew and Lavanya Chandrashekar.
(4)
Calculated using the fees and taxable benefits disclosed under Non-Executive Directors’ remuneration in the table on page 145. Taxable benefits for Non-Executive Directors comprise a
product allowance as well as expense reimbursements relating to attendance at Board meetings, which may vary year-on-year.
(5)
N/A refers to a nil value in the previous year or an incomplete prior year, meaning that the year-on-year change cannot be calculated.
Payments to former Directors (audited)
There were no payments to former Directors in the year ended 30 June 2024.
Payments for loss of office (audited)
It was announced on 3 May 2024 that Lavanya Chandrashekar would be stepping down as Chief Financial Officer and as a director of Diageo
during fiscal 25. Details of the remuneration arrangements for Lavanya, which were approved by the Remuneration Committee and are in
accordance with the Directors’ remuneration policy, are set out below. Full details of the values of any amounts paid will be reported in the
Directors' remuneration report next year.
Lavanya’s service contract provides for a twelve-month notice period (which commenced on 3 May 2024) and she remains eligible for salary and
benefits until the date she leaves the company. If the company so determines, Lavanya may be paid a payment in lieu of notice to cover salary
and the cost of contractual benefits in respect of any remaining portion of the notice period.
Lavanya is required to retain the lower of the level of her actual shareholding as at the leave date, or shares to the value of 400% of salary, for two
years post her leave date in accordance with the Directors' remuneration policy.
The Remuneration Committee exercised its discretion to treat Lavanya as a good leaver under the incentive arrangements in accordance with the
remuneration policy. Lavanya will be eligible to receive a bonus under Diageo’s annual incentive plan (AIP) for the financial years ending 30 June
2024 and 30 June 2025 on a time pro-rata basis reflecting time employed in the respective financial year (excluding any period of garden leave).
Any payments due will be payable at the normal times and subject to financial performance outcomes and delivery against individual business
objectives, with one-third delivered in deferred bonus shares in accordance with the normal deferral rules (provided that in respect of any award
made after the leave date, the award will be made on terms that it will vest immediately upon award). Deferred bonus shares related to bonuses
for prior financial years, will vest on the leave date in accordance with the remuneration policy. Any deferred bonus shares which are delivered by
the leave date are subject to the post-cessation shareholding requirement.
DIRECTORS' REMUNERATION REPORT continued
144
Diageo Annual Report 2024
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Performance conditions for long-term incentive awards to be made in the year ending 30 June 2025(1)
Performance shares
Share options
Environmental, social & governance (ESG)
Organic net
sales (CAGR)
Organic profit
before
exceptional items
and tax (CAGR)
Greenhouse
gas reduction
Water
efficiency
index
Positive
drinking
% Female
leaders
% Ethnically
diverse
leaders
Vesting
schedule
Relative Total
Shareholder Return
Cumulative free
cash flow ($m)
Vesting
schedule
Weighting (% total)
40%
40%
5%
5%
5%
2.5%
2.5%
50.0%
50.0%
Maximum
6.0%
9.1%
29.9%
11.2%
3.7m
50%
49%
100% 3rd and above
$9,950
100%
Midpoint
4.5%
6.1%
23.1%
8.7%
3.1m
48%
47%
60%
–
$8,550
60%
Threshold
3.0%
3.1%
16.3%
6.2%
2.5m
46%
45%
20%
9th
$7,150
20%
(1) Details of the considerations taken in to account when setting the targets for the DLTIP by the Committee are set out on page 146.
Additional information
Key management personnel related party
transactions (audited)
Key management personnel of the group comprises the Executive and
Non-Executive Directors, the members of the Executive Committee and
the Company Secretary.
Diageo plc has granted rolling indemnities to the Directors and the
Company Secretary, uncapped in amount, in relation to certain losses
and liabilities which they may incur in the course of acting as Directors
or Company Secretary (as applicable) of Diageo plc or of one or more
of its subsidiaries. These indemnities continue to be in place at 30 June
2024.
Other than disclosed in this report, no Director had any interest,
beneficial or non-beneficial, in the share capital of the company. Save
as disclosed above, no Director has or has had any interest in any
transaction which is or was unusual in its nature, or which is or was
significant to the business of the group and which was effected by any
member of the group during the financial year, or which having been
effected during an earlier financial year, remains in any respect
outstanding or unperformed. There have been no material
transactions during the last three years to which any Director or officer,
or 3% or greater shareholder, or any spouse or dependent thereof,
was a party. There is no significant outstanding indebtedness to the
company from any Directors or officer or 3% or greater shareholder.
Statutory and audit requirements
This report was approved by a duly authorised Committee of the
Board of Directors and was signed on its behalf on 29 July 2024 by
Susan Kilsby who is Chair of the Remuneration Committee.
The Board has followed the principles of good governance as set out
in the UK Corporate Governance Code and complied with the
regulations contained in the Schedule 8 of the Large and Medium-
sized Companies and Groups (Accounts and Reports) Regulations
2008, the Listing Rules of the Financial Conduct Authority and the
relevant schedules of the Companies Act 2006.
The Companies Act 2006 and the Listing Rules require the company’s
auditor to report on the audited information in their report and to state
that this section has been properly prepared in accordance with these
regulations.
PwC has audited the report to the extent required by the regulations,
being the sections headed Single total figure of remuneration for
Executive Directors (and notes), Payments to former Directors,
Payments for loss of office, Annual incentive plan (AIP) payouts for
2024, Long-term incentive plans (DLTIPs) vesting in 2024, Pensions and
benefits, Directors’ shareholding requirement and share interests,
Outstanding share plan interests, Non-Executive Directors’
remuneration and Key management personnel related party
transactions.
The annual remuneration report is subject to an advisory vote by
shareholders at the AGM on 26 September 2024. Terms defined in this
Directors' remuneration report are used solely herein.
Diageo Annual Report 2024
147
Looking ahead to 2025
Salary increases for the year ending 30 June
2025
The Remuneration Committee reviewed base salaries for Executive
Committee members and agreed the following increase for the Chief
Executive Officer, effective 1 October 2024.
Debra Crew
Lavanya Chandrashekar
Salary at 1 October ('000)
2024
2023
2024
2023
Base salary
$1,824
$1,750 $1,044
$1,044
% increase (over previous
year)
4.25 %
n/a
0 %
4 %
As previously announced, Nik Jhanghiani will join the Board in
Autumn 2024. His annual salary will be £900,000 and his benefits
and incentives will be in accordance with the remuneration policy. In
addition, Nik will be entitled to an additional one-off award on joining
to compensate him for the financial loss of forfeited awards from his
previous employer. Full details will be provided when these are
confirmed at the time of the award and in the Directors' remuneration
report next year.
Annual incentive design for the year ending
30 June 2025
The measures and targets for the annual incentive plan are reviewed
annually by the Remuneration Committee and are carefully chosen to
drive financial and individual business performance goals related to
the company’s short-term strategic operational objectives. The plan
design for Executive Directors for the year ending 30 June 2025 will
comprise the following performance measures and weightings (no
change from last year), with targets set for the full financial year:
• net sales value (% growth) (26.67% weighting): a key performance
measure of year-on-year top line growth;
• operating profit (% growth) (26.67% weighting): stretching profit
targets drive operational efficiency and influence the level of returns
that can be delivered to shareholders through increases in share
price and dividend income not including exceptional items or
exchange;
• operating cash conversion (26.67% weighting): ensures focus on
efficient cash delivery by the end of the year; and
• individual business objectives (20% weighting): measurable
deliverables that are specific to the individual and are focused on
supporting the delivery of key strategic objectives.
The Committee has discretion to adjust the payout to reflect
appropriately an individual's contribution or the overall business
context.
Details of the targets for the year ending 30 June 2025 will be
disclosed retrospectively in next year’s annual report, by which time
they will no longer be deemed commercially sensitive by the Board.
The annual incentive opportunity for Executive Directors will remain
consistent with prior years, equal to 100% of base salary at target, with
a maximum opportunity of 200% of base salary.
Long-term incentive awards to be made in the
year ending 30 June 2025
The long-term incentive plan measures are reviewed annually by the
Remuneration Committee and are selected to reward long-term
consistent performance in line with Diageo’s business strategy and to
create alignment with the delivery of value for shareholders. The
Committee has ensured that the incentive structure for senior
management does not raise environmental, social and governance
risks by inadvertently motivating irresponsible behaviour.
As per last year, DLTIP awards to be made in September 2024 will
comprise awards of both performance shares and share options,
based on stretching targets against the key performance measures as
outlined in the table on page 147, assessed over a three-year
performance period. The relative total shareholder return measure is
based on the same constituent group and vesting schedule as outlined
on page 136.
The Committee set fiscal 2025 financial targets by considering a
number of factors including historical performance, consumer trends
amid ongoing macroeconomic challenges, market conditions and the
competitive landscape. These targets align with our focus on returning
to our medium-term guidance ranges.
The ESG measures in the DLTIP comprise five ambitions reflecting the
‘Spirit of Progress‘ action plan, to make a positive impact on the
environment and society. Each goal is weighted equally:
• reduction in greenhouse gas emissions in our direct operations
(Scope 1&2);
• improvement in the water efficiency index;
• number of people who confirm changed attitudes on the dangers of
underage drinking after participating in a Diageo-supported
education programme; and
• inclusion and diversity (percentage of female leaders globally and
percentage of ethnically diverse leaders globally).
In setting ESG targets, the Committee took account of the material
progress made to date across the various measures versus the 'Spirit of
Progress' 2030 action plan. The Committee considered the opportunity
to continuously improve against high levels of achievement and has
set targets in this context.
The performance share element of the DLTIP applies to the Executive
Committee and the top level of senior leaders across the organisation
worldwide, whilst the share option element is applicable to a much
smaller population comprising only members of the Executive
Committee. One market price performance-based option is valued at
one-third of a performance share.
Awards are calculated on the basis of a six-month average share price
for the period ending 30 June 2024. This averaging period which is in
line with Diageo's standard practice, helps to smooth out volatility in
share price. The price used to calculate the awards (on the basis of
ordinary shares) to be granted in September 2024 was 11% higher
than the share price at the time the Committee approved the awards
to be granted.
It is intended that a DLTIP award to the equivalent of 500% of base
salary will be made to Debra Crew in September 2024, comprising
375% of salary in performance shares and the equivalent of 125% of
salary in market price performance-based share options. It is intended
that a DLTIP award to the equivalent of 480% of salary will be made
to Nik Jhangiani in 2024 following the commencement of his
employment, comprising 360% of salary in performance shares and
the equivalent of 120% of salary in market price share options. In
performance share equivalents, one market price option is valued at
one-third of a performance share.
The table below summarises the annual DLTIP awards to Debra Crew
and Nik Jhangiani to be made in 2024.
Grant value (% salary)
Chief Executive
Chief Financial Officer
Performance share equivalents (1 share: 3 options)
Performance shares
375 %
360 %
Share options
125 %
120 %
Total
500 %
480 %
DIRECTORS' REMUNERATION REPORT continued
146
Diageo Annual Report 2024
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
circumstances (including in relation to applications, training, career
development and promotion) on the grounds of any disability. In the
event that an employee, worker or contractor becomes disabled in the
course of their employment or engagement, Diageo aims to ensure
that reasonable steps are taken to accommodate their disability by
making reasonable adjustments to their existing employment or
engagement.
Trading market for shares
Diageo plc ordinary shares are listed on the London Stock Exchange
(LSE). Diageo ADSs, representing four Diageo ordinary shares each,
are listed on the New York Stock Exchange (NYSE). The principal
trading market for the ordinary shares is the LSE. Diageo shares are
traded on the LSE’s electronic order book. Orders placed on the order
book are displayed on-screen through a central electronic system and
trades are automatically executed, in price and then time priority,
when orders match with corresponding buy or sell orders. Only
member firms of the LSE, or the LSE itself if requested by the member
firm, can enter or delete orders on behalf of clients or on their own
account. All orders are anonymous. Although use of the order book is
not mandatory, all trades, whether or not executed through the order
book and regardless of size, must be reported within three minutes of
execution, but may be eligible for deferred publication.
The Markets in Financial Instruments Directive (MiFID) allows for
delayed publication of large trades with a sliding scale requirement
based on qualifying minimum thresholds for the amount of
consideration to be paid/the proportion of average daily turnover
(ADT) of a stock represented by a trade. Provided that a trade/
consideration equals or exceeds the qualifying minimum size, it will be
eligible for deferred publication ranging from 60 minutes from time of
trade to three trading days after time of trade.
American depositary shares
Fees and charges payable by ADR holders
Citibank N.A. serves as the depositary (Depositary) for Diageo’s ADS
programme. Pursuant to the deposit agreement dated 14 February
2013 between Diageo, the Depositary and owners and holders of ADSs
(the Deposit Agreement), ADR holders may be required to pay various
fees to the Depositary, and the Depositary may refuse to provide any
service for which a fee is assessed until the applicable fee has been
paid. In particular, the Depositary, under the terms of the Deposit
Agreement, shall charge a fee of up to $5.00 per 100 ADSs (or
fraction thereof) relating to the issuance of ADSs; delivery of deposited
securities against surrender of ADSs; distribution of cash dividends or
other cash distributions (i.e. sale of rights and other entitlements);
distribution of ADSs pursuant to stock dividends or other free stock
distributions, or exercise of rights to purchase additional ADSs;
distribution of securities other than ADSs or rights to purchase
additional ADSs (i.e. spin-off shares); and depositary services. Citibank
N.A. is located at 388 Greenwich Street, New York, New York, 10013,
United States. In addition, ADR holders may be required under the
Deposit Agreement to pay the Depositary (a) taxes (including
applicable interest and penalties) and other governmental charges;
(b) registration fees; (c) certain cable, telex, and facsimile transmission
and delivery expenses; (d) the expenses and charges incurred by the
Depositary in the conversion of foreign currency; (e) such fees and
expenses as are incurred by the Depositary in connection with
compliance with exchange control regulations and other regulatory
requirements; and (f) the fees and expenses incurred by the
Depositary, the custodian, or any nominee in connection with the
servicing or delivery of ADSs. The Depositary may (a) withhold
dividends or other distributions or sell any or all of the shares
underlying the ADSs in order to satisfy any tax or governmental charge
and (b) deduct from any cash distribution the applicable fees and
charges of, and expenses incurred by, the Depositary and any taxes,
duties or other governmental charges on account.
Direct and indirect payments by the Depositary
The Depositary reimburses Diageo for certain expenses it incurs in
connection with the ADR programme, subject to a ceiling set out in the
Deposit Agreement pursuant to which the Depositary provides services
to Diageo. The Depositary has also agreed to waive certain standard
fees associated with the administration of the programme. Under the
contractual arrangements with the Depositary, Diageo has received
approximately $1.3 million arising out of fees charged in respect of
dividends paid during the year and issuance and cancellation fees to
cover the Company's ADR programme costs. These payments are
received for expenses associated with non-deal road shows, third-
party investor relations consultant fees and expenses, Diageo’s cost for
administration of the ADR programme not absorbed by the Depositary
and related activities (e.g. expenses associated with the AGM), travel
expenses to attend training and seminars, exchange listing fees, legal
fees, auditing fees and expenses, the SEC filing fees, expenses related
to Diageo’s compliance with US securities law and regulations
(including, without limitation, the Sarbanes-Oxley Act) and other
expenses incurred by Diageo in relation to the ADR programme.
Articles of association
The company is incorporated under the name Diageo plc, and is
registered in England and Wales under registered number 23307. The
following description summarises certain provisions of Diageo’s articles
of association (as adopted by special resolution at the Annual General
Meeting on 28 September 2023) and applicable English law
concerning companies (the Companies Acts), in each case as at 24
July 2024. This summary is qualified in its entirety by reference to the
Companies Acts and Diageo’s articles of association. Investors can
obtain copies of Diageo’s articles of association by contacting the
Company Secretary at: the.cosec@diageo.com. Any amendment to
the articles of association of the company may be made in
accordance with the provisions of the Companies Act 2006, by way of
special resolution.
Directors
Diageo’s articles of association provide for a board of directors,
consisting (unless otherwise determined by an ordinary resolution of
shareholders) of not fewer than three directors and not more than 25
directors, in which all powers to manage the business and affairs of
Diageo are vested.
A director must not vote on, or count towards the quorum in relation
to, any resolution of the Board in respect of any contract in which they
have an interest and, if they do so, their vote will not be counted. This
prohibition does not apply to any resolution where that interest cannot
reasonably be regarded as likely to give rise to a conflict of interest or
where that interest arises only from certain specified matters, including:
(a) indemnifying the director in respect of obligations incurred at the
request of or for the benefit of the company or any of its subsidiary
undertakings; (b) indemnifying a third party in respect of obligations of
the company or any of its subsidiary undertakings for which the
director has assumed responsibility in whole or in part under an
indemnity or guarantee or by the giving of security; (c) offers of
securities by the company or any of its subsidiary undertakings in
which the director will or may be entitled to participate as a holder of
securities; (d) contracts concerning another company in which the
director is the holder of or beneficially interested in less than 1% of any
class of the equity share capital of such company; (e) employee
benefits in relation to the company or any of its subsidiary
undertakings in which the director will share in a similar manner to
other employees; and (g) the purchase or maintenance of insurance
against any liability for, or for the benefit of, any director or directors or
for, or for the benefit of, persons who include directors.
Directors may be elected by the members in a general meeting or
appointed by the Board.
Diageo Annual Report 2024
149
Directors’ report
The Directors present the Directors’ report for the year ended 30 June
2024.
Company status
Diageo plc is a public limited liability company incorporated in
England and Wales with registered number 23307 and registered
office and principal place of business at 16 Great Marlborough Street,
London W1F 7HS, United Kingdom. The company's telephone number
is +44 (0) 20 7947 9100. The company's agent in the United States is
General Counsel, Diageo North America, Inc., 175 Greenwich Street, 3
World Trade Center, New York, NY 10007, United States. The
company was incorporated on 21 October 1886. It is the ultimate
holding company of the group, a full list of whose subsidiaries,
partnerships, associates, joint ventures and joint arrangements is set
out in note 10 to the financial statements set out on pages 220-225.
Directors
The Directors of the company who currently serve are shown in the
section ‘Board of Directors’ on pages 92 and 93 and in accordance
with the UK Corporate Governance Code, all the Directors will retire by
rotation at the AGM and offer themselves for re-election. Further
details of Directors’ contracts, remuneration and their interests in the
shares of the company at 30 June 2024 are given in the Directors’
remuneration report. The Directors’ powers are determined by UK
legislation and Diageo’s articles of association. The Directors may
exercise all the company’s powers provided that Diageo’s articles of
association or applicable legislation do not stipulate that any powers
must be exercised by the members.
Auditor
The auditor, PricewaterhouseCoopers LLP, is willing to continue in
office and a resolution for its re-appointment as auditor of the
company will be submitted to the AGM.
Disclosure of information to the auditor
In accordance with Section 418 of the Companies Act 2006, the
Directors who held office at the date of approval of this Directors’
report confirm that, so far as they are each aware, there is no relevant
audit information of which the company’s auditor is unaware; and
each Director has taken all reasonable steps to ascertain any relevant
audit information and to ensure that the company’s auditor is aware of
that information.
Corporate governance statement
The corporate governance statement, prepared in accordance with
rule 7.2 of the Financial Conduct Authority’s Disclosure Guidance and
Transparency Rules, comprises the following sections of the Annual
Report: the ‘Corporate governance report’, the ‘Audit Committee
report’ and the ‘Additional information for shareholders’.
Significant agreements – change of control
The following significant agreements contain certain termination and
other rights for Diageo’s counterparties upon a change of control of
the company. Under the partners agreement governing the
company’s 34% investment in Moët Hennessy SAS (MH) and Moët
Hennessy International SAS (MHI), if a Competitor (as defined therein)
directly or indirectly takes control of the company (which, for these
purposes, would occur if such Competitor acquired more than 34% of
the voting rights or equity interests in the company), LVMH Moët
Hennessy – Louis Vuitton SA (LVMH) may require the company to sell
its interests in MH and MHI to LVMH.
The master agreement governing the operation of the group’s market-
level distribution joint ventures with LVMH states that if any person
acquires interests and rights in the company resulting in a Control
Event (as defined) occurring in respect of the company, LVMH may
within 12 months of the Control Event either appoint and remove the
chair of each joint venture entity governed by such master agreement,
who shall be given a casting vote, or require each distribution joint
venture entity to be wound up. Control Event for these purposes is
defined as the acquisition by any person of more than 30% of the
outstanding voting rights or equity interests in the company, provided
that no other person or entity (or group of affiliated persons or entities)
holds directly or indirectly more than 30% of the voting rights in the
company.
Related party transactions
Transactions with related parties are disclosed in note 21 to the
consolidated financial statements.
Major shareholders
At 30 June 2024, the following substantial interests (3% or more) in the
company’s ordinary share capital (voting securities) had been notified
to the company:
Shareholder
Number of
ordinary shares
Percentage
of issued ordinary
share (excluding
treasury shares)
Date of notification of
interest
BlackRock Investment
Management (UK)
Limited (indirect
holding)(1)
147,296,928
5.89%
3 December
2009
Capital Research and
Management Company
(indirect holding)
124,653,096
4.99%
28 April 2009
Massachusetts Financial
Services Company
(indirect holding)
111,560,606
4.99%
29 February
2024
(1)
On 25 January 2024, BlackRock Inc. filed an Amendment to Schedule 13G with the
SEC in respect of the calendar year ended 31 December 2023, reporting that, as of 25
January 2024, 192,713,107 ordinary shares representing 8.6% of the issued ordinary
share capital were beneficially owned by BlackRock Inc. and its subsidiaries
(including BlackRock Investment Management (UK) Limited).
The company has not been notified of any other substantial interests in
its securities since 30 June 2024. The company’s substantial
shareholders do not have different voting rights. Diageo, so far as is
known by the company, is not directly or indirectly owned or controlled
by another corporation or by any government. Diageo knows of no
arrangements, the operation of which may at a subsequent date result
in a change of control of the company.
As at the close of business on 24 July 2024, 325,119,456 ordinary
shares, including those held through American Depositary Shares
(ADSs), were held by approximately 2,598 holders (including
American Depositary Receipt (ADR) holders) with registered addresses
in the United States, representing approximately 14.6% of the
outstanding ordinary shares (excluding treasury shares). At such date,
81,092,735 ADSs were held by 2,140 registered ADR holders. Since
certain of such ordinary shares and ADSs are held by nominees or
former Grand Metropolitan PLC or Guinness plc ADR holders who
have not re-registered their ADSs, the number of holders may not be
representative of the number of beneficial owners in the United States
or the ordinary shares held by them.
Employment policies
A key strategic imperative of the company is to attract, retain and
grow a pool of diverse, talented employees. Diageo recognises that a
diversity of skills and experiences in its workplace and communities will
provide a competitive advantage. To enable this, the company has
various global employment policies and standards, covering such
issues as resourcing, data protection, human rights, dignity at work,
health, safety and wellbeing. These policies and standards seek to
ensure that the company treats current or prospective employees
justly, solely according to their abilities to meet the requirements and
standards of their role and in a fair and consistent way. This includes
giving full and fair consideration to applications from prospective
employees who are disabled, having regard to their aptitudes and
abilities, and not discriminating against employees under any
DIRECTORS' REMUNERATION REPORT continued
148
Diageo Annual Report 2024
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
F I N A N C I A L S T A T E M E N T S
ADDITIONAL INFORMATION
Other information
Other information relevant to the Directors’ report may be found in the following sections of the Annual Report:
Information (including that required by UK Listing Authority Listing
Rule 9.8.4)
Location in Annual Report
Agreements with controlling shareholders
Not applicable
Contracts of significance
Not applicable
Details of long-term incentive schemes
Directors’ remuneration report
Directors’ indemnities and compensation
Directors’ remuneration report - Additional information; Consolidated
financial statements - note 21 Related party transactions
Dividends
Group financial review; Consolidated financial statements - Unaudited
financial information
Engagement with employees
Corporate governance report - Workforce engagement statement
Engagement with suppliers, customers and others
Corporate governance report - Stakeholder engagement
Events post 30 June 2024
Consolidated financial statements - note 23 Post balance sheet events
Financial risk management
Consolidated financial statements - note 16 Financial instruments and risk
management
Future developments
Chair’s statement; Chief Executive’s statement; Market overview and
investment case; Business model; Our growth ambition
Greenhouse gas emissions
Pioneer grain-to-glass sustainability; Non-Financial and sustainability
information statement
Interest capitalised
Not applicable
Non-pre-emptive issues of equity for cash (including in respect of
major unlisted subsidiaries)
Not applicable
Parent participation in a placing by a listed subsidiary
Not applicable
Political donations
Corporate governance report
Provision of services by a controlling shareholder
Not applicable
Publication of unaudited financial information
Unaudited financial information
Purchase of own shares
Repurchase of shares; Consolidated financial statements - note 18 Equity
Research and development
Other additional information - Research and development; Consolidated
financial statements - note 4 Operating costs
Review of the business and principal risks and uncertainties
Chief Executive’s statement; Our principal risks and risk management;
Pioneer grain-to-glass sustainability; Business review
Share capital - structure, voting and other rights
Consolidated financial statements - note 18 Equity
Share capital - employee share plan voting rights
Consolidated financial statements - note 18 Equity
Shareholder waivers of dividends
Consolidated financial statements - note 18 Equity
Shareholder waivers of future dividends
Consolidated financial statements - note 18 Equity
Streamlined Energy and Carbon Reporting (SECR) disclosures
Pioneer grain-to-glass sustainability
Sustainability and responsibility
Pioneer grain-to-glass sustainability
Waiver of emoluments by a director
Not applicable
Waiver of future emoluments by a director
Not applicable
The Directors’ report of Diageo plc for the year ended 30 June 2024 comprises these pages and the sections of the Annual Report referred to under
‘Directors’, ‘Corporate governance statement’ and ‘Other information’ above, which are incorporated into the Directors’ report by reference.
In addition, certain disclosures required to be contained in the Directors’ report have been incorporated into the ‘Strategic report’ as set out in
‘Other information’ above.
The Directors’ report, which has been approved by a duly appointed and authorised committee of the Board of Directors, was signed on its behalf
by Tom Shropshire, the Company Secretary, on 29 July 2024.
Diageo Annual Report 2024
151
The directors are empowered to exercise all the powers of the
company to borrow money, subject to any limitation in Diageo’s
articles of association (currently two times the adjusted capital and
reserves of the company as defined in the articles of association),
unless previously sanctioned by an ordinary resolution of the
company.
At each annual general meeting, all the directors at the date on which
the notice convening the annual general meeting is approved by the
Board shall retire from office and may offer themselves for re-election
by members. There is no age limit requirement in respect of directors.
Directors may also be removed before the expiration of their term of
office in accordance with the provisions of the Companies Acts.
Directors are not required to hold any shares of the company by way
of qualification.
Voting rights
Voting on any resolution at any general meeting of the company is by
a show of hands unless a poll is duly demanded. On a show of hands,
(a) every shareholder who is present in person at a general meeting,
and every proxy appointed by any one shareholder and present at a
general meeting, has/have one vote regardless of the number of
shares held by the shareholder (or, subject to (b), represented by the
proxy), and
(b) every proxy present at a general meeting who has been appointed
by more than one shareholder has one vote regardless of the number
of shareholders who have appointed him/her or the number of shares
held by those shareholders, unless he/she has been instructed to vote
for a resolution by one or more shareholders and to vote against the
resolution by one or more shareholders, in which case he/she has one
vote for and one vote against the resolution.
On a poll, every shareholder who is present in person or by proxy has
one vote for every share held by that shareholder, but a shareholder
or proxy entitled to more than one vote need not cast all his/her votes
or cast them all in the same way (the deadline for exercising voting
rights by proxy is set out in the form of proxy).
A poll may be demanded by any of the following:
• the chair of the general meeting;
• at least three shareholders entitled to vote on the relevant resolution
and present in person or by proxy at the meeting;
• any shareholder or shareholders present in person or by proxy and
representing in the aggregate not less than one-tenth of the total
voting rights of all shareholders entitled to vote on the relevant
resolution; or
• any shareholder or shareholders present in person or by proxy and
holding shares conferring a right to vote on the relevant resolution
on which there have been paid up sums in the aggregate equal to
not less than one-tenth of the total sum paid up on all the shares
conferring that right.
Diageo’s articles of association and the Companies Acts provide for
matters to be transacted at general meetings of Diageo by the
proposing and passing of two kinds of resolutions:
• ordinary resolutions, which include resolutions for the election, re-
election and removal of directors, the declaration of final dividends,
the appointment and re-appointment of the external auditor, the
remuneration report and remuneration policy, the increase of
authorised share capital and the grant of authority to allot shares;
and
• special resolutions, which include resolutions for the amendment of
Diageo’s articles of association, resolutions relating to the
disapplication of pre-emption rights, and resolutions modifying the
rights of any class of Diageo’s shares at a meeting of the holders of
such class.
An ordinary resolution requires the affirmative vote of a simple
majority of the votes cast by those entitled to vote at a meeting at
which there is a quorum in order to be passed. Special resolutions
require the affirmative vote of not less than three-quarters of the votes
cast by those entitled to vote at a meeting at which there is a quorum
in order to be passed. The necessary quorum for a meeting of Diageo
is a minimum of two shareholders present in person or by proxy and
entitled to vote.
A shareholder is not entitled to vote at any general meeting or class
meeting in respect of any share held by them if they have been served
with a restriction notice (as defined in Diageo's articles of association)
after failure to provide Diageo with information concerning interests in
those shares required to be provided under the Companies Acts.
Pre-emption rights and new issues of shares
While holders of ordinary shares have no pre-emptive rights under
Diageo’s articles of association, the ability of the Directors to cause
Diageo to issue shares, securities convertible into shares or rights to
shares, otherwise than pursuant to an employee share scheme, is
restricted. Under the Companies Acts, the directors of a company are,
with certain exceptions, unable to allot any equity securities without
express authorisation, which may be contained in a company’s articles
of association or given by its shareholders in a general meeting, but
which in either event cannot last for more than five years. Under the
Companies Acts, Diageo may also not allot shares for cash (otherwise
than pursuant to an employee share scheme) without first making an
offer to existing shareholders to allot such shares to them on the same
or more favourable terms in proportion to their respective
shareholdings, unless this requirement is waived by a special
resolution of the shareholders.
Repurchase of shares
Subject to authorisation by special resolution, Diageo may purchase its
own shares in accordance with the Companies Acts. Any shares which
have been bought back may be held as treasury shares or, if not so
held, must be cancelled immediately upon completion of the
purchase, thereby reducing the amount of Diageo’s issued share
capital.
Restrictions on transfers of shares
The Board may decline to register a transfer of a certificated Diageo
share unless the instrument of transfer (a) is duly stamped or certified
or otherwise shown to the satisfaction of the Board to be exempt from
stamp duty, and is accompanied by the relevant share certificate and
such other evidence of the right to transfer as the Board may
reasonably require, (b) is in respect of only one class of share and (c) if
to joint transferees, is in favour of not more than four such transferees.
Registration of a transfer of an uncertificated share may be refused in
the circumstances set out in the uncertificated securities rules (as
defined in Diageo’s articles of association) and where, in the case of a
transfer to joint holders, the number of joint holders to whom the
uncertificated share is to be transferred exceeds four.
The Board may decline to register a transfer of any of Diageo’s
certificated shares by a person with a 0.25% interest (as defined in
Diageo’s articles of association) if such a person has been served with
a restriction notice (as defined in Diageo’s articles of association) after
failure to provide Diageo with information concerning interests in those
shares required to be provided under the Companies Acts, unless the
transfer is shown to the Board to be pursuant to an arm’s-length sale
(as defined in Diageo’s articles of association).
DIRECTORS' REMUNERATION REPORT continued
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ADDITIONAL INFORMATION
Financial statements
Contents
Independent auditors' report to the members of Diageo plc
153
Primary statements
Consolidated income statement
161
Consolidated statement of comprehensive income
162
Consolidated balance sheet
163
Consolidated statement of changes in equity
164
Consolidated statement of cash flows
165
Accounting information and policies
1. Accounting information and policies
166
Results for the year
2. Segmental information
168
3. Exceptional items
172
4. Operating cost
174
5. Finance income and charges
175
6. Investments in associates and joint ventures
176
7. Taxation
177
Operating assets and liabilities
8. Acquisition and sale of businesses and brands and
purchase of non-controlling interests
180
9. Intangible assets
183
10. Property, plant and equipment
187
11. Biological assets
188
12. Leases
188
13. Other investments
189
14. Post-employment benefits
189
15. Working capital
194
Risk management and capital structure
16. Financial instruments and risk management
196
17. Net borrowings
204
18. Equity
206
Other financial statements disclosures
19. Contingent liabilities and legal proceedings
210
20. Commitments
212
21. Related party transactions
212
22. Principal group companies
213
23. Post balance sheet events
213
Financial statements of the company
214
Introduction
The group's consolidated financial statements, which have
been prepared in accordance with international accounting
standards in conformity with the requirements of the
Companies Act 2006 and International Financial Reporting
Standards (IFRS) adopted by the UK (UK-adopted
International Accounting Standards) and IFRSs as issued by
the International Accounting Standards Board (IASB), give
a true and fair view of the assets, liabilities, financial position
and profit of the group.
The financial statements of Diageo plc (the company) are
prepared in accordance with the Companies Act 2006 and
in accordance with Financial Reporting Standard 101 Reduced
Disclosure Framework (FRS 101).
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Independent auditors' report to the members of
Diageo plc
Report on the audit of the financial statements
Opinion
In our opinion:
• Diageo plc’s (“Diageo”) group financial statements and company financial statements (the “financial statements”) give a true and fair view
of the state of the group’s and of the company’s affairs as at 30 June 2024 and of the group’s and company’s profit and the group’s cash flows
for the year then ended;
• the group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
• the company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards, including FRS 101 “Reduced Disclosure Framework”, and applicable law); and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report, which comprise: the consolidated and company balance sheets
as at 30 June 2024; the consolidated income statement, statement of comprehensive income, statement of changes in equity, and statement of
cash flows for the year then ended; and the notes to the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Separate opinion in relation to IFRSs as issued by the IASB
As explained in note 1(a) to the financial statements, the group, in addition to applying UK-adopted international accounting standards, has also
applied international financial reporting standards (IFRSs) as issued by the International Accounting Standards Board (IASB).
In our opinion, the group financial statements have been properly prepared in accordance with IFRSs as issued by the IASB.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under
ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We believe that the
audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the
UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our other ethical responsibilities
in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided.
Other than those disclosed in note 4(b) of the group financial statements, we have provided no non-audit services to the company or its controlled
undertakings in the period under audit.
Our audit approach
Overview
Audit scope
This was the first year that it has been my responsibility to form this opinion on behalf of PricewaterhouseCoopers LLP. In addition to forming this
opinion, in this report we have also provided information on how we approached the audit and details of the significant discussions that we had
with the Audit Committee. We attended each of the Audit Committee meetings held during the year. Part of each meeting involved a private
discussion without management present. We also met with the Chair of the Audit Committee on an ad-hoc basis. During these various
conversations we discussed our observations on a variety of accounting matters, for example the assumptions used in the group’s impairment
assessment over goodwill and brand intangibles assets, and observations on controls over financial reporting. In December, the Audit Committee
discussed and challenged the audit plan. The plan included the matters which we considered presented the highest risks to the financial statements
and other information about our audit such as our approach to testing specific balances, how we structured our team to perform work over those
balances and how technology would be used to obtain better quality audit evidence.
Key audit matters
• Valuation of goodwill and brand intangible assets (group)
• Uncertain tax positions in respect of indirect taxes in Brazil (group)
• Valuation of post-employment benefit liabilities (group & parent)
• Investments in subsidiaries (parent)
Materiality
• Overall group materiality: $270m (FY23: £251m) based on 5% of profit before exceptional items and tax.
• Overall company materiality: $332m (FY23: £273m) based on 0.5% of Net Assets.
• Performance materiality: $204m (FY23: £188m) (group) and $249m (FY23: £205m) (company).
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
INDEPENDENT AUDITORS' REPORT TO THE M EM BERS OF DIA GEO PLC
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ADDITIONAL INFORMATION
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by the
auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the
efforts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these
matters.
This is not a complete list of all risks identified by our audit.
The key audit matters below are consistent with last year.
Valuation of goodwill and brand intangible assets (group)
Nature of the Key Audit Matter
Impacted FSLIs
2024
2023
Goodwill
$2,860m
$2,807m
Brands
$9,642m
$9,475m
Goodwill and brand assets have been recognised as a result of acquisitions in prior years. Diageo is required to assess the recoverable amounts
of these assets at least annually because they are deemed to have an indefinite life, and determine whether any are impaired or, for brands, a
previously recognised impairment should be reversed.
The assessments were performed by management prior to the year end, with impairment triggers considered up to the balance sheet date.
Management estimated recoverable amounts, being the higher of value in use (VIU) and fair value less cost of disposal, and compared these
to carrying values. VIU was predominantly used, unless management believed that fair value less cost of disposal would result in a higher
recoverable amount for any CGU or brand.
Certain CGUs and brands were identified as being sensitive to reasonable changes in significant assumptions and are required to be disclosed
in the Annual Report.
The methodology used to calculate VIUs is dependent on various assumptions, both short term and long term in nature. These assumptions,
which are subject to estimation uncertainty, are derived from a combination of management’s judgement, experts engaged by management and
market data. The significant assumptions that we focused our audit on were those with greater levels of management judgement and for which
variations had the most significant impact on the recoverable amounts. Specifically, these included Diageo’s volume, revenue and operating profit
forecasts in their strategic plans for fiscal years 25 to 27, long-term growth rates and discount rates.
The discussion with the Audit Committee
We discussed with the Audit Committee the methodologies and significant assumptions used to determine the recoverable values of goodwill
and certain brand intangible assets.
These discussions covered:
• the performance in fiscal 24 of material brands and CGUs;
• the nature and extent of evidence supporting management’s forecasts from fiscal years 25 to 29;
• our experts’ assessments of discount rates applied to material brands and CGUs.
How our audit addressed the Key Audit Matter
We validated the appropriateness of the CGUs selected.
We evaluated the design and tested the operating effectiveness of controls in place over the methodologies, significant assumptions and
calculation of VIU and fair value less cost of disposal (FVLCD).
We agreed the mathematical accuracy of the calculations to estimate the VIUs and FVLCDs.
In respect of the significant assumptions, our testing included the following:
• challenging the achievability of management’s strategic plan and the prospects for Diageo’s businesses for certain CGUs and brands,
particularly where forecasts were significantly different to historic performance;
• obtaining and evaluating evidence where available relating to significant assumptions of forecasted growth, from a combination of historic
experience, external market data (e.g. IWSR, the leading source of data and analysis on the global beverage alcohol market) and other
financial information;
• assessing whether the forecast cash flows included in the calculation were in accordance with the accounting standard IAS 36 “Impairment
of Assets”;
• assessing the sensitivity of the VIU to reasonable variations in significant assumptions, both individually and in aggregate;
• determining a reasonable range for the discount rate used in the calculation, with the assistance of our valuation experts, and comparing
it to the discount rate used by management; and
• assessing the appropriateness of terminal growth rates including benchmarking to external data sources.
We evaluated and tested the disclosures made in the Annual Report in relation to goodwill and brand intangibles.
Relevant references in Annual Report
Note 1(e) - Critical accounting estimates and judgements
Note 9 - Intangible assets
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DIAGEO PLC continued
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Uncertain tax positions in respect of indirect taxes in Brazil (group)
Nature of the Key Audit Matter
Impacted disclosure
2024
2023
Contingent liability for indirect tax uncertainties - Brazil
$764m
$672m
The group operates across a large number of jurisdictions and in the normal course of business is subject to periodic challenges by tax authorities
on a range of matters. Due to the complexity of indirect tax legislation, particularly in developing markets, the group has a wide range of tax
exposures relating to indirect taxes against which provisions are held and contingent liabilities are disclosed. In common with other alcohol
beverage companies, indirect taxation is particularly complex because of specific alcohol excise duties and the international distribution of
certain brands.
Diageo makes judgements in assessing the likelihood of tax exposures, developing estimates to determine provisions where required, and
determining appropriate contingent liability disclosures. Of particular significance are indirect tax assessments in developing markets and
assessments relating to financing and transfer pricing arrangements. The impact of changes in local tax regulations and relevant rulings, together
with ongoing inspections by local tax and customs authorities and international bodies, could materially impact the amounts recorded in the group
financial statements.
The discussion with the Audit Committee
We discussed with the Audit Committee the judgements taken by management in assessing the likelihood of material exposure and determining
appropriate contingent liability disclosure regarding indirect tax risks. Our discussions focused on indirect tax matters in Brazil.
How our audit addressed the Key Audit Matter
We evaluated the design and tested the operating effectiveness of controls to identify uncertain tax positions related to indirect taxes, and the
related accounting policy for providing for and disclosing tax exposures.
Our tax specialists gained an understanding of the current status of material tax exposures. We read recent rulings and correspondence with
tax authorities, as well as external advice provided by the group’s tax experts and legal advisors.
We evaluated and tested the related contingent liability disclosure in relation to uncertain tax positions.
Relevant references in Annual Report
Note 1(e) - Critical accounting estimates and judgements
Note 7 - Taxation
Note 19 - Contingent liabilities and legal
proceedings
Valuation of post-employment benefit liabilities (group & parent)
Nature of the Key Audit Matter
Impacted FSLI
2024
2023
Post-employment benefit liabilities (Group)
$7,696m
$7,876m
Post-employment benefit liabilities (Company)
$5,029m
$5,094m
The most significant post-employment schemes are in the United Kingdom, Ireland and the United States. Each of these is in a net surplus position
as at 30 June 2024.
The valuation of post-employment benefit liabilities is dependent on a number of actuarial assumptions. Management uses external actuaries
to assist in determining these assumptions, and to determine the valuation of the post-employment benefit liabilities. The experts use valuation
methodologies that require a number of market-based inputs and other financial and demographic assumptions, including salary increases,
mortality rates, discount rates, inflation levels and the impact of any changes in individual pension plans. The significant assumptions that we
focused our audit on were those with greater levels of management judgement, and for which variations had the most significant impact on the
liabilities. Specifically, these included the discount rates, inflation rates and mortality rates.
The discussion with the Audit Committee
We discussed with the Audit Committee the significant assumptions used by management to determine the value of the post-employment benefit
liabilities, including discount rates, inflation and mortality assumptions where relevant for the UK, Irish and US schemes.
How our audit addressed the Key Audit Matter
We evaluated the design and tested the operating effectiveness of controls in place over the post-employment benefit liabilities.
Our actuarial experts assessed the appropriateness of the methodology used to estimate the liabilities and reviewed the calculations prepared
by Diageo’s actuarial experts. They also understood the judgments made by Diageo and their actuarial experts in determining the significant
assumptions and compared these assumptions for the significant schemes to our independently compiled expected ranges based on market
observable indices, relevant national and industry benchmarks, and our market experience.
We also evaluated the objectivity and competence of Diageo’s experts involved in the valuation of the post-employment benefit liabilities.
We evaluated and tested the related disclosures in relation to the post-employment benefit liabilities.
Relevant references in Annual Report
Note 1(e) - Critical accounting estimates and judgements
Note 14 - Post-employment benefits
(Group)
Note 6 - Post-employment benefits
(Company)
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ADDITIONAL INFORMATION
Investments in subsidiaries (parent)
Nature of the Key Audit Matter
Impacted FSLI
2024
2023
Investments in subsidiaries
$76,104m
$77,571m
Management assessed investments in subsidiaries for indicators of impairment and indicators that impairment charges recognised in prior
periods may no longer exist or may have decreased as at 30 June 2024. Where indicators were identified, management estimated the
recoverable amount using the higher of value in use (VIU) or fair value less cost of disposal, and compared these to carrying values.
The methodology used to estimate the recoverable amount is dependent on various assumptions, both short term and long term in nature.
These assumptions, which are subject to estimation uncertainty, are derived from a combination of management’s judgement, experts
engaged by management and market data. The significant assumptions that we focused our audit on were those with greater levels of
management judgement and for which variations had the most significant impact on the recoverable amount. Specifically, these included
Diageo’s volume, revenue and operating profit forecasts in their strategic plans for fiscal years 25 to 27, EV/EBIT multiples, long-term growth rates
and discount rates.
Management’s assessment did not result in an impairment charge or reversal for the year ended 30 June 2024.
The discussion with the Audit Committee
We discussed with the Audit Committee the methodologies and significant assumptions used to determine the recoverable amount of investments
in subsidiaries.
How our audit addressed the Key Audit Matter
We evaluated the design and tested the operating effectiveness of controls in place over the methodologies, significant assumptions and
calculation of the recoverable amounts.
We assessed the appropriateness of the methodology used, and tested the mathematical accuracy of the calculations, to estimate the
recoverable amounts.
In respect of the significant assumptions, our testing included the following:
• challenging the achievability of management’s strategic plan and the prospects for Diageo’s businesses;
• obtaining and evaluating evidence where available relating to significant assumptions, from a combination of historical experience, external
market data and other financial information;
• assessing whether the forecast cash flows included in the calculation were in compliance with the relevant accounting standard;
• assessing the sensitivity of the recoverable amounts to reasonable variations in significant assumptions, both individually and in aggregate;
• determining a reasonable range for the EV/EBIT multiples rate used within the market approach calculations, with the assistance of our
valuation experts, and comparing it to the EV/EBIT multiples used by management;
• determining a reasonable range for the discount rate used within the model, with the assistance of our valuation experts, and comparing
it to the discount rate used by management; and
• assessed the appropriateness of terminal growth rates including benchmarking to external data sources.
We evaluated and tested the disclosures made in the Annual Report in relation to investment in subsidiaries.
Relevant references in Annual Report
Note 1(e) - Critical accounting estimates and judgements
Note 3 – Investment in subsidiary
undertakings (Company)
How we tailored the audit scope
Partners and staff from 12 countries across the PwC network have performed work supporting this report, which in addition to the opinion
provides amongst other things, information on how we approached the audit and how it changed from the previous year.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements
as a whole, taking into account the structure of the group and the company, the accounting processes and controls, and the alcoholic
beverage industry.
There were three important aspects of our approach; audit work performed on individual business units, at shared service centres, and at the
group level and for the company. In 2024, we continued to drive more standardisation in our audit work performed for individual business units
and centralise more of our work in shared service centre locations.
Individual business units
We obtained audit opinions from six PwC member firms and specified procedures reporting from two PwC member firms over the financial
information of 22 reporting units, either in relation to all the financial information or specific accounts and balances. We also obtained reporting
from a non-PwC member firm over the financial information of Moët Hennessy, the group’s principal associate.
In April 2024, we hosted in London an in-person meeting for senior staff from PwC member firms involved in the audit. At this meeting we
considered developments specific to Diageo, key audit matters and changes to our approach to audit business processes across Diageo more
centrally in shared service centre locations. We heard from key members of management and the Chair of the Audit Committee.
We issued formal instructions to each component audit team setting out the work to be performed by each of them. We were in active dialogue
throughout the year with the teams responsible for these audits; this included consideration of how they planned and performed their work. Senior
team members visited the component audit teams in Great Britain, Ireland, India, Mexico, Türkiye and the United States. Senior team members
also attended via video conference the final audit meetings for certain reporting units. During these meetings, the findings reported by each of the
component audit teams were discussed. We evaluated the sufficiency of the audit evidence obtained through discussions with each team and
a review of the audit working papers.
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DIAGEO PLC continued
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Shared service centres (GBOs)
A significant number of operational processes which are critical to financial reporting are undertaken in the GBO shared service centres in
Hungary, India, Philippines and Colombia. PwC teams in these locations tested controls and transactions which supported the financial information
for many of the 22 reporting units in scope, to ensure that adequate audit evidence was obtained.
Group level and for the company
We ensured that appropriate further audit work was undertaken at a group level and for the company. This work included auditing, for example,
the consolidation of the group’s results, the preparation of the financial statements, certain disclosures within the Directors’ Remuneration Report,
litigation provisions and exposures and management’s entity level and oversight controls relevant to financial reporting. We also performed work
centrally for the audit of technology and IT general controls, goodwill and intangible assets, pensions and taxation. This work was supported
by team members who are based in Hungary and India.
Collectively, these three areas of work covered 74% of group net sales, 84% of group total assets, and 86% of group profit before exceptional
items and tax (PBET).
The impact of climate risk on our audit
We evaluated and challenged management‘s assessment of the impact of climate change risk, which is set out on page 167, including their
conclusion that there is no material impact on the financial statements.
By their nature financial statements present historical information which does not fully capture future events. We did determine that the key
areas in the financial statements that are more likely to be materially impacted by climate change are those areas that are based on estimated
future cash flows. As a result, we considered in particular how climate risks and management’s scenario analysis would impact the assumptions
made in the forecasts prepared by Diageo used in the group’s impairment analysis and for going concern purposes. We challenged how longer
term physical chronic risks had been considered such as water scarcity from water stress and chronic weather on agricultural supply chains,
as well as shorter-term transitional risks such as the introduction of carbon taxes. Our work did not identify any material impact on our audit for
the year ended 30 June 2024. We ensured that the assumptions used in preparation of the financial statements are consistent with the Task Force
on Climate-related Financial Disclosures (“TCFD”) disclosure.
Diageo’s progress against its 'Spirit of Progress' metrics set out on pages 48 – 76 is not included within the scope of this audit. We were engaged
separately to provide independent limited assurance to the Directors over some of these metrics marked with the symbol Δ. The independent
limited assurance report, which explains the scope of our work and the limited procedures undertaken is included in the Annual Report 2024 on
page 258.
Limited assurance varies significantly and is substantially less in scope than that of our financial audit, which provides reasonable assurance.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the
individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually and in aggregate on the
financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Financial Statement - group
Financial Statement - company
Overall materiality
$270m (FY23: £251m).
$332m (FY23: £273m).
How we determined it
5% of PBET.
0.5% of Net Assets.
Rationale for
benchmark
applied
We believe a standard benchmark of 5% of profit before
exceptionals and tax (PBET) is an appropriate quantitative
indicator of materiality.
This benchmark is consistent with the prior year and our
approach for listed entities.
We consider a net asset measure to reflect the nature of
the company, which primarily acts as a holding company
for the group’s investments and holds certain liabilities on
the balance sheet.
For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of
materiality allocated across components was $14m to $180m. Certain components were audited to a local statutory audit materiality that was also
less than our overall group materiality.
We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected
misstatements exceeds overall materiality. Specifically, we use performance materiality in determining the scope of our audit and the nature and
extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance
materiality was 75% (FY23: 75%) of overall materiality, amounting to $204m (FY23: £188m) for the group financial statements and $249m (FY23:
£205m) for the company financial statements.
In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation
risk and the effectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above $14m (group audit) (FY23:
£12m) and $16m (company audit) (FY23: £14m) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative
reasons.
Conclusions relating to going concern
Our evaluation of the directors’ assessment of the group's and the company’s ability to continue to adopt the going concern basis of accounting
included:
• performing a risk assessment to identify factors that could impact the going concern basis of accounting, including both internal risks (i.e.
strategy execution) and external risks (i.e. macroeconomic conditions);
• understanding and evaluating the group’s financial forecasts, including future cash flow requirements of the group’s financing activities, and
their severe but plausible downside scenarios considering the group’s principal risks;
• evaluating management’s assessment of the entity’s ability to continue as a going concern; and
• reading and evaluating the adequacy of the disclosures made in the financial statements in relation to going concern.
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ADDITIONAL INFORMATION
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the group's and the company’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate.
However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group's and the company's
ability to continue as a going concern.
In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to adopt the
going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report thereon.
The directors are responsible for the other information. Our opinion on the financial statements does not cover the other information and,
accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to
conclude whether there is a material misstatement of the financial statements or a material misstatement of the other information. If, based on the
work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report based on these responsibilities.
With respect to the Strategic report and Directors' report, we also considered whether the disclosures required by the Companies Act 2006 have
been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as
described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic report and Directors' report for the
year ended 30 June 2024 is consistent with the financial statements and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not
identify any material misstatements in the Strategic report and Directors' report.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act
2006.
Corporate governance statement
The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the corporate
governance statement relating to the company’s compliance with the provisions of the UK Corporate Governance Code specified for our review.
Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other
information section of this report.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance
statement is materially consistent with the financial statements and our knowledge obtained during the audit, and we have nothing material to add
or draw attention to in relation to:
• the directors’ confirmation that they have carried out a robust assessment of the emerging and principal risks;
• the disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an
explanation of how these are being managed or mitigated;
• the directors’ statement in the financial statements about whether they considered it appropriate to adopt the going concern basis of accounting
in preparing them, and their identification of any material uncertainties to the group’s and company’s ability to continue to do so over a period
of at least twelve months from the date of approval of the financial statements;
• the directors’ explanation as to their assessment of the group's and company’s prospects, the period this assessment covers and why the period
is appropriate; and
• the directors’ statement as to whether they have a reasonable expectation that the company will be able to continue in operation and meet its
liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualifications or
assumptions.
Our review of the directors’ statement regarding the longer-term viability of the group and company was substantially less in scope than an audit
and only consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in
alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the
financial statements and our knowledge and understanding of the group and company and their environment obtained in the course of the audit.
In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate
governance statement is materially consistent with the financial statements and our knowledge obtained during the audit:
• the directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the
information necessary for the members to assess the group’s and company's position, performance, business model and strategy;
• the section of the Annual Report that describes the review of effectiveness of risk management and internal control systems; and
• the section of the Annual Report describing the work of the Audit Committee.
We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s compliance with the
Code does not properly disclose a departure from a relevant provision of the Code specified under the Listing Rules for review by the auditors.
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DIAGEO PLC continued
158
Diageo Annual Report 2024
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors' responsibilities, the directors are responsible for the preparation of the financial statements in accordance
with the applicable framework and for being satisfied that they give a true and fair view. The directors are also responsible for such internal control
as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or
error.
In preparing the financial statements, the directors are responsible for assessing the group’s and the company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the group or the company or to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is
not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud, is detailed below.
Based on our understanding of the group and industry, we identified the principal risks of non-compliance with laws and regulations related to
anti-bribery and corruption legislation and payroll tax legislation, and we considered the extent to which non-compliance might have a material
effect on the financial statements. We also considered those laws and regulations that have a direct impact on the financial statements such as
Companies Act 2006, the Listing Rules and UK & international tax legislation. We evaluated management’s incentives and opportunities for
fraudulent manipulation of the financial statements (including the risk of override of controls), and determined that the principal risks were related
to posting inappropriate journal entries to, for example, suppress expenses to improve financial performance, and management bias in accounting
estimates. The group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit
procedures in response to such risks in their work. Audit procedures performed by the group engagement team and/or component auditors
included:
• gaining an understanding of the legal and regulatory frameworks applicable to Diageo, and considering the risk of acts by Diageo which are
contrary to applicable laws and regulations, including fraud;
• performing procedures which were deliberately unexpected and could not have reasonably been predicted by Diageo’s management. This
included performing procedures over balances and transactions which otherwise would not have been subject to audit procedures due to their
size, such as additional journal testing criteria over exceptional items;
• performing inquiries of senior management, including but not limited to members of the Executive Committee and regional and market chief
financial officers, to identify areas of possible breaches of laws and regulations;
• reviewing correspondence with regulators, including the FRC, Securities and Exchange Commission and the tax authorities in Diageo’s key
markets;
• assessing matters reported through the group’s whistleblowing programme and the results of management’s investigation in so far as they
related to financial reporting;
• challenging assumptions and judgements made by management in its significant accounting estimates, in particular in relation to key audit
matters; and
• inspecting correspondence with legal advisors and internal audit reports in so far as they related to the financial statements.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with
laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a
material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment
by, for example, forgery or intentional misrepresentations, or through collusion.
Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques.
However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target
particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion
about the population from which the sample is selected.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at: www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16
of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or
to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
• we have not obtained all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not
visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; or
• the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Diageo Annual Report 2024
159
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 15 October 2015 to audit the financial statements
for the year ended 30 June 2016 and subsequent financial periods. The period of total uninterrupted engagement is 9 years, covering the years
ended 30 June 2016 to 30 June 2024.
Other matter
The company is required by the Financial Conduct Authority Disclosure Guidance and Transparency Rules to include these financial statements in
an annual financial report prepared under the structured digital format required by DTR 4.1.15R - 4.1.18R and filed on the National Storage
Mechanism of the Financial Conduct Authority. This auditors’ report provides no assurance over whether the structured digital format annual
financial report has been prepared in accordance with those requirements.
Scott Berryman (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
29 July 2024
INDEPENDENT AUDITORS' REPORT TO THE MEMBERS OF DIAGEO PLC continued
160
Diageo Annual Report 2024
Consolidated income statement
Year ended
30 June 2024
Year ended
30 June 2023
Year ended
30 June 2022
Notes
$ million
re-presented(1)
$ million
re-presented(1)
$ million
Sales
2
27,891
28,270
29,751
Excise duties
4
(7,622)
(7,715)
(9,235)
Net sales
2
20,269
20,555
20,516
Cost of sales
4
(8,071)
(8,289)
(7,923)
Gross profit
12,198
12,266
12,593
Marketing
4
(3,691)
(3,663)
(3,616)
Other operating items
4
(2,506)
(3,056)
(3,080)
Operating profit
6,001
5,547
5,897
Non-operating items
3
(70)
364
(88)
Finance income
5
400
409
661
Finance charges
5
(1,285)
(1,121)
(1,217)
Share of after tax results of associates and joint ventures
6
414
443
555
Profit before taxation
5,460
5,642
5,808
Taxation
7
(1,294)
(1,163)
(1,398)
Profit for the year
4,166
4,479
4,410
Attributable to:
Equity shareholders of the parent company
3,870
4,445
4,280
Non-controlling interests
296
34
130
4,166
4,479
4,410
Weighted average number of shares
million
million
million
Shares in issue excluding own shares
2,234
2,264
2,318
Dilutive potential ordinary shares
5
7
7
2,239
2,271
2,325
cents
cents
cents
Basic earnings per share
173.2
196.3
184.6
Diluted earnings per share
172.8
195.7
184.1
The accompanying notes are an integral part of these consolidated financial statements.
(1)
See pages 166-167 for an explanation under Accounting information and policies.
FINANCIAL STATEM ENTS
Diageo Annual Report 2024
161
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Consolidated statement of comprehensive income
Year ended
30 June 2024
Year ended
30 June 2023
Year ended
30 June 2022
Notes
$ million
re-presented(1)
$ million
re-presented(1)
$ million
Other comprehensive income
Items that will not be recycled subsequently to the income statement
Net remeasurement of post-employment benefit plans
Group
14
(76)
(771)
820
Associates and joint ventures
1
16
6
Non-controlling interests
14
—
—
(1)
Tax on post-employment benefit plans
14
193
(164)
Changes in the fair value of equity investments at fair value through other comprehensive
income
(1)
(5)
(15)
(62)
(567)
646
Items that may be recycled subsequently to the income statement
Exchange differences on translation of foreign operations
Group
(516)
(906)
756
Associates and joint ventures
6
(64)
132
(570)
Non-controlling interests
(21)
(100)
(83)
Net investment hedges
(70)
499
(829)
Exchange loss recycled to the income statement
On disposal of foreign operations
8
26
15
143
On step acquisitions
—
2
—
Tax on exchange differences – group
11
2
(21)
Effective portion of changes in fair value of cash flow hedges
Hedge of foreign currency debt of the group
(58)
7
309
Transaction exposure hedging of the group
61
328
(230)
Hedges by associates and joint ventures
(3)
29
(20)
Commodity price risk hedging of the group
13
(67)
104
Recycled to income statement – hedge of foreign currency debt of the group
152
65
(319)
Recycled to income statement – transaction exposure hedging of the group
(266)
(16)
57
Recycled to income statement – commodity price risk hedging of the group
9
(39)
(61)
Cost of hedging
(51)
—
—
Recycled to income statement – cost of hedging
(27)
—
—
Tax on effective portion of changes in fair value of cash flow hedges
16
(46)
42
Hyperinflation adjustments
503
229
431
Tax on hyperinflation adjustments(2)
(138)
(49)
(87)
(423)
85
(378)
Other comprehensive (loss)/income, net of tax, for the year
(485)
(482)
268
Profit for the year
4,166
4,479
4,410
Total comprehensive income for the year
3,681
3,997
4,678
Attributable to:
Equity shareholders of the parent company
3,404
4,063
4,632
Non-controlling interests
18
277
(66)
46
Total comprehensive income for the year
3,681
3,997
4,678
The accompanying notes are an integral part of these consolidated financial statements.
(1)
See pages 166-167 for an explanation under Accounting information and policies.
(2)
Tax on hyperinflation adjustments $(111) million and tax rate change on hyperinflation adjustments $(27) million.
FINA NCIA L STATEMENTS continued
162
Diageo Annual Report 2024
Consolidated balance sheet
30 June 2024
30 June 2023
1 July 2022
Notes
$ million
$ million
re-presented(1)
$ million
re-presented(1)
$ million
re-presented(1)
$ million
re-presented(1)
$ million
Non-current assets
Intangible assets
9
14,814
14,506
14,401
Property, plant and equipment
10
8,509
7,738
7,076
Biological assets
11
199
197
114
Investments in associates and joint ventures
6
5,032
4,825
4,418
Other investments
13
94
71
45
Other receivables
15
38
39
45
Other financial assets
16
373
497
418
Deferred tax assets
7
143
178
138
Post-employment benefit assets
14
1,146
1,210
1,878
30,348
29,261
28,533
Current assets
Inventories
15
9,720
9,653
8,584
Trade and other receivables
15
3,487
3,427
3,549
Corporate tax receivables
7
304
292
180
Assets held for sale
8
130
—
269
Other financial assets
16
355
437
303
Cash and cash equivalents
17
1,130
1,813
2,765
15,126
15,622
15,650
Total assets
45,474
44,883
44,183
Current liabilities
Borrowings and bank overdrafts
17
(2,885)
(2,142)
(1,842)
Other financial liabilities
16
(348)
(453)
(538)
Share buyback liability
—
—
(141)
Trade and other payables
15
(6,354)
(6,678)
(7,123)
Liabilities held for sale
8
(48)
—
(74)
Corporate tax payables
7
(136)
(170)
(305)
Provisions
15
(97)
(150)
(192)
(9,868)
(9,593)
(10,215)
Non-current liabilities
Borrowings
17
(18,616)
(18,649)
(17,543)
Other financial liabilities
16
(940)
(941)
(850)
Other payables
15
(304)
(463)
(459)
Provisions
15
(300)
(306)
(312)
Deferred tax liabilities
7
(2,947)
(2,751)
(2,807)
Post-employment benefit liabilities
14
(429)
(471)
(486)
(23,536)
(23,581)
(22,457)
Total liabilities
(33,404)
(33,174)
(32,672)
Net assets
12,070
11,709
11,511
Equity
Share capital
18
887
898
875
Share premium
1,703
1,703
1,635
Other reserves
(91)
665
658
Retained earnings
7,533
6,590
6,267
Equity attributable to equity shareholders of the
parent company
10,032
9,856
9,435
Non-controlling interests
18
2,038
1,853
2,076
Total equity
12,070
11,709
11,511
The accompanying notes are an integral part of these consolidated financial statements.
These consolidated financial statements have been approved by a duly appointed and authorised committee of the Board of Directors on
29 July 2024 and were signed on its behalf by Debra Crew and Lavanya Chandrashekar, Directors.
(1)
See pages 166-167 for an explanation under Accounting information and policies.
Diageo Annual Report 2024
163
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Consolidated statement of changes in equity
Other reserves
Retained earnings/(deficit)
Notes
Share
capital
$
million
Share
premium
$ million
Capital
redemption
reserve
$ million
Hedging
and
exchange
reserve
$ million
Own
shares
$ million
Other
retained
earnings
$ million
Total
$ million
Equity
attributable to
parent company
shareholders
$ million
Non-
controlling
interests
$ million
Total
equity
$ million
At 30 June 2021 (re-presented(1))
1,030
1,878
4,451
(3,218) (2,609) 8,055 5,446
9,587
2,132 11,719
Adjustment to 2021 closing equity in respect of
hyperinflation in Türkiye
—
—
—
—
—
349
349
349
—
349
Adjusted opening balance
1,030
1,878
4,451
(3,218) (2,609) 8,404 5,795
9,936
2,132 12,068
Retranslation impact of opening balances(2)
(131)
(243)
(579)
619
334
—
334
—
—
—
Profit for the year
—
—
—
—
— 4,280 4,280
4,280
130 4,410
Other comprehensive (loss)/income
—
—
—
(639)
—
991
991
352
(84)
268
Total comprehensive (loss)/income for the year
—
—
—
(639)
— 5,271 5,271
4,632
46 4,678
Employee share schemes
—
—
—
—
52
67
119
119
—
119
Share-based incentive plans
18
—
—
—
—
—
79
79
79
—
79
Share-based incentive plans in respect of associates
—
—
—
—
—
5
5
5
—
5
Tax on share-based incentive plans
—
—
—
—
—
11
11
11
—
11
Share-based payments and purchase of own shares
in respect of subsidiaries
—
—
—
—
—
(15)
(15)
(15)
(8)
(23)
Unclaimed dividend
—
—
—
—
—
3
3
3
1
4
Change in fair value of put option
—
—
—
—
—
(45)
(45)
(45)
—
(45)
Share buyback programme
(24)
—
24
—
— (3,004) (3,004)
(3,004)
— (3,004)
Dividend declared for the year
18
—
—
—
—
— (2,286) (2,286)
(2,286)
(95) (2,381)
At 30 June 2022 (re-presented(1))
875 1,635
3,896 (3,238) (2,223) 8,490 6,267
9,435 2,076 11,511
Retranslation impact of opening balances(2)
36
68
162
(173)
(93)
—
(93)
—
—
—
Profit for the year
—
—
—
—
— 4,445 4,445
4,445
34 4,479
Other comprehensive income/(loss)
—
—
—
5
—
(387)
(387)
(382)
(100) (482)
Total comprehensive income/(loss) for the year
—
—
—
5
— 4,058 4,058
4,063
(66) 3,997
Employee share schemes
—
—
—
—
30
29
59
59
—
59
Share-based incentive plans
18
—
—
—
—
—
58
58
58
—
58
Share-based incentive plans in respect of associates
—
—
—
—
—
6
6
6
—
6
Tax on share-based incentive plans
—
—
—
—
—
7
7
7
—
7
Share-based payments and purchase of own shares
in respect of subsidiaries
—
—
—
—
—
4
4
4
2
6
Purchase of non-controlling interests
8
—
—
—
—
—
(136)
(136)
(136)
(42)
(178)
Associates' transactions with non-controlling
interests
—
—
—
—
—
(8)
(8)
(8)
—
(8)
Unclaimed dividend
—
—
—
—
—
1
1
1
—
1
Change in fair value of put option
—
—
—
—
—
(19)
(19)
(19)
—
(19)
Share buyback programme
(13)
—
13
—
— (1,543) (1,543)
(1,543)
— (1,543)
Dividend declared for the year
18
—
—
—
—
— (2,071) (2,071)
(2,071)
(117) (2,188)
At 30 June 2023 (re-presented(1))
898 1,703
4,071 (3,406) (2,286) 8,876 6,590
9,856
1,853 11,709
Adjustment to 2023 closing equity in respect of
hyperinflation in Ghana
—
—
—
—
—
41
41
41
10
51
Adjusted opening balance
898 1,703
4,071 (3,406) (2,286) 8,917 6,631
9,897
1,863 11,760
Profit for the year
—
—
—
—
— 3,870 3,870
3,870
296 4,166
Other comprehensive (loss)/income
—
—
—
(767)
—
301
301
(466)
(19) (485)
Total comprehensive (loss)/income for the year
—
—
—
(767)
—
4,171
4,171
3,404
277 3,681
Employee share schemes
—
—
—
—
36
12
48
48
—
48
Share-based incentive plans
18
—
—
—
—
—
43
43
43
—
43
Share-based incentive plans in respect of associates
—
—
—
—
—
5
5
5
—
5
Share-based payments and purchase of own shares
in respect of subsidiaries
—
—
—
—
—
(6)
(6)
(6)
(4)
(10)
Purchase of non-controlling interests
8
—
—
—
—
—
(246)
(246)
(246)
23 (223)
Tax on purchase of non-controlling interests
—
—
—
—
—
53
53
53
—
53
Unclaimed dividend
—
—
—
—
—
1
1
1
—
1
Change in fair value of put option
—
—
—
—
—
73
73
73
—
73
Share buyback programme
(11)
—
11
—
—
(997)
(997)
(997)
— (997)
Dividend declared for the year
18
—
—
—
—
— (2,243) (2,243)
(2,243)
(121) (2,364)
At 30 June 2024
887 1,703
4,082 (4,173) (2,250) 9,783 7,533
10,032 2,038 12,070
The accompanying notes are an integral part of these consolidated financial statements.
(1)
See pages 166-167 for an explanation under Accounting information and policies.
(2)
Includes foreign translation differences arising from the retranslation of reserves due to the change in the group’s presentation currency.
FINA NCIA L STATEMENTS continued
164
Diageo Annual Report 2024
Consolidated statement of cash flows
Year ended 30 June 2024
Year ended 30 June 2023
Year ended 30 June 2022
Notes
$ million
$ million
re-presented(1)
$ million
re-presented(1)
$ million
re-presented(1)
$ million
re-presented(1)
$ million
Cash flows from operating activities
Profit for the year
4,166
4,479
4,410
Taxation
1,294
1,163
1,398
Share of after tax results of associates and joint ventures
(414)
(443)
(555)
Net finance charges
885
712
556
Non-operating items
70
(364)
88
Operating profit
6,001
5,547
5,897
Increase in inventories
(156)
(810)
(984)
(Increase)/decrease in trade and other receivables
(66)
142
(502)
(Decrease)/increase in trade and other payables and
provisions
(546)
(746)
1,245
Net increase in working capital
(768)
(1,414)
(241)
Depreciation, amortisation and impairment
493
1,297
1,064
Dividends received
269
271
238
Post-employment payments less amounts included in
operating profit
(18)
(31)
(119)
Other items
88
74
70
832
1,611
1,253
Cash generated from operations
6,065
5,744
6,909
Interest received
156
157
146
Interest paid
(1,017)
(822)
(582)
Taxation paid
(1,099)
(1,443)
(1,260)
(1,960)
(2,108)
(1,696)
Net cash inflow from operating activities
4,105
3,636
5,213
Cash flows from investing activities
Disposal of property, plant and equipment and computer
software
14
16
23
Purchase of property, plant and equipment and computer
software
(1,510)
(1,417)
(1,457)
Movements in loans and other investments
(47)
(68)
(96)
Sale of businesses and brands
8
87
559
102
Acquisition of subsidiaries
8
(6)
(404)
(278)
Investments in associates and joint ventures
8
(133)
(112)
(86)
Net cash outflow from investing activities
(1,595)
(1,426)
(1,792)
Cash flows from financing activities
Share buyback programme
18
(987)
(1,673)
(2,985)
Net sale of own shares for share schemes
21
36
24
Purchase of treasury shares in respect of subsidiaries
(10)
—
(20)
Dividends paid to non-controlling interests
(117)
(117)
(108)
Proceeds from bonds
17
2,225
2,537
2,971
Repayment of bonds
17
(1,667)
(1,650)
(2,060)
Purchase of shares of non-controlling interests
8
(223)
(178)
—
Cash inflow from other borrowings
387
521
667
Cash outflow from other borrowings
(493)
(452)
(562)
Equity dividends paid
(2,242)
(2,065)
(2,300)
Net cash outflow from financing activities
(3,106)
(3,041)
(4,373)
Net decrease in net cash and cash equivalents
17
(596)
(831)
(952)
Exchange differences
(33)
(76)
(38)
Reclassification to assets held for sale
(30)
—
—
Net cash and cash equivalents at beginning of the year
1,768
2,675
3,665
Net cash and cash equivalents at end of the year
1,109
1,768
2,675
Net cash and cash equivalents consist of:
Cash and cash equivalents
17
1,130
1,813
2,765
Bank overdrafts
17
(21)
(45)
(90)
1,109
1,768
2,675
The accompanying notes are an integral part of these consolidated financial statements.
(1)
See pages 166-167 for an explanation under Accounting information and policies.
Diageo Annual Report 2024
165
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Accounting information and policies
Introduction
This section describes the basis of preparation of the consolidated financial statements and the group’s accounting policies that are applicable to
the financial statements as a whole. Accounting policies, critical accounting estimates and judgements specific to a note are included in the note to
which they relate. Furthermore, the section details new accounting standards, amendments and interpretations, that the group has adopted in the
current financial year or will adopt in subsequent years.
1. Accounting information and policies
(a) Basis of preparation
The consolidated financial statements are prepared in accordance with
IFRS® Accounting Standards (IFRSs) adopted by the UK (UK-adopted
International Accounting Standards) and IFRSs, as issued by the
International Accounting Standards Board (IASB), including
interpretations issued by the IFRS Interpretations Committee. IFRS as
adopted by the UK differs in certain respects from IFRS as issued by the
IASB. The differences have no impact on the group’s consolidated
financial statements for the years presented. The consolidated financial
statements are prepared on a going concern basis under the historical
cost convention, unless stated otherwise in the relevant accounting
policy.
The preparation of financial statements in conformity with IFRS
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements,
and the reported amounts of revenues and expenses during the year.
Actual results could differ from those estimates.
(b) Going concern
Management prepared 18 month cash flow forecasts which were also
sensitised to reflect severe but plausible downside scenarios taking into
consideration the group's principal risks. In the base case scenario,
management included assumptions for mid-single digit net sales
growth, slightly growing operating margin and global TBA market
share growth. In light of the ongoing geo-political volatility, the base
case outlook and severe but plausible downside scenarios
incorporated considerations for a prolonged global recession, supply
chain disruptions, higher inflation and further geo-political deterioration.
Even under these scenarios, the group’s liquidity is still expected to
remain strong. Mitigating actions, should they be required, are all
within management’s control and could include reductions in
discretionary spending such as acquisitions and capital expenditure,
lower level of A&P and investment in maturing stock, as well as a
temporary suspension or reduction in its return of capital to
shareholders (dividends or share buybacks) in the next 12 months, or
drawdowns on committed facilities. Having considered the outcome of
these assessments, the Directors are comfortable that the company is a
going concern for at least 12 months from the date of signing the
group's consolidated financial statements.
(c) Consolidation
The consolidated financial statements include the results of the
company and its subsidiaries together with the group’s attributable
share of the results of associates and joint ventures. A subsidiary is an
entity controlled by Diageo plc. The group controls an investee when it
is exposed, or has rights, to variable returns from its involvement with
the investee and has the ability to affect those returns through its power
over the investee. Where the group has the ability to exercise joint
control over an entity but has rights to specified assets and obligations
for liabilities of that entity, the entity is included on the basis of the
group’s rights over those assets and liabilities.
(d) Foreign currencies
Items included in the financial statements of the group’s subsidiaries,
associates and joint ventures are measured using the currency of the
primary economic environment in which each entity operates (its
functional currency). The consolidated financial statements are
presented in US dollar, which is the functional currency of the parent
company, Diageo plc. The functional currency of Diageo plc is
determined by using management judgement that considers the parent
company as an extension of its subsidiaries.
Starting 1 July 2023, in line with reporting requirements, the
functional currency of Diageo plc changed from sterling to US dollar
which is applied prospectively. This is because the group's share of net
sales and expenses in the United States and other countries whose
currencies correlate closely with the US dollar has been increasing over
the years, and that trend is expected to continue in line with the group's
strategic focus. Diageo also decided to change its presentation
currency to US dollar with effect from 1 July 2023, applied
retrospectively, as it believes that this change will provide better
alignment of the reporting of performance with its business exposures.
The income statements and cash flows of non US dollar entities are
translated into US dollar at weighted average rates of exchange,
except for subsidiaries in hyperinflationary economies that are
translated with the closing rate at the end of the year and for
substantial transactions that are translated at the rate on the date of the
transaction. Exchange differences arising on the retranslation to closing
rates are taken to the exchange reserve.
Assets and liabilities are translated at the relevant year end closing
rates. Exchange differences arising on the retranslation at closing rates
of the opening balance sheets of non US dollar entities are taken to the
exchange reserve, as are exchange differences arising on foreign
currency borrowings and financial instruments designated as net
investment hedges, to the extent that they are effective. Tax charges
and credits arising on such items are also taken to the exchange
reserve. Gains and losses accumulated in the exchange reserve are
recycled to the income statement when the foreign operation is sold.
Other exchange differences are taken to the income statement.
Transactions in foreign currencies are recorded at the rate of exchange
on the date of the transaction.
Share capital, share premium, capital redemption reserve included
in other reserves and own shares at 30 June 2023, 30 June 2022 and
30 June 2021 in the statement of changes in equity are translated to US
dollar at the closing exchange rate at the relevant balance sheet date;
exchange differences arising on the retranslation to closing rates are
taken to the exchange reserve. From 1 July 2023, as Diageo plc
changed its functional currency, the share capital, share premium,
capital redemption reserve included in other reserves and own shares
in the consolidated statement of changes in equity are recorded in US
dollar.
The cumulative foreign exchange translation reserve was set to zero
on 1 July 2004, the date of transition to IFRS and this reserve is re-
presented as if the group reported in US dollar since that date.
As a result of the functional and presentation currency change, the
group has realigned its economic hedging portfolio managing balance
sheet translation risk in line with the changed foreign exchange risk
management objective. The group has also realigned its net investment
hedging portfolio in line with the new currency exposures and as part of
this exercise Diageo has re-designated its buy US dollar sell sterling
cross currency interest swaps in net investment hedge relationships
previously used in cash flow hedging foreign currency debt of the
group.
FINA NCIA L STATEMENTS continued
166
Diageo Annual Report 2024
The principal foreign exchange rates used in the translation of
financial statements for the three years ended 30 June 2024, expressed
in sterling and euros per $1, were as follows:
2024
2023
2022
Sterling
Income statement and cash flows(1)
0.80
0.83
0.75
Assets and liabilities(2)
0.79
0.79
0.83
Euro
Income statement and cash flows(1)
0.93
0.96
0.89
Assets and liabilities(2)
0.93
0.93
0.96
(1)
Weighted average rates
(2)
Closing rates
The group uses foreign exchange hedges to mitigate the effect of
exchange rate movements. For further information, see note 16.
(e) Critical accounting estimates and judgements
Details of critical estimates and judgements which the Directors
consider could have a significant impact on the financial statements
are set out in the related notes as follows:
• Taxation – management judgement whether a provision is required
and management estimate of amount of corporate tax payable or
receivable, the recoverability of deferred tax assets and expectation
on manner of recovery of deferred taxes – pages 177 and 211
• Brands, goodwill, other intangibles and contingent considerations –
management judgement whether the assets and liabilities are to be
recognised and synergies resulting from an acquisition. Management
judgement and estimate are required in determining future cash
flows and appropriate applicable assumptions to support the
intangible asset and contingent consideration value – pages 177 and
183
• Post-employment benefits – management judgement whether a
surplus can be recovered and management estimate in determining
the assumptions in calculating the liabilities of the funds – page 189
• Contingent liabilities and legal proceedings – management
judgement in assessing the likelihood of whether a liability will arise
and an estimate to quantify the possible range of any settlement;
and significant unprovided tax matters where maximum exposure is
provided for each – page 211
(f) Hyperinflationary accounting
The group applied hyperinflationary accounting for its operations in
Türkiye, Argentina, Ghana and Venezuela.
The group applies hyperinflationary accounting for its operations in
Ghana starting from 1 July 2023. Hyperinflationary accounting needs to
be applied as if Ghana had always been a hyperinflationary economy,
hence, as per Diageo’s accounting policy choice, the differences
between equity at 30 June 2023 as reported and the equity after the
restatement of the non-monetary items to the measuring unit current at
30 June 2023 were recognised in retained earnings.
The group’s consolidated financial statements include the results
and financial position of its operations in hyperinflationary economies
restated to the measuring unit current at the end of each period, with
hyperinflationary gains and losses in respect of monetary items being
reported in finance income and charges. Comparative amounts
presented in the consolidated financial statements are not restated.
When applying IAS 29 on an ongoing basis, comparatives in stable
currency are not restated and the effect of inflating opening net assets
to the measuring unit current at the end of the reporting period is
presented in other comprehensive income. The movement in the
publicly available official price index for the year ended 30 June 2024
was 72% (2023 – 38%; 2022 – 79%) in Türkiye, 270% (2023 – 116%;
2022 – 64%) in Argentina and 23% in Ghana. The inflation rate used
by the group in the case of Venezuela is provided by an independent
valuer because no reliable, officially published rate is available.
Movement in the price index for the year ended 30 June 2024 was
77% (2023 – 382%; 2022 – 268%) in Venezuela.
Recent developments in Venezuela led management to change its
estimate for the exchange rate of VES/$ to be the official exchange
rate published by Bloomberg. Figures for the year ended 30 June 2024
show the results of the Venezuelan operation consolidated at the
official closing exchange rate.
(g) New accounting standards and interpretations
The following standard and amendments to the accounting standards,
issued by the IASB and endorsed by the UK, were adopted by the
group from 1 July 2023 with no material impact on the group’s
consolidated results, financial position or disclosures:
• IFRS 17 – Insurance Contracts
• Amendments to IAS 12 Income Taxes – Deferred Tax related to Assets
and Liabilities arising from a Single Transaction
• Amendments to IAS 1, 8 – Definition of Accounting Estimates
• Amendments to IAS 1 Disclosure Initiative – Accounting Policies
The following amendments issued by the IASB have been endorsed by
the UK and have not yet been adopted by the group, which are not
expected to have material impact on the group's consolidated results
or financial position:
• Amendments to IAS 1 – Classification of Liabilities and Non-current
Liabilities with Covenants (effective from the year ending 30 June
2025)
• Amendments to IFRS 16 – Lease Liability in a Sale and Leaseback
(effective from the year ending 30 June 2025)
• Amendments to IAS 7 and IFRS 7 – Supplier Finance Arrangements
(effective from the year ending 30 June 2025)
There are a number of other standards, amendments and clarifications
to IFRSs, effective in future years, which are not expected to significantly
impact the group’s consolidated results or financial position.
(h) Climate change considerations
The impact of climate change assessment and the net zero carbon
emission target for Diageo's direct operations (Scope 1 & 2) for 2030
have been considered as part of the assessment of estimates and
judgements in preparing the group's consolidated financial statements.
The climate change scenario analyses performed in 2024 –
conducted in line with TCFD recommendations (‘Transition
Scenario’ (RCP 2.6), a ‘Moderate Warming’ Scenario (RCP 4.5) and a
‘Severe Warming Scenario’ (RCP 8.5)) – identified no material financial
impact to these financial statements.
The following considerations were made in respect of the financial
statements:
• The impact of climate change on factors (like residual values, useful
lives and depreciation methods) that determine the carrying value of
non-current assets.
• The impact of climate change on forecasts of cash flows used
(including forecast depreciation in line with capital expenditure plans
for Diageo's net zero carbon emission commitment) in impairment
assessments for the value-in-use of non-current assets including
goodwill (see note 9).
• The impact of climate change on post-employment assets.
Diageo Annual Report 2024
167
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Results for the year
Introduction
This section explains the results and performance of the group for the three years ended 30 June 2024. Disclosures are provided for segmental
information, operating costs, exceptional items, finance income and charges, the group's share of results of associates and joint ventures, taxation.
For associates, joint ventures and taxation, balance sheet disclosures are also provided in this section.
2. Segmental information
Accounting policies
Sales comprise revenue from contracts with customers from the sale of goods, royalties and rents receivable. Revenue from the sale of goods
includes excise and other duties which the group pays as principal but excludes duties and taxes collected on behalf of third parties, such as
value added tax. Sales are recognised as or when performance obligations are satisfied by transferring control of a good or service to the
customer, which is determined by considering, among other factors, the delivery terms agreed with customers. For the sale of goods, the
transfer of control occurs when the significant risks and rewards of ownership are passed to the customer. Based on the shipping terms
agreed with customers, the transfer of control of goods occurs at the time of dispatch for the majority of sales. Where the transfer of control is
subsequent to the dispatch of goods, the time between dispatch and receipt by the customer is generally less than five days. The group
includes in sales the net consideration to which it expects to be entitled. Sales are recognised to the extent that it is highly probable that a
significant reversal will not occur. Therefore, sales are stated net of expected price discounts, allowances for customer loyalty and certain
promotional activities and similar items. Generally, payment of the transaction price is due within credit terms that are consistent with industry
practices, with no element of financing.
Net sales are sales less excise duties. Diageo incurs excise duties throughout the world. In the majority of countries, excise duties are
effectively a production tax which becomes payable when the product is removed from bonded premises and is not directly related to the
value of sales. It is generally not included as a separate item on external invoices; increases in excise duty are not always passed on to the
customer and where a customer fails to pay for products received the group cannot reclaim the excise duty. The group therefore recognises
excise duty, unless it regards itself as an agent of the regulatory authorities, as a cost to the group.
Advertising costs, point of sale materials and sponsorship payments are charged to marketing in operating profit when the company has a
right of access to the goods or services acquired.
Exceptional items are those that in management’s judgement need to be disclosed separately. Such items are included in the income
statement caption to which they relate, and form part of the segmental reporting. Management believes that separate disclosure of
exceptional items and the classification between operating and non-operating further helps investors to understand the performance of the
group.
Changes in estimates and reversals in relation to items previously recognised as exceptional are presented consistently as exceptional in
the current year.
Diageo is an international manufacturer and distributor of premium drinks. Diageo also owns a number of investments in associates and joint
ventures, as set out in note 6.
The segmental information presented is consistent with management reporting provided to the Executive Committee (the chief operating
decision-maker).
The Executive Committee considers the business principally from a geographical perspective based on the location of third-party sales and the
business analysis is presented by geographical segment. In addition to these geographical selling segments, a further segment reviewed by the
Executive Committee is the Supply Chain and Procurement (SC&P) segment, which manufactures products for other group companies and
includes the production sites in the United Kingdom, Ireland, Italy, Guatemala and Mexico, as well as comprises the global procurement function.
The group's operations also include the Corporate segment. Corporate costs are in respect of central costs, including finance, marketing,
corporate relations, human resources and legal, as well as certain information systems, facilities and employee costs that are not allocable to the
geographical segments or to SC&P.
Diageo uses shared services operations to deliver transaction processing activities for markets and operational entities. These centres are
located in India, Hungary, Colombia and the Philippines. These captive business service centres also perform certain central finance activities,
including elements of financial planning and reporting, treasury and HR services. The costs of shared services operations are recharged to the
regions.
For planning and management reporting purposes, Diageo uses budgeted exchange rates that are set at the prior year's weighted average
exchange rate. In order to ensure a consistent basis on which performance is measured through the year, prior period results are also restated to
the budgeted exchange rate. Segmental information for net sales and operating profit before exceptional items are reported on a consistent basis
with management reporting. The adjustments required to retranslate the segmental information to actual exchange rates and to reconcile it to the
group’s reported results are shown in the tables below. The comparative segmental information, prior to retranslation, has not been restated at the
current year’s budgeted exchange rates but is presented at the budgeted rates for the respective year.
In addition, for management reporting purposes, Diageo presents the result of acquisitions and disposals completed in the current and prior
year separately from the results of the geographical segments. The impact of acquisitions and disposals on net sales and operating profit is
disclosed under the appropriate geographical segments in the tables below at budgeted exchange rates.
FINA NCIA L STATEMENTS continued
168
Diageo Annual Report 2024
(a) Segmental information for the consolidated income statement
North
America
Europe
Asia
Pacific
Latin
America
and
Caribbean
Africa
SC&P
Eliminate
inter-
segment
sales
Total
operating
segments
Corporate
and other
Total
2024
$ million
$ million
$ million
$ million
$ million
$ million
$ million
$ million
$ million
$ million
Sales
8,514 8,024 6,320 2,432 2,478
3,551 (3,551) 27,768
123 27,891
Net sales
At budgeted exchange rates(1)
7,897 4,405 3,860
1,702
2,162 3,455 (3,353) 20,128
118 20,246
Acquisitions and disposals
2
30
30
—
131
—
—
193
—
193
SC&P allocation
12
65
12
11
2
(102)
—
—
—
—
Retranslation to actual exchange rates
(3)
(59)
(85)
105
(539)
198
(198)
(581)
5
(576)
Hyperinflation
—
363
—
21
22
—
—
406
—
406
Net sales
7,908 4,804
3,817
1,839
1,778
3,551 (3,551) 20,146
123 20,269
Operating profit/(loss)
At budgeted exchange rates(1)
2,992
1,370
1,121
527
448
(40)
—
6,418
(343) 6,075
Acquisitions and disposals
(12)
(14)
7
—
27
—
—
8
—
8
SC&P allocation
(5)
(22)
(7)
(5)
(1)
40
—
—
—
—
Fair value remeasurements
128
27
—
(16)
—
—
—
139
—
139
Retranslation to actual exchange rates
133
26
(58)
(5)
(332)
—
—
(236)
(23)
(259)
Hyperinflation
—
(8)
—
1
(11)
—
—
(18)
—
(18)
Operating profit/(loss) before exceptional items
3,236
1,379 1,063
502
131
—
—
6,311
(366) 5,945
Exceptional operating items(2)
(197)
(122)
375
—
—
—
—
56
—
56
Operating profit/(loss)
3,039
1,257
1,438
502
131
—
— 6,367
(366) 6,001
Non-operating items
(70)
Net finance charges
(885)
Share of after tax results of associates and joint
ventures
414
Profit before taxation
5,460
North
America
Europe
Asia
Pacific
Latin
America
and
Caribbean
Africa
SC&P
Eliminate
inter-
segment
sales
Total
operating
segments
Corporate
and other
Total
2023
re-
presented
$ million
re-
presented
$ million
re-
presented
$ million
re-
presented
$ million
re-
presented
$ million
re-
presented
$ million
re-
presented
$ million
re-
presented
$ million
re-
presented
$ million
re-
presented
$ million
Sales
8,859
7,245 6,484
2,714 2,864
3,687 (3,687) 28,166
104 28,270
Net sales
At budgeted exchange rates(1)
8,109 4,526
4,134 2,200
2,186 3,943 (3,854) 21,244
115 21,359
Acquisitions and disposals
27
27
48
3
138
—
—
243
—
243
SC&P allocation
10
52
11
12
4
(89)
—
—
—
—
Retranslation to actual exchange rates
(37)
(537)
(352)
(56)
(289)
(167)
167
(1,271)
(11) (1,282)
Hyperinflation
—
235
—
—
—
—
—
235
—
235
Net sales
8,109 4,303
3,841
2,159 2,039
3,687 (3,687) 20,451
104 20,555
Operating profit/(loss)
At budgeted exchange rates(1)
3,132
1,441
1,187
800
466
(42)
— 6,984
(392) 6,592
Acquisitions and disposals
(23)
(19)
7
—
37
—
—
2
(8)
(6)
SC&P allocation
3
(31)
(7)
(4)
(3)
42
—
—
—
—
Fair value remeasurements
122
34
—
1
—
—
—
157
—
157
Retranslation to actual exchange rates
(12)
(144)
(83)
(14)
(211)
—
—
(464)
3
(461)
Hyperinflation
—
31
—
—
—
—
—
31
—
31
Operating profit/(loss) before exceptional items
3,222
1,312
1,104
783
289
—
—
6,710
(397)
6,313
Exceptional operating items(2)
(118)
(12)
(581)
—
(55)
—
—
(766)
—
(766)
Operating profit/(loss)
3,104
1,300
523
783
234
—
— 5,944
(397) 5,547
Non-operating items
364
Net finance charges
(712)
Share of after tax results of associates and joint
ventures
443
Profit before taxation
5,642
Diageo Annual Report 2024
169
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
North
America
Europe
Asia
Pacific
Latin
America
and
Caribbean
Africa
SC&P
Eliminate
inter-
segment
sales
Total
operating
segments
Corporate
and other
Total
2022
re-
presented
$ million
re-
presented
$ million
re-
presented
$ million
re-
presented
$ million
re-
presented
$ million
re-
presented
$ million
re-
presented
$ million
re-
presented
$ million
re-
presented
$ million
re-
presented
$ million
Sales
8,888
7,531
7,481 2,585
3,196
2,672 (2,672) 29,681
70 29,751
Net sales
At budgeted exchange rates(1)
8,037 4,398
3,887 2,007 2,292 2,829 (2,720) 20,730
74 20,804
Acquisitions and disposals
46
32
—
4
20
—
—
102
—
102
SC&P allocation
13
63
13
16
4
(109)
—
—
—
—
Retranslation to actual exchange rates
10
(510)
(63)
—
(78)
(48)
48
(641)
(4)
(645)
Hyperinflation
—
255
—
—
—
—
—
255
—
255
Net sales
8,106 4,238
3,837 2,027
2,238
2,672 (2,672) 20,446
70 20,516
Operating profit/(loss)
At budgeted exchange rates(1)
3,224
1,464
948
715
466
(31)
— 6,786
(343) 6,443
Acquisitions and disposals
(37)
14
—
—
(13)
—
—
(36)
—
(36)
SC&P allocation
(3)
(23)
(1)
(3)
(1)
31
—
—
—
—
Fair value remeasurements
43
48
—
(10)
—
—
—
81
—
81
Retranslation to actual exchange rates
41
(172)
—
10
(33)
—
—
(154)
26
(128)
Hyperinflation
—
14
—
—
—
—
—
14
—
14
Operating profit/(loss) before exceptional items
3,268
1,345
947
712
419
—
—
6,691
(317) 6,374
Exceptional operating items(2)
(1)
(184)
(292)
—
—
—
—
(477)
—
(477)
Operating profit/(loss)
3,267
1,161
655
712
419
—
—
6,214
(317) 5,897
Non-operating items
(88)
Net finance charges
(556)
Share of after tax results of associates and joint
ventures
555
Profit before taxation
5,808
(1)
These items represent the IFRS 8 performance measures for the geographical and SC&P segments.
(2) For definition and details of exceptional items, see pages 172-173.
(i)
The net sales figures for SC&P reported to the Executive Committee primarily comprise inter-segment sales and these are eliminated in a separate column in the above segmental
analysis. Apart from sales by the SC&P segment to the other operating segments, inter-segmental sales are not material.
(ii) The group’s net finance charges are managed centrally and are not attributable to individual operating segments.
(iii)
Approximately 38% of annual net sales occurred in the last four months of calendar year 2023.
FINA NCIA L STATEMENTS continued
170
Diageo Annual Report 2024
(b) Other segmental information
North
America
$ million
Europe
$ million
Asia
Pacific
$ million
Latin
America
and
Caribbean
$ million
Africa
$ million
SC&P
$ million
Corporate
and other
$ million
Total
$ million
2024
Purchase of property, plant and equipment and computer
software
305
338
154
6
83
612
12
1,510
Depreciation and intangible asset amortisation
(122)
(166)
(83)
(13)
(88)
(192)
(13)
(677)
Underlying impairment
—
—
—
(1)
—
—
—
(1)
Exceptional impairment of tangible assets
(33)
(5)
(8)
—
—
—
—
(46)
Exceptional impairment of intangible assets
(54)
(96)
379
—
—
—
—
229
2023 (re-presented)
Purchase of property, plant and equipment and
computer software
236
252
198
146
152
427
6
1,417
Depreciation and intangible asset amortisation
(114)
(118)
(75)
(22)
(95)
(161)
(12)
(597)
Exceptional impairment of tangible assets
(63)
3
(27)
—
—
—
—
(87)
Exceptional impairment of intangible assets
(36)
(31)
(546)
—
—
—
—
(613)
2022 (re-presented)
Purchase of property, plant and equipment and
computer software
306
247
194
170
184
341
15
1,457
Depreciation and intangible asset amortisation
(107)
(121)
(124)
(21)
(106)
(157)
(15)
(651)
Exceptional impairment of tangible assets
—
(4)
—
—
—
—
—
(4)
Exceptional impairment of intangible assets
—
(119)
(290)
—
—
—
—
(409)
Diageo Annual Report 2024
171
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
(c) Category and geographical analysis
Category analysis
Geographic analysis
Spirits
$ million
Beer
$ million
Ready to
drink
$ million
Other
$ million
Total
$ million
United
States
$ million
India
$ million
Great
Britain
$ million
Rest of
World
$ million
Total
$ million
2024
Sales(1)
22,406
4,107
949
429 27,891
8,041
3,247
2,849 13,754 27,891
Non-current assets(2), (3)
7,642
2,207
3,969 14,868 28,686
2023 (re-presented)
Sales(1)
22,855
4,026
1,079
310 28,270
8,366
3,301
2,565 14,038 28,270
Non-current assets(2), (3)
7,328
2,265
3,665
14,118 27,376
2022 (re-presented)
Sales(1)
24,059
4,160
1,172
360 29,751
8,415
4,282
2,848 14,206 29,751
Non-current assets(2), (3)
7,137
2,899
2,920
13,143 26,099
(1)
The geographical analysis of sales is based on the location of third-party customers.
(2)
The geographical analysis of non-current assets is based on the geographical location of the assets and comprises intangible assets, property, plant and equipment, biological assets,
investments in associates and joint ventures, other investments and non-current other receivables.
(3)
The management information provided to the chief operating decision-maker does not include an analysis of assets and liabilities by category and therefore is not disclosed.
3. Exceptional items
Accounting policies
Exceptional items are those that in management’s judgement
need to be disclosed separately. Such items are included in the
income statement caption to which they relate, and form part of
the segmental reporting included in note 2. Management
believes that separate disclosure of exceptional items and the
classification between operating and non-operating further helps
investors to understand the performance of the group.
Changes in estimates and reversals in relation to items
previously recognised as exceptional are presented consistently
as exceptional in the current year.
Operating items
Exceptional operating items are those that are considered to be
material and unusual or non-recurring in nature and are part of
the operating activities of the group, such as one-off global
restructuring programmes which can be multi-year, impairment
of intangible assets and fixed assets, indirect tax settlements,
property disposals and changes in post-employment plans.
Non-operating items
Gains and losses on the sale or directly attributable to a
prospective sale of businesses, brands or distribution rights, step
up gains and losses that arise when an investment becomes an
associate or an associate becomes a subsidiary and other
material, unusual non-recurring items, that are not in respect of
the production, marketing and distribution of premium drinks,
are disclosed as exceptional non-operating items below
operating profit in the income statement.
Taxation items
Exceptional current and deferred tax items comprise material
and unusual or non-recurring items that impact taxation.
Examples include direct tax provisions and settlements in respect
of prior years and the remeasurement of deferred tax assets and
liabilities following tax rate changes.
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Exceptional operating items
Brand, goodwill and other assets
impairment income from reversal/
(charge) (1)
224
(613)
(409)
Supply chain agility programme (2)
(61)
(121)
—
Various dispute and litigation matters (3)
(107)
—
—
Distribution termination fee (4)
—
(55)
—
Winding down Russian operations (5)
—
23
(64)
Other exceptional operating items (6)
—
—
(4)
56
(766)
(477)
Non-operating items
Sale of businesses and brands
Windsor business (7)
(58)
—
(25)
Guinness Cameroun S.A. (8)
(10)
343
—
Guinness Nigeria plc (9)
(6)
—
—
USL Popular brands (10)
4
5
—
Archers brand (11)
—
23
—
USL businesses (12)
—
4
—
Tyku brand (13)
—
(5)
—
Picon brand (14)
—
—
112
Meta Abo Brewery (15)
—
—
(183)
Step acquisition - Mr Black (16)
—
(10)
—
Other non-operating exceptional items
(17)
—
4
8
(70)
364
(88)
Exceptional items before taxation
(14)
(402)
(565)
Tax on exceptional items (note 7 (b))
(24)
226
40
Total exceptional items
(38)
(176)
(525)
Attributable to:
Equity shareholders of the parent
company
(142)
(3)
(400)
Non-controlling interests
104
(173)
(125)
Total exceptional items
(38)
(176)
(525)
FINA NCIA L STATEMENTS continued
172
Diageo Annual Report 2024
(1) In the year ended 30 June 2024, a net gain of $224 million was
recognised in exceptional operating items, driven by the reversal of
Shui Jing Fang brand impairment of $379 million, partially offset by an
impairment charge of $101 million in respect of the Chase brand, and
the related goodwill and tangible fixed assets, and an impairment
charge of $54 million in respect of certain brands in the US ready to
drink portfolio.
In the year ended 30 June 2023, an impairment charge of $613 million
was recognised in exceptional operating items in respect of the
McDowell's brand ($517 million), the SIA brand ($36 million), the
Copper Dog brand ($31 million) and the Director's Special brand
($29 million).
In the year ended 30 June 2022, an impairment charge of $409 million
was recognised in exceptional operating items in respect of the
McDowell's brand ($290 million), the Bell's brand ($94 million) and
goodwill related to Smirnov ($25 million).
For further information, see note 9 (d).
(2) In the year ended 30 June 2024, an exceptional charge of
$61 million was accounted for in respect of the supply chain agility
programme (2023 – $121 million). With this five-year spanning
programme launched in July 2022, Diageo expects to strengthen its
supply chain, improve its resilience and agility, drive efficiencies, deliver
additional productivity savings and make its supply operations more
sustainable. Total implementation cost of the programme is expected
to be up to $600 million over the five-year period, which will comprise
non-cash items and one-off expenses, the majority of which are
expected to be recognised as exceptional operating items. The
exceptional charge for the years ended 30 June 2024 and 30 June
2023 was primarily in respect of accelerated depreciation, being
additional depreciation of assets in the period directly attributable to
the programme, and impairment of property, plant and equipment in
respect of North America and India. Restructuring cash expenditure
was $26 million in the year ended 30 June 2024 (2023 – $14 million).
(3) In the year ended 30 June 2024, $107 million was recorded as an
exceptional operating item in respect of various dispute and litigation
matters in North America and Europe, including certain costs and
expenses associated therewith.
(4) In the year ended 30 June 2023, Diageo agreed with one of its
distributors in Africa to terminate the distribution licence of Gordon's, in
respect of which a provision of $55 million was recognised as an
operating exceptional charge. In the year ended 30 June 2024,
$55 million in respect of the aforementioned termination were paid.
(5) In the year ended 30 June 2023, Diageo released unutilised
provisions of $23 million from the $64 million exceptional charge taken
in the year ended 30 June 2022, in respect of winding down its
operations in Russia.
(6) Other exceptional operating items include subsequent gains and
charges of items that were originally recognised as exceptional at
inception. In the year ended 30 June 2022, other exceptional operating
items resulted in a loss of $4 million driven by the reinvestment of
'Raising the Bar' corporate tax benefits.
(7) On 27 October 2023, Diageo completed the sale of Windsor Global
Co., Ltd. to PT W Co., Ltd., a Korean company sponsored by Pine Tree
Investment & Management Co., Ltd. for a total consideration of
KRW 206 billion ($152 million). The transaction resulted in a loss of
$58 million in the year ended 30 June 2024, which was recognised as
a non-operating item attributable to the sale, including cumulative
translation losses of $26 million recycled to the income statement. In
the year ended 30 June 2022, a loss of $25 million was recognised as
a non-operating item, mainly in relation to transaction and other costs
directly attributable to the prospective sale of the business.
(8) On 26 May 2023, Diageo completed the sale of its wholly owned
subsidiary in Cameroon, Guinness Cameroun S.A., to the Castel Group
for an aggregate consideration of $475 million resulting in an
exceptional gain of $343 million, including cumulative translation gain
in the amount of $19 million recycled to the income statement. In the
year ended 30 June 2024, $10 million charges directly attributable to
the disposal have been accounted for.
(9) On 11 June 2024, Diageo announced the agreement to sell its
58.02% shareholding in Guinness Nigeria plc to N-Seven Nigeria Ltd.,
part of the Tolaram group. The sale is considered to be highly probable
as at 30 June 2024 and it is expected to be completed in the year
ending 30 June 2025. In the year ended 30 June 2024, a charge of
$6 million was recognised as a non-operating item, in respect of
transaction related and other costs directly attributable to the
prospective sale of the business.
(10) On 30 September 2022, Diageo completed the sale of the Popular
brands of its United Spirits Limited (USL) business. The transaction
resulted in an exceptional gain of $5 million. $4 million of the purchase
price, that was subject to administrative actions within 12 months and
considered uncertain at the time of the transaction, was paid to Diageo
in the year ended 30 June 2024 and recognised as exceptional gain.
(11) On 26 October 2022, Diageo completed the sale of its Archers
brand. The transaction resulted in an exceptional gain of $23 million in
the year ended 30 June 2023.
(12) Certain subsidiaries of USL were sold in the year ended 30 June
2023. The sale of these subsidiaries resulted in an exceptional gain of
$4 million.
(13) In the year ended 30 June 2023, Diageo sold its Tyku brand. The
transaction resulted in an exceptional loss of $5 million.
(14) In May 2022, Diageo sold its Picon brand. The sale resulted in an
exceptional non-operating gain of $112 million, net of disposal costs.
(15) In the year ended 30 June 2022, a loss of $183 million was
recognised as a non-operating item attributable to the sale of Meta
Abo Brewery Share Company in Ethiopia.
(16) On 29 September 2022, the group acquired the part of the entire
issued share capital of Mr Black Spirits Pty Ltd, owner of Mr Black, the
Australian premium cold brew coffee liqueur, that it did not already
own. As a result of Mr Black becoming a subsidiary of the group in the
year ended 30 June 2023, a loss of $10 million arose, being the
difference between the book value of the associate prior to the
transaction and its fair value plus transaction costs.
(17) Other exceptional non-operating items include subsequent gains
and charges of items that were originally recognised as exceptional at
inception. In the year ended 30 June 2023, other exceptional non-
operating items resulted in a net gain of $4 million (2022 – $8 million),
mainly driven by the deferred consideration received in respect of the
sale of United National Breweries.
For further information on acquisition and sale of businesses and
brands, see notes 8 (a) and 8 (b).
Cash payments and receipts included in net cash inflow from operating
activities in respect of exceptional items were as follows:
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Thalidomide (note 15 (d))
(17)
(16)
(22)
Winding down Russian operations
(2)
(16)
(18)
Supply chain agility programme
(26)
(14)
—
Distribution termination fee
(55)
—
—
Litigation
(88)
—
—
Donations
—
—
(50)
Total cash payments
(188)
(46)
(90)
Diageo Annual Report 2024
173
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
4. Operating costs
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Excise duties
7,622
7,715
9,235
Cost of sales
8,071
8,289
7,923
Marketing
3,691
3,663
3,616
Other operating items
2,506
3,056
3,080
21,890 22,723 23,854
Comprising:
Excise duties
India
1,845
1,950
2,901
Great Britain
1,463
1,314
1,558
United States
738
825
816
Other
3,576
3,626
3,960
Increase in inventories
(112)
(615)
(1,208)
Raw materials and consumables
4,892
5,197
5,336
Marketing
3,691
3,663
3,616
Other external charges
3,002
3,301
3,432
Staff costs
2,314
2,197
2,385
Depreciation, amortisation and
impairment
493
1,297
1,064
Gains on disposal of properties
1
(4)
(2)
Net foreign exchange losses
8
12
14
Other operating income
(21)
(40)
(18)
21,890 22,723 23,854
(a) Other external charges
Other external charges include research and development expenditure
in respect of new drinks products and package design of $69 million
(2023 – $63 million; 2022 – $58 million) and maintenance and repairs
of $171 million (2023 – $171 million; 2022 – $181 million).
(b) Auditors fees
Other external charges include the fees of the principal auditor of the
group, PricewaterhouseCoopers LLP, and its affiliates (PwC) and are
analysed below.
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Audit of these financial statements
4.9
6.2
5.6
Audit of financial statements of
subsidiaries
8.2
6.8
8.1
Audit related assurance services(1)
3.2
3.3
3.3
Total audit fees (Audit fees)
16.3
16.3
17.0
Other assurance services (Audit
related fees)(2)
1.7
1.4
0.9
18.0
17.7
17.9
(1)
Audit related assurance services are in respect of reporting under section 404 of the
US Sarbanes-Oxley Act and the review of the interim financial information.
(2)
Other assurance services comprise the aggregate fees for assurance and related
services that are not reported under ‘total audit fees’.
(i)
Disclosure requirements for auditors' fees in the United States are different from those
required in the United Kingdom. The terminology by category required in the United
States is disclosed in brackets in the above table.
Audit services provided by firms other than PwC for the year ended 30
June 2024 were $0.1 million (2023 – $0.1 million; 2022 – $0.2 million).
Further PwC fees for audit services in respect of post-employment plans
were $0.4 million for the year ended 30 June 2024 (2023 – $0.3
million; 2022 – $0.3 million).
(c) Staff costs and average number of employees
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Aggregate remuneration
Wages and salaries
1,984
1,858
2,068
Share-based incentive plans
43
58
79
Employer’s social security
146
138
142
Employer’s pension
Defined benefit plans
72
80
48
Defined contribution plans
62
53
44
Other post-employment plans
7
10
4
2,314
2,197
2,385
The average number of employees on a full-time equivalent basis
(excluding employees of associates and joint ventures) was as follows:
2024
2023
2022
North America
2,869
2,884
2,811
Europe
2,932
2,789
3,014
Asia Pacific
6,588
6,856
6,500
Latin America and Caribbean
1,650
1,495
1,500
Africa
3,290
3,526
4,061
SC&P
6,977
6,934
5,025
Corporate and other
6,061
5,753
5,076
30,367
30,237
27,987
At 30 June 2024, on a full-time equivalent basis, the group had 30,092
(2023 – 30,269; 2022 – 28,558) employees. The average number of
employees of the group, including part-time employees, for the year
was 30,839 (2023 – 30,419; 2022 – 28,137).
(d) Exceptional operating items
Included in the table above are exceptional operating items as follows:
2024
$ million
2023
re-
presented
$ million
2022
re-
presented
$ million
Depreciation, amortisation and
impairment
Brand and goodwill impairment (gain)/
charges
(231)
613
409
Tangible asset impairment and
accelerated depreciation
46
87
—
Staff costs
2
11
—
Other external charges
127
75
68
Other operating income
—
(20)
—
Total exceptional operating items (note 3)
(56)
766
477
Cost of sales
57
80
—
Other operating (income)/expenses
(113)
686
477
FINA NCIA L STATEMENTS continued
174
Diageo Annual Report 2024
5. Finance income and charges
Accounting policies
Net interest includes interest income and charges in respect of
financial instruments and the results of hedging transactions
used to manage interest rate risk.
Finance charges directly attributable to the acquisition,
construction or production of a qualifying asset, being an asset
that necessarily takes a substantial period of time to get ready
for its intended use or sale, are added to the cost of that asset.
Borrowing costs which are not capitalised are recognised in the
income statement using the effective interest method. All other
finance charges are recognised primarily in the income
statement in the year in which they are incurred.
Net other finance charges include items in respect of post-
employment plans, the discount unwind of long-term obligations
and hyperinflation charges. The results of operations in
hyperinflationary economies are adjusted to reflect the changes
in the purchasing power of the local currency of the entity before
being translated to US dollar.
The impact of derivatives, excluding cash flow hedges that
are in respect of commodity price risk management or those that
are used to hedge the currency risk of highly probable future
currency cash flows, is included in interest income or interest
charge.
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Interest income
179
193
168
Fair value gain on financial
instruments
100
124
454
Total interest income(1)
279
317
622
Interest charge on bonds, commercial
paper, bank loans and overdrafts
(665)
(563)
(495)
Interest charge on finance leases
(23)
(19)
(16)
Other interest charges
(396)
(325)
(119)
Fair value loss on financial
instruments
(101)
(123)
(461)
Total interest charges(1)
(1,185)
(1,030)
(1,091)
Net interest charges
(906)
(713)
(469)
Net finance income in respect of post-
employment plans in surplus (note
14)
57
71
29
Monetary gain on hyperinflation in
various economies (note 1 (f))
49
13
1
Interest income in respect of direct
and indirect tax
15
8
5
Unwinding of discounts
—
—
4
Total other finance income
121
92
39
Net finance charge in respect of post-
employment plans in deficit (note 14)
(20)
(18)
(16)
Monetary loss on hyperinflation in
various economies (note 1 (f))
(8)
(3)
(45)
Interest charge in respect of direct and
indirect tax
(27)
(29)
(23)
Unwinding of discounts
(23)
(15)
(12)
Change in financial liability - Zacapa
(Level 3)
—
(10)
(27)
Other finance charges
(22)
(16)
(3)
Total other finance charges
(100)
(91)
(126)
Net other finance income/(charges)
21
1
(87)
(1)
Includes $59 million interest income and $765 million interest charge in respect of
financial assets and liabilities that are not measured at fair value through income
statement (2023 – $98 million income and $628 million charge; 2022 – $36 million
income and $554 million charge).
Diageo Annual Report 2024
175
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
6. Investments in associates and joint ventures
Accounting policies
An associate is an undertaking in which the group has a long-term
equity interest and over which it has the power to exercise significant
influence. A joint venture is a joint arrangement whereby the parties
that have joint control of the arrangement have rights to the net
assets of the arrangement. The group’s interest in the net assets of
associates and joint ventures is reported in investments in the
consolidated balance sheet and its interest in their results (net of tax)
is included in the consolidated income statement below the group’s
operating profit. Associates and joint ventures are initially recorded at
cost including transaction costs, and the group's share of post
acquisition changes in the investee's reserves are recognised under
the equity method. Investments in associates and joint ventures
acquired prior to 1 July 1998 comprise the cost of shares less goodwill
written off to reserves that has not been reinstated, plus the group’s
share of post acquisition reserves. Investments in associates and joint
ventures are reviewed for impairment whenever events or
circumstances indicate that the carrying amount may not be
recoverable. The impairment review compares the net carrying value
with the recoverable amount, where the recoverable amount is the
higher of the value in use calculated as the present value of the
group’s share of the associate’s future cash flows and its fair value
less costs of disposal.
Diageo’s principal associate is Moët Hennessy of which Diageo owns
34%. Moët Hennessy is the wines and spirits division of LVMH Moët
Hennessy Louis Vuitton SA (LVMH). LVMH is based in France and is
listed on the Paris Stock Exchange. Moët Hennessy is also based in
France and is a producer and exporter of champagne and cognac
brands.
A number of joint distribution arrangements have been established
with LVMH in Asia Pacific and France, principally covering distribution
of Diageo’s Scotch whisky and gin premium brands and Moët
Hennessy’s champagne and cognac premium brands. Diageo and
LVMH have each undertaken not to engage in any champagne or
cognac activities competing with those of Moët Hennessy. The
arrangements also contain certain provisions for the protection of
Diageo as a non-controlling shareholder in Moët Hennessy.
(a) An analysis of the movement in the group’s investments in
associates and joint ventures is as follows:
Moët
Hennessy
$ million
Others
$ million
Total
$ million
Cost less provisions
At 30 June 2022 (re-presented)
4,124
294 4,418
Exchange differences
127
5
132
Additions
—
112
112
Share of profit/(loss) after tax
455
(12)
443
Step acquisition
—
(19)
(19)
Dividends
(265)
(6)
(271)
Share of movements in other
comprehensive income and equity
43
—
43
Transfer
—
1
1
Impairment charged during the year
—
(34)
(34)
At 30 June 2023 (re-presented)
4,484
341 4,825
Exchange differences
(59)
(5)
(64)
Additions
—
134
134
Share of profit/(loss) after tax
441
(27)
414
Dividends
(261)
(8)
(269)
Share of movements in other
comprehensive income and equity
3
—
3
Impairment charged during the year
—
(11)
(11)
At 30 June 2024
4,608
424 5,032
(i) Investment in associates includes loans given to and preference shares invested in
associates of $298 million (2023 – $218 million).
(ii) If certain performance targets are met by associates in the Distill Ventures programme,
an additional $39 million (2023 – $35 million) will be invested in those associates.
(b) Moët Hennessy prepares its financial statements under IFRS as
endorsed by the EU in euros to 31 December each year. The results
were adjusted for alignment with Diageo accounting policies and were
translated at $1 = €0.93 (2023 – $1 = €0.96; 2022 – $1 = €0.89).
Income statement information for the three years ended 30 June
2024 and balance sheet information as at 30 June 2024 and 30 June
2023 of Moët Hennessy are as follows:
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Sales
6,691
7,204
7,385
Profit for the year
1,299
1,339
1,662
Total comprehensive income
1,219
1,393
1,687
2024
$ million
2023
re-presented
$ million
Non-current assets
8,772
8,536
Current assets
12,025
11,534
Total assets
20,797 20,070
Non-current liabilities
(2,732) (2,656)
Current liabilities
(4,285)
(3,982)
Total liabilities
(7,017) (6,638)
Net assets
13,780
13,432
(i)
Including acquisition fair value adjustments principally in respect of Moët Hennessy’s
brands and translated at $1 = €0.93 (2023 – $1 = €0.93).
(c) Information on transactions between the group and its associates
and joint ventures is disclosed in note 21.
(d) The associates and joint ventures have not reported any material
contingent liabilities in their latest financial statements.
FINA NCIA L STATEMENTS continued
176
Diageo Annual Report 2024
7. Taxation
Accounting policies
Current tax is based on taxable profit for the year. Taxable profit is different from accounting profit due to temporary differences between
accounting and tax treatments, and due to items that are never taxable or tax deductible. Tax treatments are not recognised unless it is
probable that a tax authority will accept the treatment. Once considered to be probable, tax treatments are reviewed each year to assess
whether a provision should be taken against full recognition of the treatment on the basis of potential settlement through negotiation and/or
litigation with the relevant tax authorities. Tax provisions are included in current liabilities. Penalties and interest on tax liabilities are included
in operating profit and finance charges, respectively.
Full provision for deferred tax is made for temporary differences between the carrying value of assets and liabilities for financial reporting
purposes and their value for tax purposes, except for deferred tax provision arising on goodwill from business combinations. The amount of
deferred tax reflects the expected recoverable amount and is based on the expected manner of recovery or settlement of the carrying
amount of assets and liabilities, using the basis of taxation enacted or substantively enacted by the balance sheet date. Deferred tax assets
are not recognised where it is more likely than not that the assets will not be realised in the future. No deferred tax liability is provided in
respect of any future remittance of earnings of foreign subsidiaries where the group is able to control the remittance of earnings and it is
probable that such earnings will not be remitted in the foreseeable future, or where no liability would arise on the remittance.
Critical accounting estimates and judgements
The group is required to estimate the corporate tax in each of the jurisdictions in which it operates. Management is required to estimate the
amount that should be recognised as a tax liability or tax asset in many countries which are subject to tax audits which by their nature are
often complex and can take several years to resolve; current tax balances are based on such estimations. Tax provisions are based on
management’s judgement and interpretation of country specific tax law and the likelihood of settlement. However, the actual tax liabilities
could differ from the provision and in such event the group would be required to make an adjustment in a subsequent period which could
have a material impact on the group’s profit for the year.
The evaluation of deferred tax asset recoverability requires estimates to be made regarding the availability of future taxable income. For
brands with an indefinite life, management’s intention is to recover the book value through a potential sale in the future, and therefore the
deferred tax on the brand value is generally recognised using the appropriate country capital gains tax rate. To the extent brands with an
indefinite life have been impaired, management considers this to be an indication of recovery through use and in such a case deferred tax
on the brand value is recognised using the appropriate country corporate income tax rate.
(a) Analysis of taxation charge for the year
United Kingdom
Rest of world
Total
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Current tax
Current year
134
192
229
983
1,056
1,150
1,117
1,248
1,379
Adjustments in respect of prior years
(7)
41
14
(4)
(46)
22
(11)
(5)
36
127
233
243
979
1,010
1,172
1,106
1,243
1,415
Deferred tax
Origination and reversal of temporary differences
39
36
(10)
113
(93)
41
152
(57)
31
Changes in tax rates
—
—
2
(18)
13
2
(18)
13
4
Adjustments in respect of prior years
16
7
—
38
(43)
(52)
54
(36)
(52)
55
43
(8)
133
(123)
(9)
188
(80)
(17)
Taxation on profit
182
276
235
1,112
887
1,163
1,294
1,163
1,398
Diageo Annual Report 2024
177
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
(b) Exceptional tax charges/(credits)
The taxation charge includes the following exceptional items:
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Brand impairment(1)
63
(154)
(69)
Disposal of businesses and brands(2)
(1)
37
29
Supply chain agility programme
(15)
(27)
—
Various dispute and litigation matters(3)
(23)
—
—
US guarantee fee claim(4)
—
(68)
—
Distribution termination fee
—
(14)
—
Winding down Russian operations
—
—
4
Other items
—
—
(4)
24
(226)
(40)
(1)
In the year ended 30 June 2024, an exceptional tax charge of $95 million was recognised in relation to the reversal of the Shui Jing Fang brand impairment charge, partly offset by an
exceptional tax credit of $19 million in respect of the Chase brand impairment and the related tangible fixed asset and an exceptional tax credit of $13 million comprised of brand
impairments in the US ready to drink portfolio. In the year ended 30 June 2023, an exceptional tax credit of $154 million was recognised mainly in respect of the impairment of the
McDowell's brand. In the year ended 30 June 2022, the exceptional tax credit of $69 million related to the tax impact on the impairment of the McDowell's and Bell's brands for
$45 million and $24 million, respectively.
(2) In the year ended 30 June 2023, the exceptional net tax charge of $37 million mainly comprised of a tax charge of $52 million in respect of the sale of Guinness Cameroun S.A., partly
offset by a tax credit of $11 million in respect of the sale of certain USL businesses. In the year ended 30 June 2022, a $29 million exceptional tax charge was recognised in respect of
the gain on the sale of the Picon brand.
(3) In the year ended 30 June 2024, an exceptional tax credit of $23 million was recorded in relation to various dispute and litigation matters in North America, including certain costs and
expenses associated therewith.
(4) In the year ended 30 June 2023, an exceptional tax credit of $68 million was recognised in respect of the deductibility of fees paid to Diageo plc for guaranteeing externally issued debt
of US group entities. Following engagement with the tax authorities, guarantee fees for the periods ended 30 June 2012 to 30 June 2022 are fully deductible.
(c) Taxation rate reconciliation and factors that may affect future tax charges
2024
$ million
2024
%
2023
re-presented
$ million
2023
%
2022
re-presented
$ million
2022
%
Profit before taxation
5,460
5,642
5,808
Notional charge at UK corporation tax rate
1,365
25.0
1,157
20.5
1,104
19.0
Elimination of notional tax on share of after tax results of associates
and joint ventures
(103)
(1.9)
(91)
(1.6)
(105)
(1.8)
Differences in overseas tax rates
(86)
(1.6)
116
2.0
217
3.7
Disposal of businesses and brands
17
0.3
(42)
(0.7)
38
0.7
Other items not chargeable
(72)
(1.3)
(76)
(1.3)
(66)
(1.1)
Impairment
6
0.1
(8)
(0.1)
45
0.8
Other items not deductible
70
1.3
85
1.5
71
1.2
Irrecoverable withholding taxes
55
1.0
46
0.8
51
0.9
Movement in provision in respect of uncertain tax positions(1)
6
0.1
34
0.6
55
0.9
Changes in tax rates
(18)
(0.3)
13
0.2
4
0.1
Adjustments in respect of prior years(2)
54
1.0
(71)
(1.3)
(16)
(0.3)
Taxation on profit
1,294
23.7
1,163
20.6
1,398
24.1
Tax rate before exceptional items
—
23.2
—
23.0
—
22.6
(1)
Movement in provision in respect of uncertain tax positions includes both current and prior year uncertain tax position movements.
(2) Excludes prior year movement in provisions. Included in the year ended 30 June 2023 was an exceptional tax credit of $68 million in respect of the deductibility of fees paid to Diageo
plc for guaranteeing externally issued debt of its US group entities.
The table above reconciles the notional taxation charge calculated at the UK tax rate, to the actual total tax charge. As a group operating in
multiple countries, the actual tax rates applicable to profits in those countries are different from the UK tax rate. The impact is shown in the table
above as differences in overseas tax rates. The group’s worldwide business leads to the consideration of a number of important factors which may
affect future tax charges, such as the levels and mix of profitability in different jurisdictions, transfer pricing regulations, tax rates imposed and tax
regime reforms, acquisitions, disposals, restructuring activities, and settlements or agreements with tax authorities.
Significant ongoing changes in the international tax environment and an increase in global tax audit activity means that tax uncertainties and
associated risks have been gradually increasing. In the medium-term, these risks could result in an increase in tax liabilities or adjustments to the
carrying value of deferred tax assets and liabilities. See note 19 (f).
The group has a number of ongoing tax audits worldwide for which provisions are recognised in line with the relevant international accounting
standard, taking into account best estimates and management’s judgements concerning the ultimate outcome of the tax audits. For the year
ended 30 June 2024, ongoing audits that are provided for individually are not expected to result in a material tax liability. The current tax asset of
$304 million (30 June 2023 – $292 million) and tax liability of $136 million (30 June 2023 – $170 million) include $209 million (30 June 2023 – $218
million) of provisions for tax uncertainties.
The cash tax paid in the year ended 30 June 2024 amounts to $1,099 million (30 June 2023 – $1,443 million) and is $7 million lower than the
current tax charge (30 June 2023 – $200 million higher). This arises as a result of timing differences between the accrual of income taxes, the
movement in the provision for uncertain tax positions and the actual payment of cash.
FINA NCIA L STATEMENTS continued
178
Diageo Annual Report 2024
In December 2021, the OECD released a framework for Pillar Two Model Rules which will introduce a global minimum corporate tax rate of
15%, applicable to multinational enterprise groups with global revenue over €750 million. The legislation implementing the rules in the United
Kingdom was substantively enacted on 20 June 2023 and will apply to Diageo from the financial year ending 30 June 2025 onwards. Diageo is
continuously reviewing the amendments to the legislation and also monitoring the status of implementation of the model rules outside of the United
Kingdom. While we expect additional tax liabilities to be incurred in some jurisdictions in which the group operates, the estimated impact on the
group’s effective tax rate is immaterial based on the data for the year ended 30 June 2023.
Diageo has applied the temporary exception under IAS 12 in relation to the accounting for deferred taxes arising from the implementation of the
Pillar Two rules.
(d) Deferred tax assets and liabilities
Deferred tax recognised in the consolidated balance sheet comprise the following net deferred tax (liabilities)/assets:
Property,
plant and
equipment
$ million
Intangible
assets
$ million
Post
employment
plans
$ million
Tax losses
$ million
Other
temporary
differences(1)
$ million
Total
$ million
At 30 June 2022 (re-presented)
(566)
(2,290)
(316)
76
427
(2,669)
Exchange differences
15
42
(6)
4
(4)
51
Recognised in income statement
(35)
116
2
(19)
29
93
Recognised in other comprehensive income and equity
(7)
(37)
182
—
(55)
83
Tax rate change – recognised in income statement
(2)
(15)
(1)
1
4
(13)
Acquisition of subsidiaries
—
(85)
—
—
—
(85)
Transfer from asset held for sale
(3)
(44)
—
—
8
(39)
Sale of businesses
13
—
(2)
—
(5)
6
At 30 June 2023 (re-presented)
(585)
(2,313)
(141)
62
404
(2,573)
Exchange differences
9
35
—
(10)
(13)
21
Recognised in income statement
(79)
(132)
(6)
28
(17)
(206)
Recognised in other comprehensive loss and equity
(34)
(73)
6
—
(8)
(109)
Tax rate change – recognised in income statement
3
13
(1)
—
3
18
Tax rate change – recognised in other comprehensive loss and
equity
(4)
(20)
—
—
(3)
(27)
Acquisition(2)
—
53
—
—
—
53
Transfer to asset held for sale
2
4
—
(16)
(8)
(18)
Sale of businesses
—
38
—
—
(1)
37
At 30 June 2024
(688)
(2,395)
(142)
64
357
(2,804)
(1)
Deferred tax on other temporary differences includes hyperinflation, fair value movement on cross-currency swaps, interest and finance costs, share-based payments and intra-group
sales of products.
(2)
In the year ended 30 June 2024, a deferred tax asset of $53 million was recognised in relation to the purchase of shares of non-controlling interests in respect of DeLeon Holdco LLC.
After offsetting deferred tax assets and liabilities that relate to taxes
levied by the same taxation authority on the same taxable fiscal unit,
the net deferred tax liability comprises:
2024
$ million
2023
re-presented
$ million
Deferred tax assets
143
178
Deferred tax liabilities
(2,947)
(2,751)
(2,804)
(2,573)
Deferred tax assets of $143 million include $98 million (2023 – $82
million) arising in jurisdictions with prior year taxable losses. The
majority of the asset is in respect of Germany, Colombia and Brazil. It is
considered more likely than not that there will be sufficient future
taxable profits to realise these deferred tax assets, which for the most
part arose on losses from a historic one-off transaction, and on existing
provisions. The majority of deferred tax assets can be carried forward
indefinitely. From the total recognised tax losses of $64 million, it is
expected that $13 million will be utilised in the year ending 30 June
2025.
(e) Unrecognised deferred tax assets
The following table shows the tax value of tax losses which has not
been recognised due to uncertainty over their utilisation in future
periods. The gross value of those losses is $724 million (2023 –
$796 million).
2024
$ million
2023
re-presented
$ million
Capital losses – indefinite
123
123
Trading losses – indefinite
31
31
Trading and capital losses – expiry dates up to
2033
33
50
187
204
Additionally, no deferred tax asset has been recognised in respect of
certain temporary differences arising from brand valuations, as the
group is not planning to sell those brands thus the benefit from the
temporary differences is unlikely to be realised.
(f) Unrecognised deferred tax liabilities
Relevant legislation largely exempts overseas dividends remitted from
tax. A tax liability is more likely to arise in respect of withholding taxes
levied by the overseas jurisdiction. Deferred tax is provided where there
is an intention to distribute earnings, and a tax liability arises. It is
impractical to estimate the amount of unrecognised deferred tax
liabilities in respect of these unremitted earnings.
The aggregate amount of temporary differences in respect of
investments in subsidiaries, branches, interests in associates and joint
ventures for which deferred tax liabilities have not been recognised is
approximately $26.3 billion (2023 – $25.0 billion).
Diageo Annual Report 2024
179
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Operating assets and liabilities
Introduction
This section describes the assets used in the group’s operations and the liabilities incurred. Liabilities relating to the group’s financing activities are
included in section ‘Risk management and capital structure’ and balance sheet information in respect of associates, joint ventures and taxation are
covered in section ‘Results for the year’. This section also provides detailed disclosures on the group’s recent acquisitions and disposals,
performance and financial position of its defined benefit post-employment plans.
8. Acquisition and sale of businesses and brands and purchase of non-controlling interests
Accounting policies
The consolidated financial statements include the results of the company and its subsidiaries together with the group’s attributable share of
the results of associates and joint ventures. The results of subsidiaries acquired or sold are included in the income statement from, or up to,
the date that control passes.
Business combinations are accounted for using the acquisition method. Identifiable assets, liabilities and contingent liabilities acquired are
measured at fair value at acquisition date. The consideration payable is measured at fair value and includes the fair value of any contingent
consideration. Among other factors, the group considers the nature of, and compensation for the selling shareholders' continuing
employment to determine if any contingent payments are for post-combination employee services, which are excluded from consideration.
On the acquisition of a business, or of an interest in an associate or joint venture, fair values, reflecting conditions at the date of
acquisition, are attributed to the net assets, including identifiable intangible assets and contingent liabilities acquired. Directly attributable
acquisition costs in respect of subsidiary companies acquired are recognised in other external charges as incurred.
The non-controlling interests on the date of acquisition can be measured either at the fair value or at the non-controlling shareholder’s
proportion of the net fair value of the identifiable assets assumed. This choice is made separately for each acquisition.
Where the group has issued a put option over shares held by a non-controlling interest, the group derecognises the non-controlling
interests and instead recognises a contingent deferred consideration liability for the estimated amount likely to be paid to the non-controlling
interest on the exercise of those options. Movements in the estimated liability in respect of put options are recognised in retained earnings.
Transactions with non-controlling interests are recorded directly in retained earnings.
For all entities in which the company directly or indirectly owns equity, a judgement is made to determine whether it controls and therefore
should fully consolidate the investee. An assessment is carried out to determine whether the group has the exposure or rights to the variable
returns of the investee and has the ability to affect those returns through its power over the investee. To establish control, an analysis is carried
out of the substantive and protective rights that the group and the other investors hold. This assessment is dependent on the activities and
purpose of the investee and the rights of the other shareholders, such as which party controls the board, executive committee and material
policies of the investee. Determining whether the rights that the group holds are substantive, requires management judgement.
Where less than 50% of the equity of an investee is held, and the group holds significantly more voting rights than any other vote holder
or organised group of vote holders, this may be an indicator of de facto control. An assessment is needed to determine all the factors
relevant to the relationship with the investee to ascertain whether control has been established and whether the investee should be
consolidated as a subsidiary. Where voting power and returns from an investment are split equally between two entities then the
arrangement is accounted for as a joint venture.
On an acquisition, fair values are attributed to the assets and liabilities acquired. This may involve material judgement to determine these
values.
FINA NCIA L STATEMENTS continued
180
Diageo Annual Report 2024
(a) Acquisition of businesses
Fair value of net assets acquired and cash consideration paid in respect of the acquisition of subsidiaries in the three years ended 30 June 2024
were as follows:
Net assets acquired and consideration
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Brands and other intangibles
—
402
157
Property, plant and equipment
—
28
—
Inventories
—
31
7
Other working capital
—
(2)
5
Deferred tax
—
(85)
(40)
Cash
—
—
2
Fair value of assets and liabilities
—
374
131
Goodwill arising on acquisition
—
109
91
Settlement of pre-existing relationship
—
—
(2)
Step acquisitions
—
(13)
(8)
Consideration payable
—
470
212
Satisfied by:
Cash consideration paid
—
(373)
(116)
Contingent consideration payable
—
(92)
(91)
Deferred consideration payable
—
(5)
(5)
—
(470)
(212)
Cash consideration paid in respect of the acquisition of businesses and
purchase of shares of non-controlling interests in the three years ended
30 June 2024 were as follows:
Consideration
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Acquisitions in the year - subsidiaries
Cash consideration paid
—
(373)
(116)
Cash acquired
—
—
2
Prior year acquisitions - subsidiaries
Contingent consideration paid for
Casamigos
—
—
(113)
Other consideration
(6)
(31)
(51)
Investments in associates
Cash consideration paid - increase in
ownership interest
(5)
(20)
(6)
Capital injection(1)
(128)
(92)
(80)
Net cash outflow on acquisition of
businesses
(139)
(516)
(364)
Purchase of shares of non-controlling
interests
(223)
(178)
—
Total net cash outflow
(362)
(694)
(364)
(1)
Additional investments in a number of Distill Ventures associates.
Prior year acquisitions
On 10 March 2023, Diageo completed the acquisition of Kanlaon
Limited and Chat Noir Co. Inc., (the owner of Don Papa Rum) to
support Diageo’s participation in the super-premium dark rum segment
for upfront cash consideration of €246 million ($261 million), deferred
consideration of €4 million ($4 million) and contingent consideration of
up to €178 million ($189 million) through to 2028 subject to certain
financial performance targets, reflecting the brand’s expected growth
potential. The fair value of the contingent consideration of €82 million
($87 million) was estimated by calculating the present value of the
future expected cash flows which is dependent on management’s
estimates in respect of the forecasting of future cash flows and the
discount rates applicable to the future cash flows. The goodwill arising
on the acquisition of Don Papa Rum represents expected revenue
synergies and the acquired workforce. Don Papa Rum contributed
$13 million to net sales and $18 million operating loss to the period, out
of which $18 million is related to acquisition transaction and integration
costs in the year ended 30 June 2023.
Diageo completed further acquisitions in the year ended 30 June
2023: (i) on 29 September 2022, the acquisition of the remaining issued
share capital of Mr Black Spirits Pty Ltd, owner of Mr Black, the
Australian premium cold brew coffee liqueur, that it did not already
own; and (ii) on 2 November 2022, the acquisition of the entire issued
share capital of Balcones Distilling, a Texas craft distiller and one of the
leading producers of American single malt whiskey in the United States.
The aggregate up-front cash consideration paid on completion of these
transactions in the year ended 30 June 2023 was $112 million.
On 31 March 2022, Diageo acquired 100% equity interest in
21Seeds, to support Diageo's participation in the super premium
flavoured tequila segment, for a total consideration of $82 million
upfront in cash and a contingent consideration of up to $80 million
linked to performance targets.
Diageo completed further acquisitions in the year ended 30 June
2022, including (i) on 27 January 2022, the acquisition of Casa UM, to
expand Reserve portfolio with premium artisanal mezcal brand, Mezcal
Unión and (ii) on 29 June 2022, the acquisition of Vivanda, owner of
the technology behind 'What's your Whisky' platform and the Journey
of Flavour experience at Johnnie Walker Princes Street, to support
Diageo's ambition to provide customised brand experiences across all
channels. The aggregate upfront cash consideration paid on
completion of these transactions in the year ended 30 June 2022 was
$34 million. In addition, these transactions included provision for further
contingent consideration of up to $24 million in aggregate, linked to
performance targets and a further deferred consideration of $5 million.
Diageo Annual Report 2024
181
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Purchase of shares of non-controlling interests
On 16 January 2024, Diageo agreed with Combs Wine and Spirits LLC
to purchase the 50% of the share capital of DeLeon Holdco LLC that
Diageo did not already own for a total consideration of $223 million,
including transaction costs. In connection with this acquisition, the
previously outstanding disputes between the shareholders were
resolved and Diageo is now the 100% owner of the DeLeón brand.
On 24 March 2023, Diageo completed the purchase of 14.97% of the
share capital of EABL for an aggregate consideration of KES 22,732
million ($173 million) in cash and transaction costs of $5 million. This
took Diageo’s shareholding in EABL from 50.03% to 65%. EABL was
already controlled and therefore consolidated prior to this transaction.
Transactions were recognised in retained earnings.
(b) Sale of businesses and brands
Cash consideration received and net assets disposed of in respect of sale of businesses and brands in the three years ended 30 June 2024 were as
follows:
Windsor business
$ million
Other
$ million
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Sale consideration
Cash received
112
4
116
604
131
(Cash)/overdraft disposed of
(20)
—
(20)
(16)
3
Transaction and other directly attributable costs paid
(4)
(5)
(9)
(29)
(32)
Net cash received
88
(1)
87
559
102
Deferred consideration receivable
32
—
32
—
—
Transaction and other directly attributable costs payable
(13)
(11)
(24)
(7)
(22)
107
(12)
95
552
80
Net assets disposed of
Brands
(167)
—
(167)
—
—
Goodwill
—
—
—
—
(18)
Other non-current assets
(3)
—
(3)
(132)
(14)
Assets and liabilities held for sale
—
—
—
(87)
—
Inventories
(11)
—
(11)
(35)
(6)
Other working capital
3
—
3
85
21
Other borrowings
—
—
—
2
1
Corporate tax
2
—
2
(4)
(6)
Deferred tax
37
—
37
6
(3)
Post-employment benefit liabilities
—
—
—
5
—
(139)
—
(139)
(160)
(25)
Impairment charge recognised up until the date of sale
—
—
—
(3)
—
Exchange recycled from other comprehensive income
(26)
—
(26)
(15)
(143)
(Loss)/gain on disposal before taxation
(58)
(12)
(70)
374
(88)
Taxation
1
—
1
(37)
(29)
(Loss)/gain on disposal after taxation
(57)
(12)
(69)
337
(117)
On 27 October 2023, Diageo completed the sale of Windsor Global Co., Ltd. to PT W Co., Ltd., a Korean company sponsored by Pine Tree
Investment & Management Co., Ltd. for a total consideration of KRW 206 billion ($152 million). The transaction resulted in a loss of $58 million in
the year ended 30 June 2024, which was recognised as a non-operating item attributable to the sale, including cumulative translation losses in the
amount of $26 million recycled to the income statement.
On 26 May 2023, Diageo completed the sale of Guinness Cameroun S.A., its brewery in Cameroon. The aggregate consideration for the
disposal was $475 million, the disposed net assets of $79 million mainly included property, plant and equipment and trade and other payables.
The transaction resulted in a non-operating exceptional gain of $343 million. The disposed Cameroon operations contributed net sales of
$128 million (2022 – $165 million), and operating profit of $33 million (2022 – $36 million) in the year ended 30 June 2023.
On 30 September 2022, Diageo completed the sale of the Popular brands of its USL business. The aggregate consideration for the disposal was
$97 million, the disposed net assets included net working capital of $34 million and brands of $23 million, and $19 million goodwill was
derecognised. The transaction resulted in a non-operating exceptional gain of $5 million. Popular brands contributed net sales of $43 million (2022
– $184 million), and operating profit of $6 million (2022 – $35 million) in the year ended 30 June 2023.
On 25 April 2022, Diageo sold its Ethiopian subsidiary, Meta Abo Brewery Share Company. A loss of $183 million was recognised as a non-
operating item attributable to the sale, including cumulative translation losses in the amount of $143 million recycled to the income statement.
On 10 May 2022, Diageo completed the sale of the Picon brand for an upfront consideration of €117 million ($123 million). The gain of
$112 million, net of disposal cost, was recognised as a non-operating item in the income statement.
In the year ended 30 June 2023, ZAR 74 million ($4 million) (2022 – ZAR 133 million ($8 million)) of deferred consideration was paid to Diageo
in respect of the sale of United National Breweries. The disposal was completed on 1 April 2020 for an aggregate consideration of ZAR 600 million
($34 million) from which ZAR 378 million ($22 million) was deferred.
FINA NCIA L STATEMENTS continued
182
Diageo Annual Report 2024
(c) Assets and liabilities held for sale
2024
$ million
Property, plant and equipment
52
Inventories
20
Trade and other receivables
10
Deferred tax asset
18
Cash
30
Assets held for sale
130
Trade and other payables
(44)
Corporate tax
(1)
Provisions
(3)
Liabilities held for sale
(48)
Total
82
On 11 June 2024, Diageo announced the agreement to sell its 58.02% shareholding in Guinness Nigeria plc to N-Seven Nigeria Ltd., part of the
Tolaram group. The transaction is subject to among other things obtaining the requisite regulatory approvals in Nigeria. On completion, Guinness
Nigeria plc will enter into long-term licence and royalty agreements for the continued production of the Guinness brand and its locally
manufactured Diageo ready-to-drink and mainstream spirits brands. The sale is considered to be highly probable as at 30 June 2024 and it is
expected to be completed in the year ending 30 June 2025. Consequently, the impacted assets and liabilities were classified as held for sale on 30
June 2024 and measured at cost as the lower of cost and fair value less cost of disposal. At 30 June 2024, cumulative translation losses recognised
in exchange reserves were $176 million, which will be recycled to the income statement at the completion of the transaction.
9. Intangible assets
Accounting policies
Acquired intangible assets are held on the consolidated balance sheet at cost less accumulated amortisation and impairment losses.
Acquired brands and other intangible assets are initially recognised at fair value if they are controlled through contractual or other legal
rights, or are separable from the rest of the business, and the fair value can be reliably measured. Where these assets are regarded as
having indefinite useful economic lives, they are not amortised.
Goodwill represents the excess of the aggregate of the consideration transferred, the value of any non-controlling interests and the fair
value of any previously held equity interest in the subsidiary acquired over the fair value of the identifiable net assets. Goodwill arising on
acquisitions prior to 1 July 1998 was eliminated against reserves, and this goodwill has not been reinstated. Goodwill arising subsequent to 1
July 1998 has been capitalised.
Amortisation and impairment of intangible assets is based on their useful economic lives and they are amortised on a straight-line basis
and reviewed for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable. Goodwill and
intangible assets that are regarded as having indefinite useful economic lives are not amortised and are reviewed for impairment at least
annually or when there is an indication that the assets may be impaired. Impairment reviews compare the net carrying value with the
recoverable amount (where recoverable amount is the higher of fair value less costs of disposal and value in use) and in case the net
carrying value exceeds the recoverable amount, an impairment charge is recognised. Amortisation and any impairment write downs are
charged to other operating expenses in the income statement. It is reviewed at each reporting date whether there is any indication that an
impairment loss recognised in prior periods for an asset other than goodwill either no longer exists or has decreased. Reversal of impairment
loss is considered if the recoverable amount of the assets is constantly and significantly above the carrying value over an extended period.
The increased carrying amount of an asset other than goodwill attributable to a reversal of an impairment loss shall not exceed the carrying
amount that would have been determined (net of amortisation or depreciation) had no impairment loss been recognised for the asset in prior
years. Any reversal of impairment loss is charged against the same income statement line on which the initial impairment was recorded.
Computer software is amortised on a straight-line basis to estimated residual value over its expected useful life. Residual values and useful
lives are reviewed each year. Subject to these reviews, the estimated useful lives are up to eight years.
Critical accounting estimates and judgements
Assessment of the recoverable amount of an intangible asset and the useful economic life of an asset are based on management's estimates.
Impairment reviews are carried out to ensure that intangible assets, including brands, are not carried at above their recoverable amounts.
Value in use and fair value less costs of disposal are both considered for these reviews and any impairment charge is based on these. The
tests are dependent on management’s estimates in respect of the forecasting of future cash flows, the discount rates applicable to the future
cash flows and what expected growth rates are reasonable. Judgement is required in determining the cash-generating units. Such estimates
and judgements are subject to change as a result of changing economic conditions and actual cash flows may differ from forecasts.
Consideration of climate risk impact
The impact of climate risk on the future cash flows has also been considered for scenarios analysed in line with the climate change risk
assessment. The climate change scenario analyses performed in 2024 – conducted in line with TCFD recommendations (‘Transition
Scenario’ (RCP 2.6), a ‘Moderate Warming’ Scenario (RCP 4.5) and a ‘Severe Warming Scenario (RCP 8.5)) – identified no material financial
impact to the current year impairment assessments.
Diageo Annual Report 2024
183
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Brands
$ million
Goodwill
$ million
Other
intangibles
$ million
Computer
software
$ million
Total
$ million
Cost
At 30 June 2022 (re-presented)
10,815
3,640
2,021
893
17,369
Hyperinflation adjustment
102
75
—
—
177
Exchange differences
(144)
(168)
4
23
(285)
Additions
402
109
15
187
713
Disposals
—
—
—
(31)
(31)
Reclassification from/(to) asset held for sale
517
(35)
—
—
482
At 30 June 2023 (re-presented)
11,692
3,621
2,040
1,072
18,425
Hyperinflation adjustment
207
157
—
1
365
Exchange differences
(146)
(96)
(30)
22
(250)
Additions
—
—
17
150
167
Disposals
(647)
—
(16)
(20)
(683)
At 30 June 2024
11,106
3,682
2,011
1,225
18,024
Amortisation and impairment
At 30 June 2022 (re-presented)
1,261
872
105
730
2,968
Exchange differences
(15)
(42)
3
11
(43)
Amortisation for the year
—
—
20
48
68
Impairment
613
—
—
—
613
Disposals
—
—
—
(29)
(29)
Reclassification from/(to) asset held for sale
358
(16)
—
—
342
At 30 June 2023 (re-presented)
2,217
814
128
760
3,919
Exchange differences
(22)
(13)
(29)
24
(40)
Amortisation for the year
—
—
19
58
77
Impairment
128
21
—
—
149
Reversal of impairment
(379)
—
—
—
(379)
Disposals
(480)
—
(16)
(20)
(516)
At 30 June 2024
1,464
822
102
822
3,210
Carrying amount
At 30 June 2024
9,642
2,860
1,909
403
14,814
At 30 June 2023 (re-presented)
9,475
2,807
1,912
312
14,506
At 30 June 2022 (re-presented)
9,554
2,768
1,916
163
14,401
FINA NCIA L STATEMENTS continued
184
Diageo Annual Report 2024
(a) Brands
The principal acquired brands, all of which are regarded as having
indefinite useful economic lives, are as follows:
Principal markets
2024
$ million
2023
re-presented
$ million
Crown Royal whisky
United States
1,464
1,464
Captain Morgan rum
Global
1,201
1,201
Smirnoff vodka
Global
824
824
Johnnie Walker whisky
Global
790
787
Shui Jing Fang Chinese
white spirit
Greater
China
689
310
Casamigos tequila
United States
604
604
Yenì raki
Türkiye
426
313
McDowell's No.1 whisky,
rum and brandy
India
382
386
Don Papa rum
Europe
353
355
Don Julio tequila
United States
277
296
Aviation American Gin
United States
264
264
Seagram's 7 Crown
whiskey
United States
223
223
Signature whisky
India
219
222
Zacapa rum
Global
191
191
Black Dog whisky
India
186
188
Antiquity whisky
India
182
184
Gordon's gin
Europe
150
150
Bell's whisky
Europe
128
128
Other brands
1,089
1,385
9,642
9,475
The brands are protected by trademarks which are renewable
indefinitely in all of the major markets where they are sold. There are
not believed to be any legal, regulatory or contractual provisions that
limit the useful lives of these brands. The nature of the premium drinks
industry is that obsolescence is not a common issue, with indefinite
brand lives being commonplace, and Diageo has a number of brands
that were originally created more than 100 years ago. Accordingly, the
Directors believe that it is appropriate that the brands are treated as
having indefinite lives for accounting purposes and are therefore not
amortised.
(b) Goodwill
For the purposes of impairment testing, goodwill has been attributed to
the following cash-generating units:
2024
$ million
2023
re-presented
$ million
North America
968
968
Europe
Türkiye
370
271
Asia Pacific
Greater China
158
157
India
838
848
Latin America and Caribbean – Mexico
189
203
Other cash-generating units
337
360
2,860
2,807
Goodwill has arisen on the acquisition of businesses and includes
synergies arising from cost savings, the opportunity to utilise Diageo’s
distribution network to leverage marketing of the acquired products
and the extension of the group’s portfolio of brands in new markets
around the world.
(c) Other intangibles
Other intangibles principally comprise distribution rights. Diageo owns
the global distribution rights for Ketel One vodka products in perpetuity,
and the Directors believe that it is appropriate to treat these rights as
having an indefinite life for accounting purposes. The net book value at
30 June 2024 was $1,800 million (2023 – $1,800 million).
(d) Impairment testing
Impairment tests are performed annually, or more frequently if events
or circumstances indicate that the carrying amount may not be
recoverable. Recoverable amounts are calculated based on the value
in use approach, also considering fair value less costs of disposal. The
value in use calculations are based on discounted forecast cash flows
using the assumption that cash flows continue in perpetuity at the
terminal growth rate of each country or region. The individual brands,
other intangibles with indefinite useful lives and the associated
property, plant and equipment are aggregated as separate cash-
generating units. Separate tests are carried out for each cash-
generating unit and for each of the markets. Goodwill is attributed to
each of the markets.
The key assumptions used for the value in use calculations are as
follows:
Cash flows
Cash flows are forecasted for each cash-generating unit for the
financial years based on management's approved plans and reflect
the following assumptions:
• Cash flows are projected based on the actual operating results and
a three-year strategic plan approved by management. Cash flows
are extrapolated up to five years using expected growth rates in line
with management’s best estimates. Growth rates reflect expectations
of sales growth, operating costs and margin, based on past
experience and external sources of information;
• The five-year forecast period is extended by up to an additional ten
years at acquisition date for some intangible assets and goodwill
when management believes that this period is justified by the
maturity of the market and expects to achieve growth in excess of
the terminal growth rate driven by Diageo’s sales, marketing and
distribution expertise. These cash flows beyond the five-year period
are projected using steady or progressively declining growth rates;
• Cash flows for the subsequent years after the forecast period are
extrapolated based on a terminal growth rate which does not
exceed the long-term annual inflation rate of the country or region.
Diageo Annual Report 2024
185
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Discount rates
The discount rates used are the weighted average cost of capital which
reflect the returns on government bonds and an equity risk premium
adjusted for the drinks industry specific to the cash-generating units.
The group applies post-tax discount rates to post-tax cash flows as the
valuation calculated using this method closely approximates to
applying pre-tax discount rates to pre-tax cash flows.
For goodwill, these assumptions are based on the cash-generating
unit or group of units to which the goodwill is attributed. For brands,
they are based on a weighted average taking into account the country
or countries where sales are made.
The pre-tax discount rates and terminal growth rates used for
impairment testing are as follows:
2024
2023
Pre-tax
discount rate
%
Terminal
growth rate
%
Pre-tax
discount rate
%
Terminal
growth rate
%
North America –
United States
9
2
9
2
Europe
United Kingdom
9
2
9
2
Türkiye
27
14
28
16
Asia Pacific
India
12
3
14
4
Greater China
10
2
11
2
Latin America
and Caribbean
Mexico
13
3
13
3
In the year ended 30 June 2024, a reversal of an impairment charge of
$379 million was recognised in exceptional operating items in respect
of the Shui Jing Fang brand. The reversal increased the deferred tax
liability by $95 million resulting in a net exceptional gain of
$284 million of which $104 million was attributable to the non-
controlling interest. The reversal is driven by a decrease in the pre-tax
discount rate and an increase in the forecast cash flow assumptions for
the brand primarily due to the continuation and acceleration of
premiumisation driving sales growth in the baijiu category in China, the
principal market of the brand. The net book value of the brand is
$689 million that is recoverable based on its value in use.
In the year ended 30 June 2024, an impairment charge of
$101 million in respect of the Chase brand, the related goodwill and
tangible fixed assets was charged to operating exceptional items. The
charge is mainly driven by the flavoured gin category slowdown in
Great Britain. Value in use and fair value less costs of disposal
methodologies were both considered to assess the recoverable
amount. The impairment reduced the tax liability by $19 million
resulting in a net exceptional loss of $82 million.
In the year ended 30 June 2024, an impairment charge of
$54 million in respect of certain brands in the US ready to drink
portfolio was recognised in exceptional operating items. The charge is
mainly driven by the reduction in forecast cash flow assumptions due to
the reprioritisation of the portfolio and the more challenging
macroeconomic environment. Value in use and fair value less costs of
disposal methodologies were both considered to assess the
recoverable amount. The value in use that was calculated exceeded
the fair value less costs of disposal. The brand impairment reduced the
deferred tax liability by $13 million. The recoverable amount is
$49 million in respect of these US brands.
In the year ended 30 June 2023, an impairment charge of
$517 million in respect of the McDowell's brand and $29 million in
respect of the Director’s Special brand were recognised in exceptional
operating items, based on their value in use. The brand impairment
reduced the deferred tax liability by $137 million.
In the year ended 30 June 2023, an additional impairment charge
of $67 million was recognised in exceptional operating items in respect
of some brands where book value was not recoverable. The brand
impairment reduced the deferred tax liability by $17 million.
(e) Sensitivity to change in key assumptions
Impairment testing for the year ended 30 June 2024 has identified the
following cash-generating units as being sensitive to reasonably
possible changes in assumptions.
The table below shows the headroom at 30 June 2024 and the
impairment charge that would be required if the assumptions in the
calculation of their value in use were changed:
Carrying
value of CGU
$ million
Headroom
$ million
8pps decrease in annual
growth rate in forecast
period 2025-2030
$ million
Aviation American Gin
268
69
(108)
FINA NCIA L STATEMENTS continued
186
Diageo Annual Report 2024
10. Property, plant and equipment
Accounting policies
Land and buildings are stated at cost less accumulated depreciation. Freehold land is not depreciated. Leaseholds are generally depreciated
over the unexpired period of the lease. Other property, plant and equipment are depreciated on a straight-line basis to estimated residual
values over their expected useful lives, and these values and lives are reviewed each year. Subject to these reviews, the estimated useful lives
fall within the following ranges: buildings – 10 to 50 years; within plant and equipment casks and containers – 15 to 50 years; other plant and
equipment – 5 to 40 years; fixtures and fittings – 5 to 10 years; and returnable bottles and crates – 5 to 10 years.
Reviews are carried out if there is an indication that assets may be impaired, to ensure that property, plant and equipment are not carried
at above their recoverable amounts.
Government grants
Government grants are not recognised until there is reasonable assurance that the group will comply with the conditions pursuant to which
they have been granted and that the grants will be received. Government grants in respect of property, plant and equipment are deducted
from the asset that they relate to, reducing the depreciation expense charged to the income statement.
Land and
buildings
$ million
Plant and
equipment
$ million
Fixtures
and
fittings
$ million
Returnable
bottles and
crates
$ million
Under
construction
$ million
Total
$ million
Cost
At 30 June 2022 (re-presented)
3,210
6,365
150
656
1,053
11,434
Hyperinflation adjustment
6
13
1
—
5
25
Exchange differences
(66)
(138)
—
(39)
30
(213)
Acquisitions
9
16
—
3
—
28
Sale of businesses
(42)
(180)
(5)
(66)
(4)
(297)
Additions
133
257
16
60
998
1,464
Disposals
(78)
(170)
(15)
(126)
(2)
(391)
Transfers
175
286
15
33
(509)
—
Reclassification from assets held for sale
3
—
2
—
—
5
At 30 June 2023 (re-presented)
3,350
6,449
164
521
1,571
12,055
Hyperinflation adjustment
48
70
2
12
16
148
Exchange differences
(74)
(123)
(3)
(24)
(50)
(274)
Sale of businesses
(1)
(14)
(3)
—
—
(18)
Additions
207
383
15
30
911
1,546
Disposals
(57)
(189)
(9)
(19)
(9)
(283)
Transfers
169
679
11
13
(872)
—
Reclassification to assets held for sale
(25)
(97)
—
(19)
(4)
(145)
At 30 June 2024
3,617
7,158
177
514
1,563
13,029
Depreciation
At 30 June 2022 (re-presented)
907
2,921
94
436
—
4,358
Exchange differences
(8)
(95)
—
(22)
—
(125)
Depreciation charge for the year
150
323
16
40
—
529
Exceptional accelerated depreciation and impairment
38
49
—
—
—
87
Sale of businesses
(26)
(96)
(2)
(41)
—
(165)
Disposals
(75)
(156)
(13)
(124)
—
(368)
Reclassification from assets held for sale
—
—
1
—
—
1
At 30 June 2023 (re-presented)
986
2,946
96
289
—
4,317
Exchange differences
(20)
(69)
(3)
(15)
—
(107)
Depreciation charge for the year
175
365
23
37
—
600
Exceptional accelerated depreciation and impairment
9
36
1
—
—
46
Sale of businesses
(1)
(13)
(3)
—
—
(17)
Disposals
(43)
(156)
(9)
(20)
—
(228)
Reclassification to assets held for sale
(8)
(72)
—
(11)
—
(91)
At 30 June 2024
1,098
3,037
105
280
—
4,520
Carrying amount
At 30 June 2024
2,519
4,121
72
234
1,563
8,509
At 30 June 2023 (re-presented)
2,364
3,503
68
232
1,571
7,738
At 30 June 2022 (re-presented)
2,303
3,444
56
220
1,053
7,076
The net book value of land and buildings comprises freeholds of $1,970 million (2023 – $1,870 million), long leaseholds of $3 million (2023 – $3
million) and short leaseholds of $546 million (2023 – $491 million). Depreciation was not charged on $182 million (2023 – $177 million) of land.
Property, plant and equipment is net of a government grant of $185 million (2023 – $185 million) received in prior years in respect of the
construction of a rum distillery in the US Virgin Islands.
Diageo Annual Report 2024
187
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
11. Biological assets
Accounting policies
Biological assets held by the group consist of agave (Agave Azul
Tequilana Weber) plants. The harvested plants are used during
the production of tequila. The maturity cycle of agave ranges
between six and eight years; based on this, biological assets are
classified as mature and immature. Mature biological assets are
measured at fair value less costs to sell on initial recognition and
at the end of each reporting period based on the present value
of future cash flows discounted at an appropriate rate for
Mexico (income approach as per IFRS 13). Immature biological
assets are plants that have not reached the point of maturity
because their sugar content yield and weight is not enough to be
harvested and there is no active market for such plants;
consequently the Company accounts for these assets by
applying fair valuation using the cost approach (replacement
cost).
Changes in biological assets were as follows:
Biological
assets
$ million
Fair value
At 30 June 2022 (re-presented)
114
Exchange differences
27
Transferred to inventories
(10)
Fair value change
—
Farming cost capitalised
66
At 30 June 2023 (re-presented)
197
Exchange differences
(13)
Transferred to inventories
(23)
Fair value change
(17)
Farming cost capitalised
55
At 30 June 2024
199
At 30 June 2024, the number of agave plants was approximately
32 million (2023 – 37 million), ranging from new plantations up to eight
year-old plants.
12. Leases
Accounting policies
Where the group is the lessee, all leases are recognised on the
balance sheet as right-of-use assets and depreciated on a
straight-line basis with the charge recognised in cost of sales or
in other operating items depending on the nature of the costs.
The liability, recognised as part of net borrowings, is measured at
a discounted value and any interest is charged to finance
charges.
The group recognises services associated with a lease as
other operating expenses. Payments associated with leases
where the value of the asset when it is new is lower than $5,000
(leases of low value assets) and leases with a lease term of 12
months or less (short-term leases) are recognised as other
operating expenses. A judgement in calculating the lease
liability at initial recognition includes determining the lease term
where extension or termination options exist. In such instances,
any economic incentive to retain or end a lease are considered
and extension periods are only included when it is considered
reasonably certain that an option to extend a lease will be
exercised.
(a) Movement in right-of-use assets
The company principally leases warehouses, office buildings, plant and
machinery, cars and distribution vehicles in the ordinary course of business.
Land and
buildings
$ million
Plant and
equipment
$ million
Total
$ million
At 30 June 2022 (re-presented)
426
257
683
Exchange differences
13
(18)
(5)
Additions
53
45
98
Reclassification from assets held
for sale
2
1
3
Derecognition due to disposal of
business
(1)
(1)
(2)
Depreciation
(67)
(47)
(114)
At 30 June 2023 (re-presented)
426
237
663
Exchange differences
(6)
(3)
(9)
Additions
106
60
166
Disposal
(11)
(2)
(13)
Depreciation
(71)
(50)
(121)
At 30 June 2024
444
242
686
(b) Lease liabilities
2024
$ million
2023
re-presented
$ million
Current lease liabilities
(95)
(94)
Non-current lease liabilities
(509)
(470)
(604)
(564)
The future cash outflows, which are not included in lease liabilities on
the balance sheet, in respect of extension and termination options
which are not reasonably expected to be exercised are estimated at
$262 million (2023 – $329 million).
FINA NCIA L STATEMENTS continued
188
Diageo Annual Report 2024
(c) Amounts recognised in the consolidated income
statement
In the year ended 30 June 2024, other external charges (within other
operating items) included $70 million (2023 – $69 million) in respect
of leases of low value assets and short-term leases and $8 million (2023
– $5 million) in respect of variable lease payments. Refer to note 5 for
further information relating to the interest expense on lease liabilities.
The total cash outflow for leases in the year ended 30 June 2024
was $209 million (2023 – $209 million).
13. Other investments
Accounting policies
Other investments are equity investments that are not classified
as investments in associates or joint arrangements nor
investments in subsidiaries. They are included in non-current
assets. Subsequent to initial measurement, other investments are
stated at fair value. Gains and losses arising from the changes in
fair value are recognised in the income statement or in other
comprehensive income on a case-by-case basis. Accumulated
gains and losses included in other comprehensive income are
not recycled to the income statement. Dividends from other
investments are recognised in the consolidated income
statement.
Loans receivable are non-derivative financial assets that are not
classified as equity investments. They are subsequently
measured either at amortised cost using the effective interest
method less allowance for impairment or at fair value with gains
and losses arising from changes in fair value recognised in the
income statement or in other comprehensive income that are
recycled to the income statement on the de-recognition of the
asset. Allowances for expected credit losses are made based on
the risk of non-payment taking into account ageing, previous
experience, economic conditions and forward-looking data.
Such allowances are measured as either 12-months expected
credit losses or lifetime expected credit losses depending on
changes in the credit quality of the counterparty.
Loans
$ million
Other
investments
$ million
Total
$ million
Cost less allowances or fair value
At 30 June 2022 (re-presented)
21
24
45
Additions
23
11
34
Repayments and disposals
(3)
—
(3)
Fair value adjustment
—
(5)
(5)
Capitalised interest
2
—
2
Impairment charged during the year
—
(2)
(2)
At 30 June 2023 (re-presented)
43
28
71
Additions
18
9
27
Repayments and disposals
(17)
—
(17)
Fair value adjustment
—
(3)
(3)
Capitalised interest
5
—
5
Impairment reversed/(charged)
during the year
14
(3)
11
At 30 June 2024
63
31
94
At 30 June 2024, loans comprise $6 million (2023 – $7 million; 2022 –
$7 million) of loans to customers and other third parties, after
allowances of $138 million (2023 – $152 million; 2022 – $156 million),
and $57 million (2023 – $36 million; 2022 – $14 million) of loans to
associates.
14. Post-employment benefits
Accounting policies
The group’s principal post-employment funds are defined benefit
plans. In addition, the group has defined contribution plans,
unfunded post-employment medical benefit liabilities and other
unfunded defined benefit post-employment liabilities. For post-
employment plans other than defined contribution plans, the
amount charged to operating profit is the cost of accruing
pension benefits promised to employees over the year, plus any
changes arising on benefits granted to members by the group
during the year. Net finance charges comprise the net deficit/
surplus on the plans at the beginning of the year, adjusted for
cash flows in the year, multiplied by the discount rate for plan
liabilities. The differences between the fair value of the plans’
assets and the present value of the plans’ liabilities are disclosed
as an asset or liability on the consolidated balance sheet. Any
differences due to changes in assumptions or experience are
recognised in other comprehensive income. The amount of any
pension fund asset recognised on the balance sheet is limited to
any future refunds from the plan or the present value of
reductions in future contributions to the plan.
Contributions payable by the group in respect of defined
contribution plans are charged to operating profit as incurred.
Critical accounting estimates and judgements
Application of IAS 19 requires the exercise of estimate and
judgement in relation to various assumptions.
Diageo determines the assumptions on a country-by-country
basis in conjunction with its actuaries. Estimates are required in
respect of uncertain future events, including the life expectancy
of members of the funds, salary and pension increases, future
inflation rates, discount rates and employee and pensioner
demographics. The application of different assumptions could
have a significant effect on the amounts reflected in the income
statement, other comprehensive income and the balance sheet.
There may be interdependencies between the assumptions.
Where there is an accounting surplus on a defined benefit
plan, management judgement is necessary to determine
whether the group can obtain economic benefits through a
refund of the surplus or by reducing future contributions to the
plan.
(a) Post-employment benefit plans
The group operates a number of pension plans throughout the world,
devised in accordance with local conditions and practices. Diageo's
most significant plans are defined benefit plans and are funded by
payments to separately administered trusts or insurance companies.
The group also operates a number of plans that are generally
unfunded, primarily in the United States, which provide to employees
post-employment medical benefits.
The principal plans are in the United Kingdom, Ireland and the
United States where benefits are based on employees’ length of service
and salary. All valuations were performed by independent actuaries
using the projected unit credit method to determine pension costs.
The most recent funding valuations of the significant defined benefit
plans were carried out as follows:
Principal plans
Date of valuation
United Kingdom(1)
1 April 2021
Ireland(2)
31 December 2021
United States
1 January 2023
(1)
The Diageo Pension Scheme (DPS, the UK Scheme) closed to new members in
November 2005. Employees who joined Diageo in the United Kingdom between
November 2005 and January 2018, were eligible to become members of the Diageo
Lifestyle Plan (a cash balance defined benefit plan) which was merged into the DPS in
July 2023. Since January 2018, new employees have been eligible to become
Diageo Annual Report 2024
189
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
members of a master trust defined contribution plan. The latest valuation as at 1 April
2024 is currently underway and will be finalised during the course of the next financial
year.
(2)
The Guinness Ireland Group Pension Scheme (GIGPS, the Irish scheme) closed to new
members in May 2013. Employees who have joined Diageo in Ireland since the defined
benefit scheme closed have been eligible to become members of a master trust
defined contribution plan.
The assets of the UK and Irish pension plans are held in separate trusts
administered by trustees who are required to act in the best interests of
the plans’ beneficiaries. For DPS, the trustee is Diageo Pension Trust
Limited. As required by legislation, one-third of the directors of the Trust
are nominated by the members of the DPS, member nominated
directors are appointed from both the pensioner member community
and the active member community. For the Irish Scheme, Diageo
Ireland makes three nominations and appoints three further candidates
nominated by representative groupings.
The amounts charged to the consolidated income statement and
statement of comprehensive income for the group’s defined benefit
plans for the three years ended 30 June 2024 are as follows:
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Current service cost and
administrative expenses
(82)
(91)
(142)
Past service gains/(losses) – ordinary
activities
3
(1)
46
Gains on curtailments and settlements
—
2
44
Charge to operating profit
(79)
(90)
(52)
Net finance income in respect of post-
employment plans
37
53
13
Charge before taxation(1)
(42)
(37)
(39)
Actual returns less amounts included
in finance income
(168)
(1,722)
(1,904)
Experience gains/(losses)
24
(273)
(46)
Changes in financial assumptions
20
1,150
2,837
Changes in demographic assumptions
43
65
(53)
Other comprehensive (loss)/income
(81)
(780)
834
Changes in the surplus restriction
5
9
(15)
Total other comprehensive (loss)/
income
(76)
(771)
819
(i)
The year ended 30 June 2022 includes settlement gains of $36 million in respect of the
Enhanced Transfer Values (ETV) exercise carried out in the Irish Schemes and past
service gains of $37 million as a result of the changes of the benefits in the Irish
Scheme.
(1)
The (charge)/income before taxation is in respect of the following countries:
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
United Kingdom
5
19
(37)
Ireland
3
1
61
United States
(35)
(38)
(42)
Other
(15)
(19)
(21)
(42)
(37)
(39)
In addition to the charge in respect of defined benefit post-employment
plans, contributions to the group’s defined contribution plans were $62
million (2023 – $53 million; 2022 – $44 million).
The movements in the plan assets and liabilities for the two years
ended 30 June 2024 are set out below:
Plan
assets
$ million
Plan
liabilities
$ million
Net
surplus
$ million
At 30 June 2022 (re-presented)
10,163
(8,753)
1,410
Exchange differences
267
(238)
29
Disposals
—
5
5
Income/(charge) before taxation
357
(394)
(37)
Other comprehensive (loss)/income(1)
(1,722)
942
(780)
Contributions by the group
121
—
121
Employee contributions
5
(5)
—
Benefits paid
(567)
567
—
At 30 June 2023 (re-presented)
8,624 (7,876)
748
Exchange differences
(5)
4
(1)
Income/(charge) before taxation
383
(425)
(42)
Other comprehensive (loss)/income(1)
(168)
87
(81)
Contributions by the group
97
—
97
Settlements
(43)
43
—
Employee contributions
2
(2)
—
Benefits paid
(473)
473
—
At 30 June 2024
8,417 (7,696)
721
(1)
Excludes surplus restriction.
The plan assets and liabilities by type of post-employment benefit and
country are as follows:
2024
2023 (re-presented)
Plan
assets
$ million
Plan
liabilities
$ million
Plan
assets
$ million
Plan
liabilities
$ million
Pensions
United Kingdom
5,654 (5,028)
5,771 (5,094)
Ireland
1,954
(1,595)
1,999
(1,650)
United States
569
(534)
555
(516)
Other
216
(241)
227
(244)
Post-employment medical
3
(266)
3
(288)
Other post-employment
21
(32)
69
(84)
8,417 (7,696)
8,624
(7,876)
The balance sheet analysis of the post-employment plans is as follows:
2024
2023 (re-presented)
Non-
current
assets(1)
$ million
Non-
current
liabilities
$ million
Non-
current
assets(1)
$ million
Non-
current
liabilities
$ million
Funded plans
1,146
(152)
1,210
(167)
Unfunded plans
—
(277)
—
(304)
1,146
(429)
1,210
(471)
(1)
Includes surplus restriction of $4 million (2023 – $9 million).
FINA NCIA L STATEMENTS continued
190
Diageo Annual Report 2024
The disclosures have been prepared in accordance with IFRIC 14. In
particular, where the calculation for a plan results in a surplus, the
recognised asset is limited to the present value of any available future
refunds from the plan or reductions in future contributions to the plan,
and any additional liabilities are recognised as required. At 30 June
2024, the DPS had a net surplus of $689 million (2023 – $742 million;
2022 – $1,421 million) and the GIGPS had a net surplus of $332 million
(2023 – $328 million; 2022 – $267 million) and other schemes in a
surplus totalled $125 million (2023 – $140 million; 2022 – $191 million).
The DPS and GIGPS surpluses have been recognised, with no provision
made against them, as they are expected to be recoverable through a
combination of a reduction in future cash contributions or ultimately via
a cash refund when the last member’s obligations have been met.
(b) Principal risks and assumptions
The material post-employment plans are not exposed to any unusual,
entity-specific or scheme-specific risks but there are general risks:
Inflation – The majority of the plans’ obligations are linked to inflation.
Higher inflation will lead to increased liabilities which is partially offset
by the plans holding inflation linked gilts, swaps and caps against the
level of inflationary increases.
Interest rate – The plan liabilities are determined using discount rates
derived from yields on AA-rated corporate bonds. A decrease in
corporate bond yields will increase plan liabilities though this will be
partially offset by an increase in the value of the bonds held by the
post-employment plans.
Mortality – The majority of the obligations are to provide benefits for the
life of the members and their partners, so any increase in life
expectancy will result in an increase in the plans’ liabilities.
Asset returns – Assets held by the pension plans are invested in a
diversified portfolio including equities, bonds and other assets. Volatility
in asset values will lead to movements in the net deficit/surplus
reported in the consolidated balance sheet for post-employment plans
which in addition will also impact the post-employment expense in the
consolidated income statement.
The following weighted average assumptions were used to
determine the group’s deficit/surplus in the main post-employment
plans at 30 June in the relevant year. The assumptions used to
calculate the charge/credit in the consolidated income statement for
the year ending 30 June are based on the assumptions disclosed as at
the previous 30 June.
United Kingdom
Ireland
United States(1)
2024
%
2023
%
2022
%
2024
%
2023
%
2022
%
2024
%
2023
%
2022
%
Rate of general increase in salaries(2)
3.6
3.7
3.6
3.7
3.9
3.8
—
—
—
Rate of increase to pensions in payment
2.8
2.9
2.9
2.2
2.3
2.2
—
—
—
Rate of increase to deferred pensions
2.6
2.7
2.6
2.2
2.4
2.3
—
—
—
Discount rate for plan liabilities
5.1
5.2
3.8
3.6
3.6
3.2
5.3
4.9
4.4
Inflation – CPI
2.6
2.7
2.6
2.3
2.5
2.4
2.3
2.2
2.3
Inflation – RPI
3.1
3.2
3.1
—
—
—
—
—
—
(1)
The salary increase assumption in the United States is not a significant assumption as only a minimal amount of members’ pension entitlement is dependent on a member’s projected
final salary.
(2)
The salary increase assumptions include an allowance for age-related promotional salary increases.
For the principal UK and Irish pension funds, the table below illustrates the expected age at death of an average worker who retires currently at the
age of 65, and one who is currently aged 45 and subsequently retires at the age of 65:
United Kingdom(1)
Ireland(2)
United States
2024
Age
2023
Age
2022
Age
2024
Age
2023
Age
2022
Age
2024
Age
2023
Age
2022
Age
Retiring currently at age 65
Male
86.8
86.8
87.1
87.2
87.2
87.7
85.7
85.6
85.5
Female
88.4
88.4
88.7
89.7
89.6
90.0
87.4
87.2
87.2
Currently aged 45, retiring at age 65
Male
88.1
88.1
88.5
88.8
88.8
89.3
87.2
87.1
87.0
Female
90.5
90.4
90.7
91.4
91.3
91.7
88.9
88.7
88.6
(1)
Based on the CMI’s S3 mortality tables with scaling factors based on the experience of the plan and where people live, with suitable future improvements.
(2)
Based on the CMI's S3 mortality tables with scaling factors based on the experience of the plan, with suitable future improvements.
For the significant assumptions, the following sensitivity analysis estimates the potential impacts on the consolidated income statement for the year
ending 30 June 2025 and on the plan liabilities at 30 June 2024:
United Kingdom
Ireland
United States
Benefit/(cost)
Operating
profit
$ million
Profit after
taxation
$ million
Plan
liabilities(1)
$ million
Operating
profit
$ million
Profit after
taxation
$ million
Plan
liabilities(1)
$ million
Operating
profit
$ million
Profit after
taxation
$ million
Plan
liabilities(1)
$ million
Effect of 0.5% increase in discount rate
2
16
307
1
6
101
2
2
27
Effect of 0.5% decrease in discount rate
(2)
(16)
(339)
(1)
(5)
(112)
(2)
(2)
(30)
Effect of 0.5% increase in inflation
(2)
(9)
(201)
—
(2)
(62)
(1)
(1)
(10)
Effect of 0.5% decrease in inflation
2
9
200
—
3
73
1
1
9
Effect of one year increase in life expectancy
—
(6)
(162)
—
(2)
(67)
—
(1)
(17)
(1)
The estimated effect on the liabilities excludes the impact of any interest rate and inflation swaps held by the pension plans.
(i)
The sensitivity analyses above have been determined based on reasonably possible changes of the respective assumptions and may not be representative of the actual change. Each
sensitivity is calculated on a change in the key assumption while holding all other assumptions constant. The sensitivity to inflation includes the impact on all inflation linked assumptions
(e.g. pension increases and salary increases where appropriate).
Diageo Annual Report 2024
191
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
(c) Investment and hedging strategy
The investment strategy for the group’s funded post-employment plans is determined locally by the trustees of the plan and/or Diageo, as
appropriate, and it takes account of the relevant statutory requirements. The objective of the investment strategy is to achieve a target rate of return
in excess of the movement on the liabilities, whilst taking an acceptable level of investment risk relative to the liabilities. This objective is
implemented by using the funds of the plans to invest in a variety of asset classes that are expected over the long-term to deliver a target rate of
return. The majority of the investment strategies have significant amounts allocated to bonds in order to provide protection against adverse
movements in the liabilities of the plans. This includes corporate bonds and bonds held under sale and repurchase agreements (repos) whereby
the bond is provided as security for bank funding to enable the acquisition of additional bonds to increase the level of protection provided. Repos
are fully collateralised short-term agreements (typically up to 12 months in duration) and are a well-recognised investment practice as part of a risk
management programme against interest rates or inflation risks. Under the UK Scheme, a significant amount of the repos are less than 3 months in
duration. At 30 June 2024, approximately 95% and 100% (2023 – 97% and 98%) of the UK Scheme’s liabilities measured on the Trustee's funding
basis (gilts+50bp) were protected against future adverse movements in interest rates and inflation respectively through the combined effect of
bonds and swaps. At 30 June 2024, approximately 90% and 112% (2023 – 92% and 112%) of the Irish plans’ liabilities measured on the Trustee's
funding basis (euro-swaps+50bp) were protected against future adverse movements in interest rates and inflation respectively through the
combined effect of bonds and swaps.
The discount rates used are based on the yields of high-quality fixed income investments. For the UK plans, which represent approximately 65%
of total plan liabilities, the discount rate is determined by reference to the yield curves of AA-rated corporate bonds for which the timing and
amount of cash outflows are similar to those of the plans. A similar process is used to determine the discount rates used for the non-UK plans.
An analysis of the fair value of the plan assets is as follows:
2024
United Kingdom
$ million
Ireland
$ million
United States and other
$ million
Total
$ million
Quoted
Unquoted
Quoted
Unquoted
Quoted
Unquoted
Quoted
Unquoted
Total
Equities
1
1,121
—
330
80
129
81
1,580
1,661
Bonds
Fixed-interest government
943
25
—
60
62
10
1,005
95
1,100
Inflation-linked government
2,112
495
—
111
—
2
2,112
608
2,720
Investment grade corporate
—
503
—
623
21
311
21
1,437
1,458
Non-investment grade
4
448
5
346
—
146
9
940
949
Loan securities
—
421
—
107
—
—
—
528
528
Liability Driven Investment (LDI)
—
—
—
124
—
—
—
124
124
Property - unquoted
—
551
—
54
—
1
—
606
606
Hedge funds
—
—
—
—
—
6
—
6
6
Interest rate and inflation swaps
—
(1,126)
36
65
—
—
36
(1,061)
(1,025)
Cash and other
20
136
28
65
—
41
48
242
290
Total bid value of assets
3,080
2,574
69
1,885
163
646
3,312
5,105
8,417
2023 (re-presented)
United Kingdom
$ million
Ireland
$ million
United States and other
$ million
Total
$ million
Quoted
Unquoted
Quoted
Unquoted
Quoted
Unquoted
Quoted
Unquoted
Total
Equities
15
1,155
—
365
81
125
96
1,645
1,741
Bonds
Fixed-interest government
739
189
—
8
60
10
799
207
1,006
Inflation-linked government
1,286
1,393
—
121
2
2
1,288
1,516
2,804
Investment grade corporate
—
37
—
413
26
285
26
735
761
Non-investment grade
27
364
7
234
2
168
36
766
802
Loan securities
17
664
—
106
—
—
17
770
787
Liability Driven Investment (LDI)
—
—
—
102
—
—
—
102
102
Property - unquoted
36
582
—
79
—
1
36
662
698
Hedge funds
—
—
—
15
—
6
—
21
21
Interest rate and inflation swaps
—
(1,224)
129
(22)
—
—
129
(1,246)
(1,117)
Cash and other
128
363
6
436
—
86
134
885
1,019
Total bid value of assets
2,248
3,523
142
1,857
171
683
2,561
6,063
8,624
(i)
The analyses of the fair value of plan assets has been amended to reflect the underlying asset categories of repurchase agreements. The presentation of fair value of the plan assets for
the year ended 30 June 2023 has been aligned with the presentation provided for the year ended 30 June 2024.
(ii) The asset classes include some cash holdings that are temporary. This cash is likely to be invested imminently and so has been included in the asset class where it is anticipated to be
invested in the long-term.
(iii) For the year ended 30 June 2024 the analyses of asset categories above includes $1,626 million (2023 - $2,213 million) in the United Kingdom, $1,060 million (2023 - $1,065 million) in
Ireland and $572 million (2023 - $558 million) in the United States held in unquoted pooled investment vehicles.
Total cash contributions by the group to all post-employment plans in the year ending 30 June 2025 are estimated to be approximately
$55 million.
FINA NCIA L STATEMENTS continued
192
Diageo Annual Report 2024
(d) Deficit funding arrangements
UK plans
In the year ended 30 June 2011, the group established a Pension Funding Partnership (PFP) in respect of the UK Scheme. Whisky inventory was
transferred into the partnership but the group retains control over the partnership which at 30 June 2024 held inventory with a book value of $648
million (2023 – $923 million). The partnership is fully consolidated in the group financial statements. The UK Scheme has a limited interest in the
partnership and, as a partner, is entitled to a distribution from the profits of the partnership. The arrangement is expected to cease in 2030, and
contributions to the UK scheme in any year will be dependent on the funding position of the UK scheme at the previous 31 March. Given the surplus
funding position in the DPS, there were no contributions to the DPS in the years ended 30 June 2024 and 30 June 2023.
In 2030, the group will be required, dependent upon the funding position of the UK Scheme at that time, to pay an amount not greater than the
actuarial deficit at that time, up to a maximum of £430 million ($542 million) in cash, to purchase the UK Scheme’s interest in the partnership. If the
UK Scheme is in surplus at an actuarial triennial valuation excluding the value of the PFP, then the group can exit the PFP with the agreement of the
trustees.
Irish plans
The 31 December 2021 triennial actuarial valuation of the Guinness Ireland Group Pension Scheme was completed during the year ended 30 June
2023 showing the Scheme is fully funded on the Trustee’s ongoing funding basis and the statutory minimum funding standard basis. Given the fully
funded position, no deficit contributions were payable in the years ended 30 June 2024 and 30 June 2023. The company has agreed with the
Trustee on conditional contributions if there is a deficit in the Scheme on any of the next three valuation dates. These conditional contributions shall
be payable over the 3 years following the valuation and the aggregate payment will be equal to the ongoing deficit disclosed, subject to the caps
set out below:
Valuation date
31 December 2024
31 December 2027
31 December 2030
€ million
$ million
€ million
$ million
€ million
$ million
Maximum conditional contribution
35
33
39
36
39
36
(e) Timing of benefit payments
The following table provides information on the timing of the benefit payments and the average duration of the defined benefit obligations and the
distribution of the timing of benefit payments:
United Kingdom
Ireland
United States
2024
$ million
2023
re-presented
$ million
2024
$ million
2023
re-presented
$ million
2024
$ million
2023
re-presented
$ million
Maturity analysis of benefits expected to be paid
Within one year
311
382
88
92
64
72
Between 1 to 5 years
1,225
1,373
441
462
216
219
Between 6 to 15 years
3,123
3,073
870
916
456
417
Between 16 to 25 years
2,948
2,827
748
813
297
260
Beyond 25 years
3,378
3,357
816
941
230
236
Total
10,985
11,012
2,963
3,224
1,263
1,204
years
years
years
years
years
years
Average duration of the defined benefit obligation
14
14
14
14
9
9
The projected benefit payments are based on the assumptions underlying the assessment of the obligations, including inflation. They are disclosed
undiscounted and therefore appear large relative to the discounted value of the plan liabilities recognised on the consolidated balance sheet. They
are in respect of benefits that have accrued at the balance sheet date and make no allowance for any benefits to be accrued subsequently.
(f) Related party disclosures
Information on transactions between the group and its pension plans is given in note 21.
Diageo Annual Report 2024
193
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
15. Working capital
Accounting policies
Inventories are stated at the lower of cost and net realisable
value. Cost includes raw materials, direct labour and expenses,
an appropriate proportion of production and other overheads,
but not borrowing costs. Cost is calculated at the weighted
average cost incurred in acquiring inventories. All maturing
inventories and raw materials are classified as current assets, as
they are expected to be realised in the normal operating cycle
which can be a period of several years.
Trade and other receivables are initially recognised at fair value
less transaction costs and subsequently carried at amortised cost
less any allowance for discounts and doubtful debts. Trade
receivables arise from contracts with customers, and are
recognised when performance obligations are satisfied, and the
consideration due is unconditional as only the passage of time is
required before the payment is received. Allowance losses are
calculated by reviewing lifetime expected credit losses using
historic and forward-looking data on credit risk.
Trade and other payables are initially recognised at fair value
including transaction costs and subsequently carried at
amortised costs. Contingent considerations recognised in
business combinations are subsequently measured at fair value
through income statement. The group evaluates supplier
arrangements against a number of indicators to assess if the
liability has the characteristics of a trade payable or should be
classified as borrowings. This assessment considers the
commercial purpose of the facility, whether payment terms are
similar to customary payment terms, whether the group is legally
discharged from its obligation towards suppliers before the end
of the original payment term, and the group’s involvement in
agreeing terms between banks and suppliers.
Provisions are liabilities of uncertain timing or amount. A
provision is recognised if, as a result of a past event, the group
has a present legal or constructive obligation that can be
estimated reliably, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
Provisions are calculated on a discounted basis. The carrying
amounts of provisions are reviewed at each balance sheet date
and adjusted to reflect the current best estimate.
(a) Inventories
2024
$ million
2023
re-presented
$ million
Raw materials and consumables
639
684
Work in progress
118
166
Maturing inventories
7,832
7,300
Finished goods and goods for resale
1,131
1,503
9,720
9,653
Maturing inventories include whisk(e)y, rum, tequila and Chinese white
spirits. The following amounts of inventories can be utilised after more
than one year:
2024
$ million
2023
re-presented
$ million
Raw materials and consumables
19
29
Maturing inventories
5,885
5,119
5,904
5,148
Inventories are disclosed net of provisions for obsolescence, an analysis
of which is as follows:
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Balance at beginning of the year
128
113
133
Exchange differences
(3)
(27)
(8)
Income statement charge
51
66
8
Utilised
(47)
(23)
(18)
Sale of businesses
(5)
(1)
(2)
124
128
113
(b) Trade and other receivables
2024
2023 (re-presented)
Current
assets
$ million
Non-current
assets
$ million
Current
assets
$ million
Non-current
assets
$ million
Trade receivables
2,674
—
2,534
—
Interest receivable
31
—
15
—
VAT recoverable and other
prepaid taxes
227
17
342
19
Other receivables
240
14
205
16
Prepayments
274
7
288
4
Accrued income
41
—
43
—
3,487
38
3,427
39
At 30 June 2024, approximately 21%, 16% and 9% of the group’s
trade receivables of $2,674 million are due from counterparties based
in the United States, India and United Kingdom, respectively. Accrued
income primarily represents amounts receivable from customers in
respect of performance obligations satisfied but not yet invoiced.
The aged analysis of trade receivables, net of expected credit loss
allowance, is as follows:
2024
$ million
2023
re-presented
$ million
Not overdue
2,490
2,479
Overdue 1 – 30 days
43
32
Overdue 31 – 60 days
31
8
Overdue 61 – 90 days
27
4
Overdue 91 – 180 days
71
7
Overdue more than 180 days
12
4
2,674
2,534
Increase in overdue balances in the year ended 30 June 2024 was
driven by receivables against institutional customers with low credit risk
in certain countries.
Trade and other receivables are disclosed net of expected credit loss
allowance for doubtful debts, an analysis of which is as follows:
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Balance at beginning of the year
112
143
154
Exchange differences
(3)
(10)
(12)
Income statement (release)/charge
8
(4)
28
Written off
(22)
(17)
(27)
95
112
143
FINA NCIA L STATEMENTS continued
194
Diageo Annual Report 2024
(c) Trade and other payables
2024
2023 (re-presented)
Current
liabilities
$ million
Non-current
liabilities
$ million
Current
liabilities
$ million
Non-current
liabilities
$ million
Trade payables
3,071
—
3,351
—
Interest payable
358
—
299
—
Tax and social security excluding income tax
724
—
796
—
Other payables
499
304
544
463
Accruals
1,564
—
1,549
—
Deferred income
84
—
92
—
Dividend payable
31
—
29
—
Dividend payable to non-controlling interests
23
—
18
—
6,354
304
6,678
463
Interest payable at 30 June 2024 includes interest on non-derivative financial instruments of $291 million (2023 – $274 million). Accruals at 30 June
2024 include $764 million (2023 – $707 million) accrued discounts attributed to sales recognised. Deferred income represents amounts paid by
customers in respect of performance obligations not yet satisfied. The amount of contract liabilities recognised as revenue in the current year is
$92 million (2023 – $109 million). Non-current liabilities include the net present value of contingent consideration in respect of prior acquisitions of
$231 million (2023 – $369 million). For further information on contingent consideration, please refer to note 16 (g).
Together with the group’s partner banks, supply chain financing (SCF) facilities are provided to suppliers in certain countries. These
arrangements enable suppliers to receive funding earlier than the invoice due date at their discretion and at their own cost. Payment terms
continue to be agreed directly between the group and suppliers, independently from the availability of SCF facilities. Liabilities are settled in
accordance with the original due date of invoices. The group does not incur any fees or receive any rebates where the suppliers choose to utilise
these facilities. The group has determined that it is appropriate to present amounts outstanding subject to SCF arrangements as trade payables.
Consistent with this classification, cash flows are presented either as operating cash flows or cash flows from investing activities, when related to the
acquisition of non-current assets. At 30 June 2024, the amount that has been subject to SCF and accounted for as trade payables was $847 million
(2023 – $916 million).
(d) Provisions
Thalidomide
$ million
Other
$ million
Total
$ million
At 30 June 2023 (re-presented)
212
244
456
Exchange differences
—
(3)
(3)
Provisions charged during the year
—
61
61
Provisions utilised during the year
(17)
(103)
(120)
Transfers from other payables
—
(5)
(5)
Unwinding of discounts
6
2
8
At 30 June 2024
201
196
397
Current liabilities
17
80
97
Non-current liabilities
184
116
300
201
196
397
Provisions have been established in respect of the discounted value of the group’s commitment to the UK and Australian Thalidomide Trusts. These
provisions will be utilised over the period of the commitments up to 2037.
The largest item in other provisions at 30 June 2024 is $54 million (2023 – $64 million) in respect of deferred employee compensation plans
which will be utilised when employees leave the group.
Diageo Annual Report 2024
195
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Risk management and capital structure
Introduction
This section sets out the policies and procedures applied to manage the group’s capital structure and the financial risks the group is exposed to.
Diageo considers the following components of its balance sheet to be capital: borrowings and equity. Diageo manages its capital structure to
achieve capital efficiency, provide flexibility to invest through the economic cycle and give efficient access to debt markets at attractive cost levels.
16. Financial instruments and risk management
Accounting policies
Financial assets and liabilities are initially recorded at fair value including, where permitted by IFRS 9, any directly attributable transaction
costs. For those financial assets that are not subsequently held at fair value, the group assesses whether there is evidence of impairment at
each balance sheet date.
The group classifies its financial assets and liabilities into the following categories: financial assets and liabilities at amortised cost, financial
assets and liabilities at fair value through income statement and financial assets at fair value through other comprehensive income.
The accounting policies for other investments and loans are described in note 13, for trade and other receivables and payables in note 15
and for cash and cash equivalents in note 17.
Financial assets and liabilities at fair value through income statement include derivative assets and liabilities. Where financial assets or
liabilities are eligible to be carried at either amortised cost or fair value through other comprehensive income, the group does not apply the
fair value option.
Derivative financial instruments are carried at fair value using a discounted cash flow model based on market data applied consistently
for similar types of instruments. Gains and losses on derivatives that do not qualify for hedge accounting treatment are taken to the income
statement as they arise.
Other financial liabilities are carried at amortised cost unless they are part of a fair value hedge relationship when the amortised cost of
the financial liabilities are adjusted with the fair value change attributable to the risk being hedged from the inception of the hedge
relationship. The difference between the initial carrying amount of the financial liabilities and their redemption value is recognised in the
income statement over the contractual terms using the effective interest rate method. Financial liabilities in respect of the Zacapa acquisition
are recognised at fair value.
Hedge accounting
The group designates and documents certain derivatives as hedging instruments against changes in fair value of recognised assets and
liabilities (fair value hedges), commodity price risk of highly probable forecast transactions, as well as the cash flow risk from a change in
exchange or interest rates (cash flow hedges) and hedges of net investments in foreign operations (net investment hedges). Derivative
instruments designated in hedge relationship are included in other financial assets and liabilities on the consolidated balance sheet. The
effectiveness of such hedges is assessed at inception and at least on a quarterly basis, using prospective testing. Methods used for testing
effectiveness include critical terms, regression analysis and hypothetical derivative models.
Fair value hedges are used to manage the currency and/or interest rate risks to which the fair value of certain assets and liabilities are
exposed. Changes in the fair value of the derivatives are recognised in the income statement, along with any changes in the relevant fair
value of the underlying hedged asset or liability. If such a hedge relationship no longer meets hedge accounting criteria, fair value
movements on the derivative continue to be taken to the income statement while any fair value adjustments made to the underlying hedged
item to that date are amortised through the income statement over its remaining life using the effective interest rate method.
Cash flow hedges are used to hedge the foreign currency risk of highly probable future foreign currency cash flows, the commodity price risk
of highly probable future transactions, as well as the cash flow risk from changes in exchange or interest rates. The effective portion of the
gain or loss on the hedges is recognised in other comprehensive income, while any ineffective part is recognised in the income statement.
Amounts recorded in other comprehensive income are recycled to the income statement in the same period in which the underlying foreign
currency, commodity or interest exposure affects the income statement. When a hedge relationship no longer meets the criteria for hedge
accounting, any cumulative gain or loss existing in equity is either transferred to the income statement or amortised over its remaining life
using the effective interest rate method.
Net investment hedges utilise either foreign currency borrowings or derivatives as hedging instruments. Foreign exchange differences arising
on translation of net investments are recorded in other comprehensive income and included in the exchange reserve. Liabilities used as
hedging instruments are revalued at closing exchange rates and the resulting gains or losses are also recognised in other comprehensive
income to the extent that they are effective, with any ineffectiveness taken to the income statement. Foreign currency derivative contracts
hedging net investments are carried at fair value. Effective fair value movements are recognised in other comprehensive income, with any
ineffectiveness taken to the income statement. Cost of hedging model is applied in case of cross-currency interest rate swaps in net
investment hedges. The fair value changes attributable to the spot component of the hedging instruments are designated to offset foreign
exchange differences of net investments and therefore taken to net investment hedge reserve. The fair value changes attributable to the
forward component of the hedging instruments (including currency basis) is taken to the cost of hedging reserve and amortised to the
consolidated income statement.
The group’s funding, liquidity and exposure to foreign currency, interest
rate risks and commodity price risk are managed by the group’s
treasury department. The treasury department uses a range of financial
instruments to manage these underlying risks.
Treasury operations are conducted within a framework of Board-
approved policies and guidelines, which are recommended and
reviewed by the Finance Committee, chaired by the Chief Financial
Officer. The policies and guidelines include benchmark exposure and/
or hedge cover levels for key areas of treasury risk which are
periodically reviewed by the Board following, for example, significant
business, strategic or accounting changes. The framework provides for
limited defined levels of flexibility in execution to allow for the optimal
FINA NCIA L STATEMENTS continued
196
Diageo Annual Report 2024
application of the Board-approved strategies. Transactions arising from
the application of this flexibility are carried at fair value, gains or losses
are taken to the income statement as they arise and are separately
monitored on a daily basis using Value at Risk analysis. In the years
ended 30 June 2024 and 30 June 2023, gains and losses on these
transactions were not material. The group does not use derivatives for
speculative purposes. All transactions in derivative financial instruments
are initially undertaken to manage the risks arising from underlying
business activities.
The group purchases insurance for commercial or, where required,
for legal or contractual reasons. In addition, the group retains insurable
risk where external insurance is not considered an economic means of
mitigating these risks.
The Finance Committee receives a quarterly report on the key
activities of the treasury department, however any exposures which
differ from the defined benchmarks are reported as they arise.
(a) Currency risk
The group presents its consolidated financial statements in US dollar
and conducts business in many currencies. As a result, it is subject to
foreign currency risk due to exchange rate movements, which affects
the group’s transactions and the translation of the results and
underlying net assets of its operations. To manage the currency risk, the
group uses certain financial instruments. Where hedge accounting is
applied, hedges are documented and tested for effectiveness on an
ongoing basis.
Hedge of net investment in foreign operations
The group hedges a certain portion of its exposure to fluctuations in the
US dollar value of its foreign operations by designating borrowings
held in foreign currencies and using foreign currency spots, forwards,
swaps and other financial derivatives. For the year ended 30 June
2024, the group maintained the total net investment Value at Risk to
total net asset value below 20%, where Value at Risk is defined as the
maximum amount of loss over a one-year period with a 95%
probability confidence level.
At 30 June 2024, foreign currency borrowings (euro, sterling) and
financial derivatives (Chinese yuan, euro, sterling) designated in net
investment hedge relationships amounted to $3,198 million derivatives
and $8,109 million bonds (2023 – $806 million derivatives and $12,584
million bonds).
Hedge of foreign currency debt
The group uses cross currency interest rate swaps to hedge the foreign
currency risk associated with certain foreign currency denominated
borrowings.
Transaction exposure hedging
The group’s policy is to hedge forecast transactional foreign currency
risk on major currency pair exposures up to 24 months, targeting 75%
coverage for the current financial year, and on other currency
exposures up to 18 months. The group’s exposure to foreign currency
risk arising principally on forecasted sales transactions is managed
using forward agreements and options.
(b) Interest rate risk
The group has an exposure to interest rate risk, arising principally on
changes in US dollar, euro and sterling interest rates. To manage
interest rate risk, the group manages its proportion of fixed to floating
rate borrowings within limits approved by the Board, primarily through
issuing fixed and floating rate borrowings, and by utilising interest rate
swaps. These practices aim to minimise the group’s net finance charges
with acceptable year-on-year volatility. To facilitate operational
efficiency and effective hedge accounting, for the year ended 30 June
2024 the group’s policy was to maintain fixed rate borrowings within a
band of 40% to 90% of forecast net borrowings. For these calculations,
net borrowings exclude interest rate related fair value adjustments. The
majority of the group’s existing interest rate derivatives are designated
as hedges and are expected to be effective. Fair value of these
derivatives is recognised in the income statement, along with any
changes in the relevant fair value of the underlying hedged asset or
liability.
The interest rate profile of the group's net borrowings is as follows:
2024
2023
$ million
%
re-presented
$ million
%
Fixed rate
16,174
77
15,071
77
Floating rate(1)
4,384
21
4,064
21
Impact of financial
derivatives and fair value
adjustments
(145)
(1)
(117)
(1)
Lease liabilities
604
3
564
3
Net borrowings
21,017
100
19,582
100
(1)
The floating rate portion of net borrowings includes cash and cash equivalents,
collaterals, floating rate loans and bonds and bank overdrafts.
The table below sets out the average monthly net borrowings and
effective interest rate:
Average monthly net borrowings
Effective interest rate
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
2024
%
2023
%
2022
%
21,034
18,362
16,883
4.3
3.9
2.7
(i)
For this calculation, net interest charge excludes fair value adjustments to derivative
financial instruments and average monthly net borrowings include the impact of
interest rate swaps that are no longer in a hedge relationship but exclude the market
value adjustment for cross currency interest rate swaps.
(c) Commodity price risk
Commodity price risk is managed in line with the principles approved
by the Board either through long-term purchase contracts with suppliers
or, where appropriate, derivative contracts. The group policy is to
maintain the Value at Risk of commodity price risk arising from
commodity exposures below 75 bps of forecast gross profit in any given
financial year. Where derivative contracts are used, the commodity
price risk exposure is hedged up to 24 months of forecast volume
through exchange-traded and over-the-counter contracts (futures,
forwards and swaps) and cash flow hedge accounting is applied.
(d) Market risk sensitivity analysis
The group uses a sensitivity analysis that estimates the impacts on the
consolidated income statement and other comprehensive income of
either an instantaneous increase or decrease of 0.5% in market interest
rates or a 10% strengthening or weakening in US dollar against all
other currencies, from the rates applicable for each class of financial
instruments on the consolidated balance sheet at these dates with all
other variables remaining constant. The sensitivity analysis excludes the
impact of market risk on the net post-employment benefit liabilities and
assets, and corporate tax payable. This analysis is for illustrative
purposes only, as in practice interest and foreign exchange rates rarely
change in isolation.
The sensitivity analysis estimates the impact of changes in interest
and foreign exchange rates. All hedges are expected to be highly
effective for this analysis and it considers the impact of all financial
instruments including financial derivatives, cash and cash equivalents,
borrowings and other financial assets and liabilities. The results of the
sensitivity analysis should not be considered as projections of likely
future events, gains or losses as actual results in the future may differ
materially due to developments in the global financial markets which
may cause fluctuations in interest and exchange rates to vary from the
hypothetical amounts disclosed in the table below.
Comparative figures to currency risk sensitivity are not disclosed in
fiscal 24. Due to the functional currency change of the parent company
that is applied prospectively from 1 July 2023 (see note 1), it would not
be practicable to compare the re-presented results of the data prior to
the functional currency change with the results of the sensitivity analysis
for fiscal 24.
Diageo Annual Report 2024
197
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Impact on income
statement
gain/(loss)
Impact on consolidated
comprehensive income
gain/(loss)(1) (2)
2024
$ million
2023
re-presented
$ million
2024
$ million
2023
re-presented
$ million
0.5% decrease in interest
rates
22
19
43
43
0.5% increase in interest
rates
(22)
(19)
(42)
(41)
10% weakening of US
dollar(3)
(39)
—
(974)
—
10% strengthening of US
dollar(3)
33
—
813
—
(1)
The impact on foreign currency borrowings and derivatives in net investment hedges is
largely offset by the foreign exchange difference arising on the translation of net
investments.
(2)
The impact on the consolidated statement of comprehensive income includes the
impact on the income statement.
(3)
In the year ended 30 June 2023, the impact of a 10% strengthening or weakening in
sterling was £36 million gain and £45 million loss on the consolidated income
statement and £1,093 million gain and £1,336 million loss on the other comprehensive
income.
(e) Credit risk
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the group. Credit
risk arises on cash balances (including bank deposits and cash and
cash equivalents), derivative financial instruments and credit exposures
to customers, including outstanding loans, trade and other receivables,
financial guarantees and committed transactions.
The carrying amount of financial assets of $5,221 million (2023 –
$5,849 million) represents the group’s exposure to credit risk at the
balance sheet date as disclosed in section (i), excluding the impact of
any collateral held or other credit enhancements. A financial asset is in
default when the counterparty fails to pay its contractual obligations.
Financial assets are written off when there is no reasonable expectation
of recovery.
Credit risk is managed separately for financial and business related
credit exposures.
According to the enforceable master netting agreements with
counterparties, in the event of default, derivative financial instruments
with the same counterparty can be net settled. The table below shows
the Group’s financial assets and liabilities that could be subject to offset
in the balance sheet and the impact of a trigger for the enforcement of
the master netting agreement after applying any existing collaterals.
Gross
amount
$ million
Right of
asset offset
$ million
Right of
liability offset
$ million
Net amount
$ million
2024
Derivative financial assets
483
(184)
(139)
160
Derivative financial
liabilities
(486)
184
139
(163)
2023
Derivative financial assets
729
(294)
(161)
274
Derivative financial
liabilities
(556)
294
161
(101)
Financial credit risk
Diageo aims to minimise its financial credit risk through the application
of risk management policies approved and monitored by the Board.
Counterparties are predominantly limited to investment grade banks
and financial institutions, and policy restricts the exposure to any one
counterparty by setting credit limits taking into account the credit
quality of the counterparty. The group’s policy is designed to ensure
that individual counterparty limits are adhered to and that there are no
significant concentrations of credit risk. The Board also defines the types
of financial instruments which may be transacted. The credit risk arising
through the use of financial instruments for currency, interest rate and
commodity price risk management is estimated with reference to the
fair value of contracts with a positive value, rather than the notional
amount of the instruments themselves. Diageo annually reviews the
credit limits applied and regularly monitors the counterparties’ credit
quality reflecting market credit conditions.
When derivative transactions are undertaken with bank
counterparties, the group may, where appropriate, enter into certain
agreements with such bank counterparties whereby the parties agree
to post cash collateral for the benefit of the other if the net valuations of
the derivatives are above a predetermined threshold. At 30 June 2024,
the collateral held under these agreements amounted to $(14) million
(2023 – $(19) million).
Business related credit risk
Exposures from loans, trade and other receivables are managed
locally in the operating units where they arise and active risk
management is applied, focusing on country risk, credit limits, ongoing
credit evaluation and monitoring procedures. There is no significant
concentration of credit risk with respect to loans, trade and other
receivables as the group has a large number of customers that are
internationally dispersed.
(f) Liquidity risk
Liquidity risk is the risk of Diageo encountering difficulties in meeting its
obligations associated with financial liabilities that are settled by
delivering cash or other financial assets. The group uses short-term
commercial paper to finance its day-to-day operations. The group’s
policy with regard to the expected maturity profile of borrowings is to
limit the amount of such borrowings maturing within 12 months to 50%
of gross borrowings less money market demand deposits, and the level
of commercial paper to 30% of gross borrowings less money market
demand deposits. In addition, the group’s policy is to maintain
backstop facilities with relationship banks to support commercial paper
obligations.
The following tables provide an analysis of the anticipated
contractual cash flows including interest payable for the group’s
financial liabilities and derivative instruments on an undiscounted basis.
Where interest payments are calculated at a floating rate, rates of each
cash flow until maturity of the instruments are calculated based on the
forward yield curve prevailing at the respective year ends. The gross
cash flows of cross currency swaps are presented for the purposes of
this table. All other derivative contracts are presented on a net basis.
Financial assets and liabilities are presented gross in the consolidated
balance sheet although, in practice, the group uses netting
arrangements to reduce its liquidity requirements on these instruments.
FINA NCIA L STATEMENTS continued
198
Diageo Annual Report 2024
Contractual cash flows
Due within
1 year
$ million
Due between
1 and 3 years
$ million
Due between
3 and 5 years
$ million
Due after
5 years
$ million
Total
$ million
Carrying
amount at
balance
sheet date
$ million
2024
Borrowings(1)
(2,902)
(4,991)
(4,259)
(9,812)
(21,964)
(21,501)
Interest on borrowings(1)(2)
(791)
(1,043)
(789)
(1,866)
(4,489)
(291)
Lease capital repayments
(95)
(148)
(95)
(266)
(604)
(604)
Lease future interest payments
(19)
(30)
(22)
(44)
(115)
—
Trade and other financial liabilities(3)
(5,316)
(280)
(217)
(5)
(5,818)
(5,619)
Non-derivative financial liabilities
(9,123)
(6,492)
(5,382)
(11,993)
(32,990)
(28,015)
Cross currency swaps (gross)
Receivable
128
549
1,249
3,666
5,592
Payable
(126)
(549)
(1,303)
(3,341)
(5,319)
Other derivative instruments (net)
(39)
(139)
(76)
(33)
(287)
Derivative instruments(2)
(37)
(139)
(130)
292
(14)
(23)
2023 (re-presented)
Borrowings(1)
(2,152)
(4,553)
(3,754)
(10,903)
(21,362)
(20,791)
Interest on borrowings(1)(2)
(681)
(945)
(784)
(1,894)
(4,304)
(274)
Lease capital repayments
(94)
(131)
(86)
(253)
(564)
(564)
Lease future interest payments
(23)
(35)
(25)
(48)
(131)
—
Trade and other financial liabilities(3)
(5,565)
(291)
(154)
(121)
(6,131)
(6,025)
Non-derivative financial liabilities
(8,515)
(5,955)
(4,803)
(13,219)
(32,492)
(27,654)
Cross currency swaps (gross)
Receivable
55
109
109
1,690
1,963
Payable
(35)
(70)
(70)
(1,172)
(1,347)
Other derivative instruments (net)
24
(111)
(99)
(68)
(254)
Derivative instruments(2)
44
(72)
(60)
450
362
168
(1)
For the purposes of these tables, borrowings are defined as gross borrowings excluding lease liabilities and fair value of derivative instruments as disclosed in note 17.
(2)
Carrying amount of interest on borrowings, interest on derivatives and interest on other payable is included within interest payable in note 15.
(3)
Primarily consists of trade and other payables that meet the definition of financial liabilities under IAS 32.
The group had available undrawn committed bank facilities as follows:
2024
$ million
2023
re-presented
$ million
Expiring within one year
625
125
Expiring between one and two years
1,040
625
Expiring after two years
1,585
2,625
3,250
3,375
The facilities can be used for general corporate purposes and, together
with cash and cash equivalents, support the group’s commercial paper
programmes.
There are no financial covenants on the group’s material short- and
long-term borrowings. Certain of these borrowings contain cross default
provisions and negative pledges.
The committed bank facilities are subject to a single financial
covenant, being minimum interest cover ratio of two times (defined as
the ratio of operating profit before exceptional items, aggregated with
share of after tax results of associates and joint ventures, to net interest
charges). They are also subject to pari passu ranking and negative
pledge covenants.
Any non-compliance with covenants underlying Diageo’s financing
arrangements could, if not waived, constitute an event of default with
respect to any such arrangements, and any non-compliance with
covenants may, in particular circumstances, lead to an acceleration of
maturity on certain borrowings and the inability to access committed
facilities. Diageo was in full compliance with its financial, pari passu
ranking and negative pledge covenants in respect of its material short-
and long-term borrowings throughout each of the years presented.
(g) Fair value measurements
Fair value measurements of financial instruments are presented
through the use of a three-level fair value hierarchy that prioritises the
valuation techniques used in fair value calculations.
The group maintains policies and procedures to value instruments
using the most relevant data available. If multiple inputs that fall into
different levels of the hierarchy are used in the valuation of an
instrument, the instrument is categorised on the basis of the least
observable input.
Foreign currency forwards and swaps, cross currency swaps and
interest rate swaps are valued using discounted cash flow techniques.
These techniques incorporate inputs at levels 1 and 2, such as foreign
exchange rates and interest rates. These market inputs are used in the
discounted cash flow calculation incorporating the instrument’s term,
notional amount and discount rate, and taking credit risk into account.
As significant inputs to the valuation are observable in active markets,
these instruments are categorised as level 2 in the hierarchy.
Other financial liabilities include a put option, which does not have
an expiry date, held by Industrias Licoreras de Guatemala (ILG) to sell
the remaining 50% equity stake in Rum Creation & Products Inc., the
owner of the Zacapa rum brand, to Diageo. The liability is fair valued
using the discounted cash flow method and as at 30 June 2024, an
amount of $198 million (30 June 2023 – $274 million) is recognised as a
liability with changes in the fair value of the put option included in
retained earnings. As the valuation of this option uses assumptions not
Diageo Annual Report 2024
199
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
observable in the market, it is categorised as level 3 in the hierarchy. As
at 30 June 2024, because it is unknown when or if ILG will exercise the
option, the liability is measured as if the exercise date is on the last day
of the next financial year considering forecast future performance. The
option is not sensitive to reasonably possible changes in assumptions; if
the option were to be exercised as at 30 June 2026, the fair value of
the liability would not change.
Included in other financial liabilities, the contingent consideration on
acquisition of businesses represents the present value of payments up
to $273 million, which are expected to be paid over the next six years.
Contingent considerations linked to certain volume targets at 30 June
2024 were $153 million (2023 – $279 million), mainly in respect of the
acquisition of Aviation American Gin and 21Seeds. Contingent
considerations linked to certain financial performance targets at 30
June 2024 were $92 million (2023 – $112 million), mainly in respect of
the acquisition of Don Papa Rum. Contingent considerations are fair
valued based on a discounted cash flow method using assumptions
not observable in the market. Contingent considerations are sensitive to
possible changes in assumptions; a 10% increase or 20% decrease in
volume would increase or decrease the fair value of contingent
considerations linked to certain volume targets by approximately
$25 million and $70 million, respectively, and a 10% increase or
decrease in cash flows would increase or decrease the fair value of
contingent considerations linked to certain financial performance
targets by approximately $30 million.
There were no significant changes in the measurement and
valuation techniques, or significant transfers between the levels of the
financial assets and liabilities in the year ended 30 June 2024.
The group’s financial assets and liabilities measured at fair value are
categorised as follows:
2024
$ million
2023
re-presented
$ million
Derivative assets
497
748
Derivative liabilities
(486)
(556)
Valuation techniques based on observable market input (Level 2)
11
192
Financial assets - other
333
249
Financial liabilities - other
(443)
(665)
Valuation techniques based on unobservable market input (Level 3)
(110)
(416)
In the year ended 30 June 2024 and 30 June 2023, the increase in financial assets - other of $84 million (2023 – the increase in financial asset -
other of $24 million) is principally in respect of acquisitions. The balance of financial assets - other is primarily made up of individually immaterial
convertible loans and share options in associates.
The movements in level 3 liability instruments, measured on a recurring basis, are as follows:
Zacapa
financial
liability
Contingent
consideration
recognised on
acquisition of
businesses
Zacapa
financial
liability
Contingent
consideration
recognised on
acquisition of
businesses
2024
$ million
2024
$ million
2023
re-presented
$ million
2023
re-presented
$ million
At the beginning of the year
(274)
(391)
(261)
(449)
Net gains/(losses) included in the income statement
—
145
(10)
145
Net losses included in exchange in other comprehensive income
—
—
—
(4)
Net gains/(losses) included in retained earnings
73
—
(19)
—
Acquisitions
—
—
—
(92)
Settlement of liabilities
3
1
16
9
At the end of the year
(198)
(245)
(274)
(391)
FINA NCIA L STATEMENTS continued
200
Diageo Annual Report 2024
(h) Results of hedge relationships
The group targets a one-to-one hedge ratio. The strength of the economic relationship between the hedged items and the hedging instruments is
analysed on an ongoing basis. Ineffectiveness can arise from change in hedged balance sheet positions, group net investment positions, or
subsequent change in the forecast transactions as a result of differences in timing, cash flows or value except when the critical terms of the hedging
instrument and hedged item are closely aligned. Where applicable, the change in the credit risk of the hedging instruments or the hedged items is
not expected to be the primary factor in the economic relationship.
Further to the foreign currency borrowings in net investment hedge relationships disclosed in note 16 (a), the notional amounts, contractual
maturities and rates of the hedging instruments designated in hedging relationships by the main risk categories are as follows:
Notional
amounts
$ million
Maturity
Range of hedged rates(1)
2024
Net investment hedges
Derivatives in net investment hedges of foreign operations
3,198
September 2024 - April 2043
sterling 0.53 - 0.78
euro 0.91 - 0.93
Chinese yuan 6.93 - 7.29
Foreign currency borrowings in net investment hedges
8,109
September 2024 - June 2038
sterling 0.76 - 0.82
euro 0.89 - 0.94
Cash flow hedges
Derivatives in cash flow hedge (foreign currency debt)
2,747
September 2028 - June 2034
euro 0.89 - 0.90
Derivatives in cash flow hedge (foreign currency risk)
1,855
September 2024 -
December 2025
sterling 0.78 - 0.94
euro 0.87 - 0.93
Mexican peso 17.73 - 20.57
Derivatives in cash flow hedge (commodity price risk)
207
July 2024 - September 2025
Feed Wheat: 177.50 - 206.00 USD/Bu
Natural Gas: 0.86 - 1.40 USD/therm
Fair value hedges
Derivatives in fair value hedge (interest rate risk)
4,044
April 2025 - April 2030
EURIBOR 0.63 - 1.88%
SOFR 1.38 - 3.09%
(1)
In case of derivatives in cash flow hedges (commodity price risk and foreign currency risk), the range of the most significant contract’s hedged rates are presented.
The below re-presented disclosures of the fiscal 23 sterling reporting currency group and the quoted rates are applicable to the risk exposures
observed by the group at the date of 30 June 2023. Accordingly, nominal amounts have been re-presented in US dollar, without adjustments to
rates achieved on hedges of exposures observed at the time. The change in functional currency at 1 July 2023 has fundamentally changed the
group foreign currency exposures. This exposure set change resulted in a realignment of the group's financial risk management hedge portfolio,
but no change in overall risk management strategy.
Notional
amounts
re-presented
$ million
Maturity
Range of hedged rates(1)
2023 (re-presented)
Net investment hedges
Derivatives in net investment hedges of foreign
operations
803
July 2023
US dollar 1.27
Foreign currency borrowings in net investment hedges
12,584
September 2023 - March 2032
euro 1.07 - 1.37
Cash flow hedges
Derivatives in cash flow hedge (foreign currency debt)
1,100
September 2036 - April 2043
US dollar 1.60 - 1.88
Derivatives in cash flow hedge (foreign currency risk)
2,185
September 2023 -
December 2024
US dollar 1.05 - 1.33,
Mexican peso 14.76 - 18.38
Derivatives in cash flow hedge (commodity price risk)
273
July 2023 - September 2024
Feed Wheat: 183.75 - 240.00 USD/Bu
LME Aluminium: 2,248 - 3,399 USD/Mt
Fair value hedges
Derivatives in fair value hedge (interest rate risk)
5,038
September 2023 - April 2030
EURIBOR(0.01) - 1.88%
SOFR 2.38 - 2.39%
USDLIBOR 1.38 - 3.09%
(1)
In case of derivatives in cash flow hedges (commodity price risk and foreign currency risk), the range of the most significant contract’s hedged rates are presented.
For hedges of the cash flow risk from a change in forward exchange rates using cross currency interest rate swaps, the retranslation of the related
bond principal to closing exchange rates and recognition of interest on the related bonds will affect the income statement in each year until the
related bonds mature in 2028, 2032 and 2034. Exchange retranslation and the interest on the hedged bonds in the income statement are
expected to offset those on the cross currency swaps in each of the years.
Diageo Annual Report 2024
201
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
In respect of cash flow hedging instruments, a gain of $13 million (2023 – $297 million gain; 2022 – $163 million gain) was recognised in other
comprehensive income due to changes in fair value. A gain of $266 million was transferred out of other comprehensive income to other operating
expenses and a loss of $152 million to other finance charges, respectively, (2023 – a gain of $16 million and a loss of $65 million; 2022 – a loss of
$57 million and a gain of $319 million) to offset the foreign exchange impact on the underlying transactions. A loss of $9 million (2023 – $39 million
gain, 2022 – $61 million gain) was transferred out of other comprehensive income to operating profit in relation to commodity hedges. The notional
amount of hedged items recognised in the consolidated balance sheet in relation to hedges of cash flow risk arising from foreign currency debts
equals the notional value of the hedging instruments at 30 June 2024 and are included within borrowings. The notional amount for cash flow
hedges of foreign currency debt at 30 June 2024 was $2,747 million (2023 – $1,100 million).
In respect of derivatives in net investment hedges, a gain of $12 million was recognised in other comprehensive income due to changes in fair
value. A gain of $27 million was transferred out of other comprehensive income to other finance charges.
For cash flow hedges of forecast transactions at 30 June 2024, based on year end interest and exchange rates, a gain to the income statement
of $28 million in the year ending 30 June 2025 and a loss of $9 million in the year ending 30 June 2026 is expected to be recognised.
In respect of hedges of foreign currency borrowings that are no longer applicable at 30 June 2024, a loss of $24 million (2023 – a loss of $22
million) was reported in reserves. There was no significant ineffectiveness on net investment and cash flow hedges during the years ended 30 June
2024 and 2023.
Out of the total exchange reserve $2,488 million (2023 - $2,418 million) is attributable to net investment hedges.
The $4,044 million (2023 – $5,038 million) notional value of hedged items in fair value hedges equals to the notional value of hedging instruments
designated in these relationships at 30 June 2024 and the carrying amount of hedged items are included within borrowings in the consolidated
balance sheet.
The following table sets out information regarding the effectiveness of hedging relationships designated by the group, as well as the impacts on the
income statement and other comprehensive income:
At the beginning
of the year
$ million
Consolidated income
statement
$ million
Consolidated
statement of
comprehensive
income
$ million
Other(2)
$ million
At the end
of the year
$ million
2024
Net investment hedges(1)
Derivatives in net investment hedges of foreign operations
—
22
(66)
411
367
Foreign currency borrowings in net investment hedges
(12,584)
—
(82)
4,557
(8,109)
Cash flow hedges(1)
Derivatives in cash flow hedge (foreign currency debt)
438
(152)
94
(412)
(32)
Derivatives in cash flow hedge (foreign currency risk)
232
203
(205)
(203)
27
Derivatives in cash flow hedge (commodity price risk)
(32)
(9)
22
10
(9)
Fair value hedges(1)
Derivatives in fair value hedge (interest rate risk)
(476)
100
—
—
(376)
Fair value hedge hedged item
469
(101)
—
—
368
Instruments in fair value hedge relationship
(7)
(1)
—
—
(8)
2023 (re-presented)
Net investment hedges(1)
Derivatives in net investment hedges of foreign operations
(1)
—
1
—
—
Foreign currency borrowings in net investment hedges
(10,558)
—
499
(2,525)
(12,584)
Cash flow hedges(1)
Derivatives in cash flow hedge (foreign currency debt)
444
(65)
90
(31)
438
Derivatives in cash flow hedge (foreign currency risk)
(93)
(20)
325
20
232
Derivatives in cash flow hedge (commodity price risk)
60
39
(107)
(24)
(32)
Fair value hedges(1)
Derivatives in fair value hedge (interest rate risk)
(342)
(113)
(21)
—
(476)
Fair value hedge hedged item
335
115
19
—
469
Instruments in fair value hedge relationship
(7)
2
(2)
—
(7)
(1)
There was no significant ineffectiveness on net investment, cash flow hedges and fair value hedges during the years ended 30 June 2024 and 2023, accordingly the fair value
movement of the hedged items was materially similar and offsetting to the movement of the hedges.
(2)
Other movements include cash flows on result of matured derivatives, notional of bonds designated in or de-designated from net investment hedge and reclassification of hedging
instruments between hedge portfolios.
FINA NCIA L STATEMENTS continued
202
Diageo Annual Report 2024
(i) Reconciliation of financial instruments
The table below sets out the group’s accounting classification of each class of financial assets and liabilities:
Fair value
through income
statement
$ million
Assets and
liabilities at
amortised cost
$ million
Not categorised
as a financial
instrument
$ million
Total
$ million
Current
$ million
Non-current
$ million
2024
Other investments and loans(1)
333
59
—
392
—
392
Trade and other receivables
—
2,971
554
3,525
3,487
38
Cash and cash equivalents
—
1,130
—
1,130
1,130
—
Derivatives in cash flow hedge (foreign currency risk)
62
—
—
62
58
4
Derivatives in cash flow hedge (commodity price risk)
5
—
—
5
5
—
Derivatives in net investment hedge
386
—
—
386
17
369
Other instruments
275
—
—
275
275
—
Total other financial assets
728
—
—
728
355
373
Total financial assets
1,061
4,160
554
5,775
4,972
803
Borrowings(2)
—
(21,501)
—
(21,501)
(2,885)
(18,616)
Trade and other payables
(245)
(5,373)
(1,040)
(6,658)
(6,354)
(304)
Derivatives in fair value hedge (interest rate risk)
(376)
—
—
(376)
(16)
(360)
Derivatives in cash flow hedge (foreign currency debt)
(32)
—
—
(32)
—
(32)
Derivatives in cash flow hedge (foreign currency risk)
(35)
—
—
(35)
(14)
(21)
Derivatives in cash flow hedge (commodity price risk)
(14)
—
—
(14)
(14)
—
Derivatives in net investment hedge
(19)
—
—
(19)
(1)
(18)
Other instruments
(208)
—
—
(208)
(208)
—
Leases
—
(604)
—
(604)
(95)
(509)
Total other financial liabilities
(684)
(604)
—
(1,288)
(348)
(940)
Total financial liabilities
(929)
(27,478)
(1,040)
(29,447)
(9,587)
(19,860)
Total net financial assets/(liabilities)
132
(23,318)
(486)
(23,672)
(4,615)
(19,057)
2023 (re-presented)
Other investments and loans(1)
249
38
2
289
—
289
Trade and other receivables
—
2,815
651
3,466
3,427
39
Cash and cash equivalents
—
1,813
—
1,813
1,813
—
Derivatives in cash flow hedge (foreign currency debt)
438
—
—
438
—
438
Derivatives in cash flow hedge (foreign currency risk)
243
—
—
243
186
57
Derivatives in cash flow hedge (commodity price risk)
2
—
—
2
2
—
Other instruments
249
—
—
249
249
—
Leases
—
2
—
2
—
2
Total other financial assets
932
2
—
934
437
497
Total financial assets
1,181
4,668
653
6,502
5,677
825
Borrowings(2)
—
(20,791)
—
(20,791)
(2,142)
(18,649)
Trade and other payables
(391)
(5,634)
(1,116)
(7,141)
(6,678)
(463)
Derivatives in fair value hedge (interest rate risk)
(476)
—
—
(476)
(8)
(468)
Derivatives in cash flow hedge (foreign currency risk)
(11)
—
—
(11)
(9)
(2)
Derivatives in cash flow hedge (commodity price risk)
(34)
—
—
(34)
(33)
(1)
Other instruments
(309)
—
—
(309)
(309)
—
Leases
—
(564)
—
(564)
(94)
(470)
Total other financial liabilities
(830)
(564)
—
(1,394)
(453)
(941)
Total financial liabilities
(1,221)
(26,989)
(1,116)
(29,326)
(9,273)
(20,053)
Total net financial liabilities
(40)
(22,321)
(463)
(22,824)
(3,596)
(19,228)
(1)
Other investments and loans include those in respect of associates.
(2)
Borrowings are defined as gross borrowings excluding lease liabilities and the fair value of derivative instruments.
Diageo Annual Report 2024
203
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
At 30 June 2024 and 30 June 2023, the carrying values of cash and
cash equivalents, other financial assets and liabilities approximate fair
values. At 30 June 2024, the fair value of borrowings, based on
unadjusted quoted market data, was $20,663 million (2023 – $19,707
million).
(j) Capital management
The group’s management is committed to enhancing shareholder
value in the long-term, both by investing in the business and brands so
as to deliver continued improvement in the return from those
investments and by managing the capital structure. Diageo manages
its capital structure to achieve capital efficiency, provide flexibility to
invest through the economic cycle and give efficient access to debt
markets at attractive cost levels. This is achieved by targeting an
adjusted net borrowings (net borrowings aggregated with post-
employment benefit liabilities) to adjusted EBITDA leverage of 2.5 - 3.0
times, this range for Diageo being currently broadly consistent with an
A-band credit rating. Diageo would consider operating outside of this
range in order to effect strategic initiatives within its stated goals, which
could have an impact on its rating. If Diageo’s leverage was to be
negatively impacted by the financing of an acquisition, it would seek
over time to return to the range of 2.5 – 3.0 times. The group regularly
assesses its debt and equity capital levels against its stated policy for
capital structure. As at 30 June 2024, the adjusted net borrowings of
$21,446 million (2023 - $20,053 million) to adjusted EBITDA ratio was
3.0 (2023 - 2.7) times. For this calculation, net borrowings are adjusted
by post-employment benefit liabilities before tax of $429 million (2023 -
$471 million) whilst adjusted EBITDA of $7,037 million (2023 -
$7,353 million) comprises operating profit excluding exceptional
operating items and depreciation, amortisation and impairment and
includes share of after tax results of associates and joint ventures.
The group aims to increase the dividend each year. The decision in
respect of the dividend is made with reference to the dividend cover, as
well as current performance trends, including sales and profit after tax
together with cash generation. Diageo targets dividend cover (the ratio
of basic earnings per share before exceptional items to dividend per
share) within the range of 1.8 - 2.2 times. For the year ended 30 June
2024, dividend cover was 1.7 times. The recommended final dividend
for the year ended 30 June 2024, to be put to the shareholders for
approval at the Annual General Meeting is 62.98 cents, an increase of
5% on the prior year final dividend. This would bring the
recommended full year dividend to 103.48 cents per share, an increase
of 5% on the prior year.
17. Net borrowings
Accounting policies
Borrowings are initially recognised at fair value net of transaction
costs and are subsequently reported at amortised cost. Certain
bonds are designated in fair value hedge relationship. In these
cases, the amortised cost is adjusted for the fair value of the risk
being hedged, with changes in value recognised in the income
statement. The fair value adjustment is calculated using a
discounted cash flow technique based on unadjusted market
data.
Bank overdrafts form an integral part of the group’s cash
management and are included as a component of net cash and
cash equivalents in the consolidated statement of cash flows.
Cash and cash equivalents comprise cash in hand and deposits
which are readily convertible to known amounts of cash and
which are subject to insignificant risk of changes in value and
have an original maturity of three months or less, including
money market deposits, commercial paper and investments.
Net borrowings are defined as gross borrowings (short-term
borrowings and long-term borrowings plus lease liabilities plus
interest rate hedging instruments, cross currency interest rate
swaps and foreign currency forwards and swaps used to
manage borrowings) less cash and cash equivalents.
Bank overdrafts
21
45
Commercial paper
479
250
Bank and other loans
76
153
Credit support obligations
14
19
€600 million 0.125% bonds due 2023
—
646
$500 million 3.5% bonds due 2023(2)
—
500
€500 million 0.5% bonds due 2024
—
537
$600 million 2.125% bonds due 2024(2)
600
—
€500 million 1.75% bonds due 2024
535
—
€600 million 1% bonds due 2025
641
—
€500 million 3.5% bonds due 2025
534
—
Fair value adjustment to borrowings
(15)
(8)
Borrowings due within one year
2,885
2,142
$600 million 2.125% bonds due 2024(2)
—
600
€500 million 1.75% bonds due 2024
—
538
€600 million 1% bonds due 2025
—
644
€500 million 3.5% bonds due 2025
—
537
$500 million 5.2% bonds due 2025(2)
499
499
$750 million 1.375% bonds due 2025(2)
749
748
€850 million 2.375% bonds due 2026
908
913
€500 million floating bonds due 2026
535
—
£500 million 1.75% bonds due 2026
630
627
$800 million 5.375% bonds due 2026(2)
797
—
$750 million 5.3% bonds due 2027(2)
748
748
€750 million 1.875% bonds due 2027
800
805
€500 million 1.5% bonds due 2027
534
537
€700 million 0.125% bonds due 2028
746
750
$500 million 3.875% bonds due 2028(2)
498
498
£300 million 2.375% bonds due 2028
377
375
$1,000 million 2.375% bonds due 2029(2)
993
992
£300 million 2.875% bonds due 2029
377
376
€750 million 1.5% bonds due 2029
801
806
$1,000 million 2% bonds due 2030(2)
995
994
€1,000 million 2.5% bonds due 2032
1,066
1,072
$750 million 2.125% bonds due 2032(2)
744
743
£400 million 1.25% bonds due 2033
500
499
$750 million 5.5% bonds due 2033(2)
744
744
$900 million 5.625% bonds due 2033(2)
894
—
€900 million 1.875% bonds due 2034
957
962
$400 million 7.45% bonds due 2035(1)
400
400
$600 million 5.875% bonds due 2036(2)
594
594
£600 million 2.75% bonds due 2038
752
750
$500 million 4.25% bonds due 2042(1)
495
495
$500 million 3.875% bonds due 2043(2)
492
492
Bank and other loans
344
372
Fair value adjustment to borrowings
(353)
(461)
Borrowings due after one year
18,616 18,649
2024
$ million
2023
re-presented
$ million
FINA NCIA L STATEMENTS continued
204
Diageo Annual Report 2024
Total borrowings before leases and derivative
financial instruments
21,501 20,791
Fair value of cross currency interest rate swaps
(323)
(438)
Fair value of foreign currency swaps and
forwards
(11)
2
Fair value of interest rate hedging instruments
376
476
Lease liabilities
604
564
Gross borrowings
22,147 21,395
Less: Cash and cash equivalents
(1,130)
(1,813)
Net borrowings
21,017 19,582
2024
$ million
2023
re-presented
$ million
(1)
SEC-registered debt issued on an unsecured basis by Diageo Investment Corporation,
a 100% owned finance subsidiary of Diageo plc and fully and unconditionally
guaranteed by Diageo plc. No other subsidiary of Diageo plc guarantees the security.
(2)
SEC-registered debt issued on an unsecured basis by Diageo Capital plc, a 100%
owned finance subsidiary of Diageo plc and fully and unconditionally guaranteed by
Diageo plc. No other subsidiary of Diageo plc guarantees the security.
(i) The interest rates shown are those contracted on the underlying borrowings before
taking into account any interest rate hedges (see note 16).
(ii) Bonds are stated net of unamortised finance costs of $95 million (2023 – $102 million).
(iii) All bonds, medium-term notes and commercial paper issued on an unsecured basis by
the group’s 100% owned subsidiaries are fully and unconditionally guaranteed on an
unsecured basis by Diageo plc and no other subsidiary of Diageo plc guarantees such
securities.
Gross borrowings before leases and derivative financial instruments are
expected to mature as follows:
2024
$ million
2023
re-presented
$ million
Within one year
2,885
2,142
Between one and three years
4,873
4,437
Between three and five years
4,222
3,620
Beyond five years
9,521 10,592
21,501 20,791
During the year, the following bonds were issued and repaid:
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Issued
€ denominated
535
548
1,800
£ denominated
—
—
1,171
$ denominated
1,690
1,989
—
Repaid
€ denominated
(1,167)
—
(1,060)
$ denominated
(500)
(1,650)
(1,000)
558
887
911
(a) Reconciliation of movement in net borrowings
2024
$ million
2023
re-presented
$ million
At beginning of the year
19,582
17,107
Net decrease in cash and cash equivalents
before exchange
596
831
Net increase in bonds and other borrowings(1)
453
958
Increase in net borrowings from cash flows
1,049
1,789
Exchange differences on net borrowings
199
646
Other non-cash items(2)
187
40
Net borrowings at end of the year
21,017 19,582
(1)
In the year ended 30 June 2024, net increase in bonds and other borrowings excludes
$1 million cash outflow in respect of derivatives designated in forward point hedges
(2023 – $2 million).
(2) In the year ended 30 June 2024, other non-cash items are principally in respect of fair
value gains of cross currency interest rate swaps and interest rate swaps of $111 million,
offsetting an increase in lease liabilities of $152 million, and fair value losses on
borrowings of $116 million, and $30 million reclassification of cash to assets held for
sale. In the year ended 30 June 2023, other non-cash items are principally in respect of
fair value gains of cross currency interest rate swaps and interest rate swaps of
$42 million, and an increase in lease liabilities of $99 million, partially offset by the
$101 million fair value loss on borrowings.
(b) Analysis of gross borrowings by currency
2024
2023
Cash and
cash
equivalents
$ million
Gross
borrowings(1)
$ million
Cash and
cash
equivalents
re-presented
$ million
Gross
borrowings(1)
re-presented
$ million
US dollar
130
(9,590)
682
(7,247)
Euro(2)
59
(5,820)
60 (4,870)
Sterling
29
(4,767)
59 (7,846)
Indian rupee
170
(57)
155
(39)
Mexican peso
34
(261)
31
(361)
Hungarian forint
3
(21)
4
(329)
Kenyan shilling
55
(295)
36
(318)
Chinese yuan
258
(964)
251
(79)
Nigerian naira
—
—
105
—
Other(2)
392
(372)
430
(306)
Total
1,130 (22,147)
1,813 (21,395)
(1)
Includes foreign currency forwards and swaps and leases.
(2)
Includes $11 million (euro) cash and cash equivalents in cash-pooling arrangements
(2023 – $26 million (euro)).
Diageo Annual Report 2024
205
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
18. Equity
Accounting policies
Own shares represent shares and share options of Diageo plc
that are held in treasury or by employee share trusts for the
purpose of fulfilling obligations in respect of various employee
share plans or were acquired as part of a share buyback
programme. Own shares are treated as a deduction from equity
until the shares are cancelled, reissued or disposed of and when
vest are transferred from own shares to retained earnings at their
weighted average cost.
Share-based payments include share awards and options
granted to directors and employees. The fair value of equity
settled share options and share grants is initially measured at
grant date based on Monte Carlo and Black Scholes models
and is charged to the income statement over the vesting period.
For equity settled shares, the credit is included in retained
earnings. Cancellations of share options are treated as an
acceleration of the vesting period and any outstanding charge is
recognised in operating profit immediately. Any surplus or deficit
arising on the sale of the Diageo plc shares held by the group is
included as a movement in equity.
Dividends are recognised in the financial statements in the year
in which they are approved.
(a) Allotted and fully paid share capital – ordinary shares of
28101⁄108 pence each
Number
of shares
million
Nominal
value
$ million
At 30 June 2022 re-presented
2,498
875
Retranslation impact of opening balances(1)
—
36
Shares cancelled
(38)
(13)
At 30 June 2023 (re-represented)
2,460
898
Shares cancelled
(28)
(11)
At 30 June 2024
2,432
887
(1)
Includes foreign translation differences arising on the retranslation of reserves due to
the change in the group’s presentation currency.
(b) Hedging and exchange reserve
Hedging
reserve
$ million
Exchange
reserve
$ million
Total
$ million
At 30 June 2021 (re-presented)
150 (3,368)
(3,218)
Other comprehensive loss
(118)
(521)
(639)
Retranslation impact of opening
balances(1)
—
619
619
At 30 June 2022 (re-presented)
32
(3,270)
(3,238)
Other comprehensive income/(loss)
261
(256)
5
Retranslation impact of opening
balances(1)
—
(173)
(173)
At 30 June 2023 (re-presented)
293 (3,699) (3,406)
Other comprehensive loss
(154)
(613)
(767)
At 30 June 2024
139
(4,312)
(4,173)
(1)
Includes foreign translation differences arising on the retranslation of reserves due to
the change in the group’s presentation currency.
Out of the total hedging reserve, $78 million represents the cost of
hedging arising from cross currency interest rate swaps in net
investment hedges.
(c) Own shares
Movements in own shares
Number
of shares
million
Purchase
consideration
$ million
At 30 June 2021 (re-presented)
223
2,609
Retranslation impact of opening balances(1)
—
(334)
Share trust arrangements
(2)
(31)
Shares used to satisfy options
(2)
(21)
Shares purchased - share buyback programme
61
2,985
Shares cancelled
(61) (2,985)
At 30 June 2022 (re-presented)
219
2,223
Retranslation impact of opening balances(1)
—
93
Share trust arrangements
(1)
(15)
Shares used to satisfy options
(2)
(15)
Shares purchased - share buyback programme
38
1,673
Shares cancelled
(38)
(1,673)
At 30 June 2023 (re-presented)
216
2,286
Share trust arrangements
(2)
(19)
Shares used to satisfy options
(2)
(17)
Shares purchased - share buyback programme
28
987
Shares cancelled
(28)
(987)
At 30 June 2024
212
2,250
(1) Includes foreign translation differences arising on the retranslation of reserves due to the
change in the group’s presentation currency.
Share trust arrangements
At 30 June 2024, the employee share trusts owned 3 million of ordinary
shares in Diageo plc at a cost of $66 million and market value of
$97 million (2023 – 3 million shares at a cost of $66 million, market value
$127 million; 2022 – 2 million shares at a cost of $30 million, market value
$76 million). Dividends receivable by the employee share trusts on the
shares are waived and the trustee abstains from voting.
FINA NCIA L STATEMENTS continued
206
Diageo Annual Report 2024
Purchase of own shares
Authorisation was given by shareholders on 28 September 2023 to
purchase a maximum of 224,704,974 ordinary shares at a minimum
price of 28101/108 pence and a maximum price of the higher of (a) 105%
of the average market value of the company's ordinary shares for the
five business days prior to the day the purchase is made and (b) the
higher of the price of the last independent trade and the highest current
independent bid on the trading venue where the purchase is carried
out. The programme expires at the conclusion of the next Annual
General Meeting or on 27 December 2024, if earlier.
Diageo completed a total of $1.0 billion return of capital during the
year ended 30 June 2024. This programme followed the successful
completion of Diageo's previous return of capital programme that
ended on 2 June 2023, in which $0.6 billion of capital (announced as
up to £0.5 billion on 26 January 2023) was returned to shareholders.
During the year ended 30 June 2024, the group purchased
28 million ordinary shares (2023 – 38 million; 2022 – 61 million),
representing approximately 1.1% of the issued ordinary share capital
(2023 – 1.5%; 2022 – 2.4%) at an average price of 2918 pence (3644
cents) per share, and an aggregate cost of $987 million, including
transaction costs (2023 – 3616 pence (4382 cents) per share, and an
aggregate cost of $1,673 million, including $16 million of transaction
costs; 2022 – 3709 pence (4842 cents) per share, and an aggregate
cost of $2,985 million, including $21 million of transaction costs) under
the share buyback programme. The shares purchased under the share
buyback programmes were cancelled.
The monthly breakdown of all shares purchased and the average
price paid per share (excluding expenses) for the year ended 30 June
2024 were as follows:
Period
Number
of shares
purchased under
share buyback
programme
Total number of
shares
purchased
Average
price
paid
cents(2)
Authorised
purchases
unutilised at
month end
July 2023
—
—
—
196,247,438
August 2023
—
—
—
196,247,438
1-28 September 2023
—
—
—
196,247,438
29-30 September
2023(1)
—
—
—
224,704,974
October 2023
6,218,199
6,218,199
3768
218,486,775
November 2023
4,396,943
4,396,943
3671
214,089,832
December 2023
2,521,196
2,521,196
3572
211,568,636
January 2024
3,328,361
3,328,361
3504
208,240,275
February 2024
339,788
339,788
3737 207,900,487
March 2024
5,896,084
5,896,084
3685 202,004,403
April 2024
4,475,478
4,475,478
3542
197,528,925
May 2024
267,276
267,276
3440
197,261,649
June 2024
—
—
—
197,261,649
Total
27,443,325 27,443,325
3644
197,261,649
(1) New maximum number of purchasable shares was authorised by shareholders at the
AGM held on 28 September 2023.
(2) Based on daily transaction rates.
(d) Dividends
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Amounts recognised as distributions to
equity shareholders in the year
Final dividend for the year ended 30
June 2023 59.98 cents per share
(2022 – 52.71 cents; 2021 – 59.91
cents)(1)
1,349
1,200
1,398
Interim dividend for the year ended 30
June 2024 40.50 cents per share
(2023 – 38.57 cents; 2022 – 38.38
cents)(2)
894
871
888
2,243
2,071
2,286
(1)
Re-presented at exchange rate prevailing at AGM's date (2023 - 49.17 pence per
share; 2022 - 46.82 pence; 2021 - 44.59 pence).
(2)
Re-presented at exchange date at the date of payment (2023 - 30.83 pence per share;
2022 - 29.36 pence). Interim dividend for the year ended 30 June 2024 was declared
in USD.
The proposed final dividend of $1,398 million (62.98 cents per share)
for the year ended 30 June 2024 was approved by a duly authorised
committee of the Board of Directors on 29 July 2024. As this was after
the balance sheet date and the dividend is subject to approval by
shareholders at the Annual General Meeting, this dividend has not
been included as a liability in these consolidated financial statements.
There are no corporate tax consequences arising from this treatment.
Dividends are waived on all treasury shares owned by the company
and all shares owned by the employee share trusts.
Diageo Annual Report 2024
207
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
(e) Non-controlling interests
Diageo consolidates USL, a company incorporated in India, with a 42.79% non-controlling interest, Sichuan Shuijingfang Company Limited, a
company incorporated in China, with a 36.50% non-controlling interest and has a 50% controlling interest in Ketel One Worldwide B.V. (Ketel
One), a company incorporated in the Netherlands.
Summarised financial information for USL and other subsidiaries, after fair value adjustments on acquisition, and the amounts attributable to
non-controlling interests are as follows:
2024
2023
2022
USL
$ million
Others
$ million
Total
$ million
Total
re-presented
$ million
Total
re-presented
$ million
Income statement
Sales
3,183
3,041
6,224
6,409
7,710
Net sales
1,338
2,380
3,718
3,767
4,063
Profit for the year(1)
173
604
777
80
329
Other comprehensive (loss)/income(2)
(21)
5
(16)
(172)
(227)
Total comprehensive income/(loss)
152
609
761
(92)
102
Attributable to non-controlling interests
65
212
277
(66)
46
Balance sheet
Non-current assets(3)
1,336
4,405
5,741
5,354
6,071
Current assets
1,172
1,373
2,545
2,316
2,422
Non-current liabilities
(197)
(1,577)
(1,774)
(1,656)
(1,814)
Current liabilities
(518)
(1,220)
(1,738)
(1,788)
(1,991)
Net assets
1,793
2,981
4,774
4,226
4,688
Attributable to non-controlling interests
767
1,271
2,038
1,853
2,076
Cash flow
Net cash inflow from operating activities
90
603
693
604
916
Net cash outflow from investing activities
(39)
(172)
(211)
(236)
(385)
Net cash outflow from financing activities
(32)
(424)
(456)
(170)
(428)
Net increase in cash and cash equivalents
19
7
26
198
103
Exchange differences
(2)
(31)
(33)
(111)
(23)
Dividends payable to non-controlling interests
(15)
(106)
(121)
(117)
(95)
(1)
Profit for the year includes exceptional operating expenses attributable to non-controlling interests.
(2) Other comprehensive (loss)/income is principally in respect of exchange on translating the subsidiaries to US dollar.
(3) Non-current assets include the global distribution rights for Ketel One vodka products worldwide. The carrying value of the distribution right at 30 June 2024 was $1,800 million (2023 –
$1,800 million; 2022 – $1,800 million).
(i)
On 16 January 2024, Diageo agreed with Combs Wine and Spirits LLC to purchase the 50% of the share capital of DeLeon Holdco LLC that Diageo North America, Inc did not already
own, whereby DeLeon Holdco LLC became a wholly-owned subsidiary of Diageo.
FINA NCIA L STATEMENTS continued
208
Diageo Annual Report 2024
(f) Employee share compensation
The group uses a number of share award and option plans to grant to
its directors and employees.
The annual fair value charge in respect of the equity settled plans
for the three years ended 30 June 2024 is as follows:
2024
$ million
2023
re-presented
$ million
2022
re-presented
$ million
Executive share award plans
34
49
68
Executive share option plans
7
4
5
Savings plans
2
5
6
43
58
79
Executive share awards have been granted under the Diageo 2014
Long-Term Incentive Plan (DLTIP) from September 2014 until September
2023 and are granted under the replacement plan, the Diageo 2023
Long-Term Incentive Plan from March 2024 onwards to some
employees below the Board and from September 2024 to Executive
Directors. Awards are granted as conditional awards in the form of
performance shares, performance share options, time-vesting restricted
stock units (RSUs) and/or time-vesting share options (or cash-based
equivalents in certain locations for regulatory reasons). Share options
are granted at the market value at the time of grant. Prior to the
introduction of the DLTIP, employees in associated companies were
granted awards under the Diageo plc 2011 Associated Companies
Share Incentive Plan (DACSIP). In the case of Executive Directors,
conditional awards of time-vesting RSUs or forfeitable shares may be
awarded under the 2020 Deferred Bonus Share Plan (DBSP), with
vesting not subject to any performance conditions and not subject to a
post-vesting retention period.
Share awards normally vest on the third anniversary of the grant
date. Participants do not make a payment to receive the award at
grant. Executive Directors are required to hold any vested shares
awarded under DLTIP for a further two-year post-vesting holding period.
Share options may normally be exercised between three and ten years
after the grant date. Executives in North America and Latin America
and Caribbean are granted awards over the company’s ADRs (one
ADR is equivalent to four ordinary shares).
For Executive Directors, performance shares under the DLTIP (for
awards granted in 2020 and thereafter) are subject to the achievement
of three performance measures: 1) compound annual growth in profit
before exceptional items over three years; 2) compound annual growth
in organic net sales over three years; 3) environmental, social and
governance (ESG) priorities, weighted 40%, 40% and 20% of the
maximum respectively, as set out in the Directors’ remuneration report.
Performance share options under the DLTIP are subject to the
achievement of two equally weighted performance measures: 1) a
comparison of Diageo’s three-year TSR with a peer group; 2)
cumulative free cash flow over a three-year period, measured at
constant exchange rates. Performance measures and targets are set
annually by the Remuneration Committee. The vesting range is 20%
for Executive Directors, and 25% for other participants, for achieving
minimum performance targets, up to 100% for achieving the maximum
target level. Retesting of the performance measures is not permitted.
For performance shares under the DLTIP, dividends are accrued on
awards and are released to participants to the extent that the awards
vest at the end of the performance period. Dividend equivalents are
normally paid out in the form of shares.
Savings plans are provided in the form of a savings-related share
option plan. For UK employees, awards were made under the Diageo
2010 Sharesave plan (for options granted up until 2020) and the
Diageo 2020 Sharesave plan (for options granted from 2021).
For Republic of Ireland (ROI) based employees, awards were made
under the Diageo 2009 Irish Sharesave Scheme (for options granted
up until 2019) and the Diageo 2019 Irish Sharesave Scheme (for options
granted in 2020). These are HMRC and Irish Revenue approved all-
employee savings plans.
For ROI employees, grants from 2021 were made under the Diageo
2020 Sharesave plan which is not an approved plan in the Republic of
Ireland. These plans are made available to UK and ROI employees
who are employed on the annual results announcement date.
Participants can save monthly, with deductions taken directly from net
pay, for a period of 3 or 5 years. In return, employees are granted the
option to buy Diageo shares using the savings accrued at the end of
the relevant savings period and at a 20% discounted option price,
which is set at the time of grant. Provided participants fulfil the terms set
out within the relevant UK or ROI tax approved scheme rules, any gains
from the option exercise are free from UK or ROI income tax. For the
ROI Sharesave awards granted in 2021, 2022 and 2023, as these are
not made under a Revenue tax approved plan, the gains from the
option exercise are subject to ROI income tax.
For US employees, the awards are made under the Diageo plc 2017
United States Employee Stock Purchase Plan. Employees agree to
make regular monthly savings for a period of one year and acquire
American Depositary Receipts (ADRs) at 15% discounted price (which is
set at the time of grant) using their contributions at the end of the plan
cycle. They receive the benefit of tax relief if certain conditions are
satisfied.
For the three years ended 30 June 2024, the calculation of the fair
value of each share award used the Monte Carlo and Black Scholes
pricing model and the following assumptions:
2024
2023
re-presented
2022
re-presented
Risk free interest rate
4.7%
3.1%
0.4%
Expected life of the awards
33 months 35 months 40 months
Dividend yield
2.6%
2.0%
2.1%
Weighted average share price
3118 p
3758 p
3545 p
Weighted average fair value of
awards granted in the year(1)
1757 c
2318 c
3754 c
Number of awards granted in
the year
2.1 million
1.7 million
2.1 million
Fair value of all awards granted
in the year
$36 million $40 million $79 million
(1) Based on transaction rate at grant date of the awards.
Transactions on schemes
Transactions on the executive share award plans for the three years
ended 30 June 2024 were as follows:
2024
million
2023
million
2022
million
Number of awards outstanding at
1 July
4.9
5.2
5.3
Granted
2.1
1.7
2.1
Awarded
(1.8)
(1.1)
(1.1)
Forfeited
(0.4)
(0.9)
(1.1)
Number of awards outstanding at
30 June
4.8
4.9
5.2
The exercise price of share options outstanding at 30 June 2024 was in
the range of 1709 pence - 3854 pence (2023 – 1709 pence - 3864
pence; 2022 – 1704 pence - 4024 pence).
At 30 June 2024, 3.3 million share options were exercisable at a
weighted average exercise price of 2639 pence. Weighted average
remaining contractual life of share options was six years at 30 June
2024.
Diageo Annual Report 2024
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S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Other financial statements disclosures
Introduction
This section includes additional financial information that are either required by the relevant accounting standards or management considers these
to be material information for shareholders.
19. Contingent liabilities and legal proceedings
Accounting policies
Provision is made for the anticipated settlement costs of legal or
other disputes against the group where it is considered to be
probable that a liability exists and a reliable estimate can be
made of the likely outcome. Where it is possible that a settlement
may be reached or it is not possible to make a reliable estimate
of the estimated financial effect, appropriate disclosure is made
but no provision created.
Critical accounting judgements and estimates
Judgement is necessary in assessing the likelihood that a claim
will succeed, or a liability will arise, and an estimate to quantify
the possible range of any settlement. Due to the inherent
uncertainty in this evaluation process, actual losses may be
different from the liability originally estimated. The group may be
involved in legal proceedings in respect of which it is not
possible to make a reliable estimate of any expected settlement.
In such cases, appropriate disclosure is provided but no
provision is made and no contingent liability is quantified.
(a) Guarantees and related matters
As of 30 June 2024, the group has no material unprovided guarantees
or indemnities in respect of liabilities of third parties.
(b) Acquisition of USL shares from UBHL and related
proceedings in relation to the USL transaction
On 4 July 2013, Diageo completed its acquisition, under a share
purchase agreement with United Breweries (Holdings) Limited (UBHL)
and various other sellers (the SPA), of shares representing 14.98% in
USL, including shares representing 6.98% from UBHL. The SPA was
signed on 9 November 2012 as part of the transaction announced by
Diageo in relation to USL on that day (the Original USL Transaction).
Following a series of further transactions, as of 30 June 2024, Diageo
has a 55.88% investment in USL (excluding 2.38% owned by the USL
Benefit Trust).
Prior to the acquisition from UBHL on 4 July 2013, the High Court of
Karnataka (High Court) had granted leave to UBHL under the Indian
Companies Act 1956 (the Leave Order) to enable the sale by UBHL to
Diageo to take place (the UBHL Share Sale) notwithstanding the
continued existence of certain winding-up petitions that were pending
against UBHL on the date of the SPA. At the time of the completion of
the UBHL Share Sale, the Leave Order remained subject to review on
appeal. However, as stated by Diageo at the time of closing, it was
considered unlikely that any appeal process in respect of the Leave
Order would definitively conclude on a timely basis and, accordingly,
Diageo waived the conditionality under the SPA relating to the absence
of insolvency proceedings in relation to UBHL and acquired the 6.98%
stake in USL from UBHL at that time.
Following appeal and counter-appeal in respect of the Leave Order,
this matter is now before the Supreme Court of India which has issued
an order that the status quo be maintained with regard to the UBHL
Share Sale pending a hearing on the matter before it. Following a
number of adjournments, the next date for a substantive hearing is yet
to be fixed.
In separate proceedings, the High Court passed a winding-up order
against UBHL on 7 February 2017, and appeals filed by UBHL against
that order have since been dismissed, initially by a division bench of the
High Court and subsequently by the Supreme Court of India.
Diageo continues to believe that the acquisition price of INR 1,440
per share paid to UBHL for the USL shares is fair and reasonable as
regards UBHL, UBHL’s shareholders and UBHL’s secured and
unsecured creditors. However, adverse results for Diageo in the
proceedings referred to above could, absent leave or relief in other
proceedings, ultimately result in Diageo losing title to the 6.98% stake
in USL acquired from UBHL. Diageo believes, including by reason of its
rights under USL’s articles of association to nominate USL’s CEO and
CFO and the right to appoint, through USL, a majority of the directors
on the boards of USL’s subsidiaries as well as its ability as promoter to
nominate for appointment up to two-thirds of USL’s directors for so long
as the chairperson of USL is an independent director, that it would
remain in control of USL and would continue to be able to consolidate
USL as a subsidiary for accounting purposes regardless of the outcome
of this litigation.
There can be no certainty as to the outcome of the existing or any
further related legal proceedings or the time frame within which they
would be concluded.
(c) Continuing matters relating to Dr Vijay Mallya and
affiliates
On 25 February 2016, Diageo and USL each announced that they had
entered into arrangements with Dr Mallya under which he had agreed
to resign from his position as a director and as chair of USL and from
his positions in USL’s subsidiaries.
Diageo’s agreement with Dr Mallya (the February 2016 Agreement)
provided for a payment of $75 million to Dr Mallya over a five-year
period of which $40 million was paid on the signing of the February
2016 Agreement with the balance being payable in equal instalments
of $7 million a year over five years (2017-2021). All payments were
subject to and conditional on Dr Mallya’s compliance with the
agreement. The February 2016 Agreement also provided for the release
of Dr Mallya’s personal obligations to indemnify Diageo Holdings
Netherlands B.V. (DHN) in respect of its earlier liability ($141 million)
under a backstop guarantee of certain borrowings of Watson Limited
(Watson) (a company affiliated with Dr Mallya).
On account of various breaches and other provisions of agreements
between Dr Mallya and persons connected with him and Diageo and/
or USL, Diageo did not make the five instalment payments due during
the five-year period between 2017 and 2021. In addition, Diageo has
also demanded that Dr Mallya repay the $40 million paid by Diageo in
February 2016 and sought compensation for various losses incurred by
the relevant members of the Diageo group.
On 16 November 2017, Diageo and other relevant members of the
Diageo group commenced claims in the High Court of Justice in
England and Wales (the English High Court) against Dr Mallya in
relation to these matters. At the same time DHN also commenced
claims in the English High Court against Dr Mallya, his son Sidhartha
Mallya, Watson and Continental Administration Services Limited
(CASL) (a company affiliated with Dr Mallya and understood to hold
assets on trust for him and certain persons affiliated with him) for in
excess of $142 million (plus interest) in relation to Watson’s liability to
DHN in respect of its borrowings referred to above and the breach of
associated security documents. Dr Mallya, Sidhartha Mallya and the
relevant affiliated companies filed a defence to these claims, and Dr
Mallya also filed a counterclaim for payment of the two instalment
payments that had by that time been withheld as described above.
Diageo continues to prosecute its claims and to defend the
counterclaim. As part of these proceedings, Diageo and the other
relevant members of its group filed an application for strike out and/or
summary judgement in respect of certain aspects of the defence filed
by Dr Mallya and the other defendants, including their defence in
FINA NCIA L STATEMENTS continued
210
Diageo Annual Report 2024
relation to Watson and CASL’s liability to repay DHN. The application
was successful resulting in Watson being ordered to pay approximately
$135 million plus various amounts in respect of interest to DHN, with
CASL being held liable as co-surety for 50% of any such amount
unpaid by Watson. These amounts were, contrary to the relevant
orders, not paid by the relevant deadlines and Watson and CASL’s
remaining defences in the proceedings were struck out. Diageo and
DHN have accordingly sought asset disclosure and are considering
further enforcement steps against Watson and CASL, both in the United
Kingdom and in other jurisdictions where they are present or hold
assets.
A trial of the remaining elements of these claims was due to
commence on 21 November 2022. However, on 26 July 2021 Dr Mallya
was declared bankrupt by the English High Court pursuant to a
bankruptcy petition presented by a consortium of Indian banks. Diageo
and the relevant members of its group have informed the Trustee in
Bankruptcy of their position as creditors in the bankruptcy and have
engaged with the Trustee regarding their claims and the status of the
current proceedings. An appeal by Dr Mallya against his bankruptcy
(and an appeal by the bank consortium against orders made in the
course of the bankruptcy proceedings) was scheduled to be heard in
April 2024, but the court has vacated the hearing date. In light of the
uncertainty posed by the ongoing bankruptcy appeals, the trial of
Diageo’s claim, which was scheduled to take place in March 2025, is
expected to be deferred further based on the anticipated relisting of the
bankruptcy appeals.
At this stage, it is not possible to assess the extent to which the
various ongoing proceedings related to the bankruptcy will affect the
remaining elements of the claims by Diageo and the relevant members
of its group.
Upon completion of an initial inquiry in April 2015 into past improper
transactions which identified references to certain additional parties
and matters, USL carried out an additional inquiry into these
transactions (Additional Inquiry) which was completed in July 2016. The
Additional Inquiry, prima facie, identified transactions indicating actual
and potential diversion of funds from USL and its Indian and overseas
subsidiaries to, in most cases, entities that appeared to be affiliated or
associated with Dr Mallya. All amounts identified in the Additional
Inquiry have been provided for or expensed in the financial statements
of USL or its subsidiaries in the respective prior periods. USL has filed
recovery suits against relevant parties identified pursuant to the
Additional Inquiry.
Further, at this stage, it is not possible for the management of USL to
estimate the financial impact on USL, if any, arising out of potential
non-compliance with applicable laws in relation to such fund
diversions.
(d) Other matters in relation to USL
In respect of the Watson backstop guarantee arrangements, the
Securities and Exchange Board of India (SEBI) issued a notice to
Diageo on 16 June 2016 that if there is any net liability incurred by
Diageo (after any recovery under relevant security or other
arrangements, which matters remain pending) on account of the
Watson backstop guarantee, such liability, if any, would be considered
to be part of the price paid for the acquisition of USL shares under the
SPA which formed part of the Original USL Transaction and that, in that
case, additional equivalent payments would be required to be made to
those shareholders (representing 0.04% of the shares in USL) who
tendered in the open offer made as part of the Original USL
Transaction. Diageo believes that the Watson backstop guarantee
arrangements were not part of the price paid or agreed to be paid for
any USL shares under the Original USL Transaction and that therefore
SEBI's decision was not consistent with applicable law, and Diageo
appealed against it before the Securities Appellate Tribunal, Mumbai
(SAT). On 1 November 2017, SAT issued an order in respect of Diageo’s
appeal in which, amongst other things, it observed that the relevant
officer at SEBI had neither considered Diageo’s earlier reply nor
provided Diageo with an opportunity to be heard, and accordingly
directed SEBI to pass a fresh order after giving Diageo an opportunity
to be heard. Following SAT’s order, Diageo made its further
submissions in the matter, including at a personal hearing before a
Deputy General Manager of SEBI. On 26 June 2019, SEBI issued an
order reiterating the directions contained in its previous notice dated 16
June 2016. As with the previous SEBI notice, Diageo believes that SEBI's
latest order is not consistent with applicable law. Diageo appealed
against this order before SAT and, after a hearing in March 2023, SAT
allowed Diageo’s appeal on 26 July 2023. Accordingly, SEBI’s order
dated 26 June 2019 stands quashed at present. Under applicable law,
SEBI has filed an appeal against SAT’s order before the Supreme Court
of India, which is scheduled to be heard in October 2024. However,
there can be no certainty as to its outcome or the timeframe within
which any such appeal would be concluded.
(e) USL’s dispute with IDBI Bank Limited
Prior to the acquisition by Diageo of a controlling interest in USL, USL
had prepaid a term loan taken through IDBI Bank Limited (IDBI), an
Indian bank, which was secured on certain fixed assets and brands of
USL, as well as by a pledge of certain shares in USL held by the USL
Benefit Trust (of which USL is the sole beneficiary). The maturity date of
the loan was 31 March 2015. IDBI disputed the prepayment, following
which USL filed a writ petition in November 2013 before the High Court
of Karnataka (the High Court) challenging the bank’s actions.
Following the original maturity date of the loan, USL received
notices from IDBI seeking to recall the loan, demanding a further sum
of INR 459 million ($6 million) on account of the outstanding principal,
accrued interest and other amounts, and also threatening to enforce
the security in the event that USL did not make these further payments.
Pursuant to an application filed by USL before the High Court in the writ
proceedings, the High Court directed that, subject to USL depositing
such further amount with the bank (which amount was duly deposited
by USL), the bank should hold the amount in a suspense account and
not deal with any of the secured assets including the shares until
disposal of the original writ petition filed by USL before the High Court.
On 27 June 2019, a single judge bench of the High Court issued an
order dismissing the writ petition filed by USL, amongst other things, on
the basis that the matter involved an issue of breach of contract by USL
and was therefore not maintainable in exercise of the court’s writ
jurisdiction. USL filed an appeal against this order before a division
bench of the High Court, which on 30 July 2019 issued an interim order
directing the bank to not deal with any of the secured assets until the
next date of hearing. On 13 January 2020, the division bench of the
High Court admitted the writ appeal and extended the interim stay.
This appeal is currently pending. Based on the assessment of USL’s
management supported by external legal opinions, USL continues to
believe that it has a strong case on the merits and therefore continues
to believe that the secured assets will be released to USL and the
aforesaid amount of INR 459 million ($6 million) remains recoverable
from IDBI.
(f) Tax
The international tax environment has seen increased scrutiny and
rapid change over recent years bringing with it greater uncertainty for
multinationals. Against this backdrop, Diageo has been monitoring
developments and continues to engage transparently with the tax
authorities in the countries where it operates to ensure that the group
manages its arrangements on a sustainable basis.
The group operates in a large number of markets with complex tax
and legislative regimes that are open to subjective interpretation. In the
context of these operations, it is possible that tax exposures which have
not yet materialised (including those which could arise as part of tax
assessments) may result in losses to the group. Where the potential tax
exposures are known to us and may lead to a possible material
outflow, the group assesses the disclosure of such matters as contingent
liabilities, taking into account both assessed and unassessed amounts
(if any), their size and nature, relevant regulatory requirements and
potential prejudice of the future resolution or assessment thereof.
Diageo has a large number of ongoing tax cases in Brazil and India, for
which contingent liabilities are disclosed on the basis of the current known
possible exposure from tax assessment values. While not all of these cases
are individually significant, the current aggregate known possible exposure
Diageo Annual Report 2024
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G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
from tax assessment values is up to approximately $853 million for Brazil
and up to approximately $118 million for India. The group believes that the
likelihood that the tax authorities will ultimately prevail is lower than
probable but higher than remote. Due to the fiscal environment in Brazil
and in India, the possibility of further tax assessments related to the same
matters cannot be ruled out and the judicial processes may take extended
periods to conclude. Based on its current assessment, Diageo believes that
no provision is required in respect of these issues.
Payments were made under protest in India in respect of the periods
1 April 2006 to 31 March 2019 in relation to tax assessments where the
risk is considered to be remote or possible. These payments have to be
made in order to be able to challenge the assessments and as such
have been recognised as a receivable in the group's balance sheet.
The total amount of payments under protest recognised as a receivable
as at 30 June 2024 is $159 million (corporate tax payments of
$146 million and indirect tax payments of $13 million).
(g) UK pension fund
In June 2023, the UK High Court (Virgin Media Limited v NTL Pension
Trustees II Limited) ruled that certain historical amendments for
contracted out defined benefit schemes were invalid if they were not
accompanied by the correct actuarial confirmation. Following a
hearing in late June 2024, the UK Court of Appeal issued judgment on
25 July 2024 upholding this ruling. The group and its UK pension
scheme trustee are reviewing this development and considering any
implications for the UK pension fund.
(h) Other
The group has extensive international operations and routinely makes
judgements on a range of legal, customs and tax matters which are
incidental to the group's operations. Some of these judgements are or
may become the subject of challenges and involve proceedings, the
outcome of which cannot be foreseen. In particular, the group is
currently a defendant in various customs proceedings that challenge
the declared customs value of products imported by certain Diageo
companies. Diageo continues to defend its position vigorously in these
proceedings.
Save as disclosed above, neither Diageo, nor any member of the
Diageo group, is or has been engaged in, nor (so far as Diageo is
aware) is there pending or threatened by or against it, any legal or
arbitration proceedings which may have a significant effect on the
financial position of the Diageo group.
20. Commitments
(a) Capital commitments
Commitments for expenditure on intangibles and property, plant and
equipment not provided for in these consolidated financial statements
are estimated at $783 million (2023 – $755 million; 2022 – $482
million).
(b) Other commitments
The future minimum lease rentals payable in the year ended 30 June
2024 for short-term leases and leases of low-value assets are estimated
at $23 million (2023 – $45 million; 2022 – $15 million). The total future
cash outflows for leases that had not yet commenced, and not
recognised as lease liabilities at 30 June 2024, are estimated at $3
million (2023 – $14 million; 2022 – $14 million).
21. Related party transactions
Transactions between the group and its related parties are made on
terms equivalent to those that prevail in arm’s length transactions.
(a) Subsidiaries
Transactions between the company and its subsidiaries are eliminated
on consolidation and therefore are not disclosed. Details of the
principal group companies are given in note 22.
(b) Associates and joint ventures
Sales and purchases to and from associates and joint ventures are
principally in respect of premium drinks products but also include the
provision of management services.
Transactions and balances with associates and joint ventures are set
out in the table below:
2024
2023
2022
$ million
re-presented
$ million
re-presented
$ million
Income statement items
Sales
14
13
15
Purchases
73
16
42
Balance sheet items
Group payables
2
3
2
Group receivables
2
2
2
Loans receivable
355
254
212
Cash flow items
Loans and equity contributions, net
134
112
86
Other disclosures in respect of associates and joint ventures are
included in note 6.
(c) Key management personnel
The key management of the group comprises the Executive and Non-
Executive Directors, the members of the Executive Committee and the
Company Secretary. They are listed under ‘Board of Directors and
Company Secretary’ and ‘Executive Committee’.
2024
2023
2022
$ million
re-presented
$ million
re-presented
$ million
Salaries and short-term employee
benefits
12
13
13
Annual incentive plan
4
7
17
Non-Executive Directors’ fees
2
2
2
Share-based payments(1)
7
14
25
Post-employment benefits
2
2
2
27
38
59
(1)
Time-apportioned fair value of unvested options and share awards.
Non-Executive Directors do not receive share-based payments or post-
employment benefits.
There were no transactions with these related parties during the year
ended 30 June 2024 on terms other than those that prevail in arm’s
length transactions.
(d) Pension plans
The Diageo pension plans are recharged with the cost of administration
services provided by the group to the pension plans and with
professional fees paid by the group on behalf of the pension plans. The
total amount recharged for the year was $0.1 million (2023 – $0.2
million; 2022 – $0.2 million).
(e) Directors’ remuneration
2024
2023
2022
$ million
re-presented
$ million
re-presented
$ million
Salaries and short-term employee
benefits
4
3
4
Annual incentive plan
1
2
5
Non-Executive Directors' fees
2
2
2
Share option exercises(1)
—
—
6
Shares vesting(1)
18
5
3
Post-employment benefits
—
1
—
25
13
20
(1)
Gains on options realised in the year and the benefit from share awards, calculated by
using the share price applicable on the date of exercise of the share options and
release of the awards.
FINA NCIA L STATEMENTS continued
212
Diageo Annual Report 2024
22. Principal group companies
The companies listed below include those which principally affect the profits and assets of the group. The operating companies listed below may
carry on the business described in the countries listed in conjunction with their subsidiaries and other group companies.
Country of
incorporation
Country of operation
Percentage of
equity
owned(1)
Business description
Subsidiaries
Diageo Ireland Unlimited
Company
Ireland
Worldwide
100%
Production, marketing and distribution of premium drinks
Diageo Great Britain Limited
England
Great Britain
100%
Marketing and distribution of premium drinks
Diageo Scotland Limited
Scotland
Worldwide
100%
Production, marketing and distribution of premium drinks
Diageo Brands B.V.
Netherlands
Worldwide
100%
Marketing and distribution of premium drinks
Diageo North America, Inc.
United States Worldwide
100%
Production, importing, marketing and distribution of premium drinks
United Spirits Limited(2)
India
India
55.88%
Production, importing, marketing and distribution of premium drinks
Diageo Capital plc(3)
Scotland
United Kingdom 100%
Financing company for the group
Diageo Capital B.V.(3)
Netherlands
Netherlands
100%
Financing company for the group
Diageo Finance plc(3)
England
United Kingdom 100%
Financing company for the group
Diageo Investment Corporation United States United States
100%
Financing company for the US group
Mey İçki Sanayi ve Ticaret A.Ş.
Türkiye
Türkiye
100%
Production, marketing and distribution of premium drinks
Associates
Moët Hennessy, SAS(4)
France
France
34%
Production, marketing and distribution of premium drinks
(1)
All percentages, unless otherwise stated, are in respect of holdings of ordinary share capital and are equivalent to the percentages of voting rights held by the group.
(2) Percentage ownership excludes 2.38% owned by the USL Benefit Trust.
(3) Directly owned by Diageo plc.
(4) French limited liability company.
See pages 220 to 225 for a complete list of subsidiary undertakings, associates and joint ventures.
23. Post balance sheet events
On 24 July 2024, Diageo announced its agreement with LVMH to exit from their joint operation Moët Hennessy Diageo France, and the termination
of the existing distribution agreements in place for France for all remaining Diageo brands, effective from 1 January 2025. In respect of the
termination, the parties have agreed Diageo to pay a settlement amount, that will be accounted for in the year ending 30 June 2025.
Diageo Annual Report 2024
213
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G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Company balance sheet of Diageo plc
30 June 2024
30 June 2023
30 June 2022
Notes
$ million
$ million
re-presented(1)
$ million
re-presented(1)
$ million
re-presented(1)
$ million
re-presented(1)
$ million
Non-current assets
Investments in subsidiary undertakings
3
76,103
77,571
74,488
Other financial assets
4
378
844
649
Post-employment benefit assets
6
689
745
1,464
77,170
79,160
76,601
Current assets
Amounts owed by group undertakings
4
968
1,425
3,484
Trade and other receivables
4
36
35
8
Other financial assets
4
—
3
116
Cash and cash equivalents
1
1
19
1,005
1,464
3,627
Total assets
78,175
80,624
80,228
Current liabilities
Amounts owed to group undertakings
4
(14)
(3)
(58)
Other financial liabilities
4
—
(3)
(197)
Trade and other payables
4
(65)
(74)
(45)
Provisions
7
(15)
(15)
(13)
(94)
(95)
(313)
Non-current liabilities
Amounts owed to group undertakings
4
(10,940)
(10,376)
(11,356)
Other financial liabilities
4
(294)
(771)
(649)
Provisions
7
(178)
(188)
(191)
Deferred tax liabilities
5
(106)
(116)
(294)
Post-employment benefit liabilities
6
(64)
(68)
(80)
(11,582)
(11,519)
(12,570)
Total liabilities
(11,676)
(11,614)
(12,883)
Net assets
66,499
69,010
67,345
Equity
Share capital (2024 – 2,432 million shares (2023 –
2,460 million shares) of 28 101/108 pence each)
9
887
898
875
Share premium
1,703
1,703
1,635
Merger reserve
9
11,541
11,541
11,083
Capital redemption reserve
4,082
4,071
3,896
18,213
18,213
17,489
Retained earnings:
At beginning of year
50,797
49,856
60,852
Profit for the year
615
3,178
1,611
Other changes in retained earnings
(3,126)
(2,237)
(12,607)
48,286
50,797
49,856
Total equity
66,499
69,010
67,345
(1)
See note 1. Accounting information and policies for an explanation.
The accompanying notes are an integral part of these parent company financial statements.
These financial statements have been approved by a duly appointed and authorised committee of the Board of Directors on 29 July 2024 and
were signed on its behalf by Debra Crew and Lavanya Chandrashekar, Directors.
Company registration number: 23307
FINA NCIA L STATEMENTS continued
214
Diageo Annual Report 2024
Statement of changes in equity for Diageo plc
Retained earnings/(deficit)
Share capital
Share premium
Merger reserve
Capital
redemption
reserve
Own shares
Other reserve
Total
Total equity
$ million
$ million
$ million
$ million
$ million
$ million
$ million
$ million
At 30 June 2022 (re-presented(1))
875
1,635
11,083
3,896
(2,223)
52,079
49,856
67,345
Retranslation impact of opening balances(2)
36
68
458
162
(93)
(631)
(724)
—
Profit for the year
—
—
—
—
—
3,178
3,178
3,178
Other comprehensive income
—
—
—
—
—
1,972
1,972
1,972
Total comprehensive income for the year
—
—
—
—
—
5,150
5,150
5,150
Employee share schemes
—
—
—
—
30
29
59
59
Share-based incentive plans
—
—
—
—
—
58
58
58
Tax on share-based incentive plans
—
—
—
—
—
1
1
1
Unclaimed dividend
—
—
—
—
—
1
1
1
Share buyback programme
(13)
—
—
13
—
(1,533)
(1,533)
(1,533)
Dividend declared for the year
—
—
—
—
—
(2,071)
(2,071)
(2,071)
At 30 June 2023 (re-presented(1))
898
1,703
11,541
4,071
(2,286)
53,083
50,797
69,010
Profit for the year
—
—
—
—
—
615
615
615
Other comprehensive income
—
—
—
—
—
11
11
11
Total comprehensive income for the year
—
—
—
—
—
626
626
626
Employee share schemes
—
—
—
—
36
12
48
48
Share-based incentive plans
—
—
—
—
—
43
43
43
Tax on share-based incentive plans
—
—
—
—
—
1
1
1
Unclaimed dividend
—
—
—
—
—
1
1
1
Share buyback programme
(11)
—
—
11
—
(987)
(987)
(987)
Dividend declared for the year
—
—
—
—
—
(2,243)
(2,243)
(2,243)
At 30 June 2024
887
1,703
11,541
4,082
(2,250)
50,536
48,286
66,499
(1)
See note 1. Accounting policies of the company for an explanation.
(2)
Includes amounts relating to foreign translation differences arising from the retranslation of reserves due to the change in the company’s presentation currency.
The accompanying notes are an integral part of these parent company financial statements.
Diageo Annual Report 2024
215
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Notes to the company financial statements of Diageo plc
1. Accounting policies of the company
Basis of preparation
The financial statements of Diageo plc (the company) are prepared in
accordance with Financial Reporting Standard 101 Reduced Disclosure
Framework (FRS 101).
In preparing these financial statements, the company applies the
recognition, measurement, and disclosure requirements of International
Financial Reporting Standards as adopted by the UK (IFRS), but makes
amendments where necessary in order to comply with the Companies
Act 2006 and has excluded certain information as permitted by FRS
101.
The financial statements are prepared on a going concern basis
under the historical cost convention, except for certain financial
instruments and post-employment benefits which are measured and
stated at their fair value.
By virtue of section 408 of the Companies Act 2006, the company is
exempt from presenting an income statement and disclosing employee
numbers and staff costs. The company has taken advantage of the
exemption under FRS 101 from preparing a cash flow statement and
related notes, disclosures in respect of transactions and the capital
management of wholly owned subsidiaries, the effects of new but not
yet effective IFRSs and disclosures in respect of the compensation of
key management personnel. As the consolidated financial statements
of Diageo plc include equivalent disclosures, the company has also
utilised exemptions available under FRS 101 from disclosing IFRS 2
Share-based Payment in respect of group settled share-based
payments, disclosures required by IFRS 7 Financial Instruments
Disclosures and by IFRS 13 Fair Value Measurement.
Functional and presentation currency
The functional currency of Diageo plc is determined by using
management judgement that considers the parent company as an
extension of its subsidiaries.
Starting 1 July 2023, in line with reporting requirements the
functional currency of Diageo plc has changed from sterling to US
dollar which is applied prospectively. This is because the group's share
of net sales and expenses in the United States and other countries
whose currencies correlate closely with the US dollar has been
increasing over the years, and that trend is expected to continue in line
with the group's strategic focus. Diageo plc has also decided to change
its presentation currency to US dollar with effect from 1 July 2023,
applied retrospectively, as it believes that this change will provide
better alignment of the reporting of performance with the group’s
business exposures.
Assets and liabilities at 30 June 2023 and 30 June 2022 were
translated to US dollar at the relevant year end closing rate.
Performance items and movements in assets and liabilities in the year
ended 30 June 2023 were translated into US dollar at weighted
average rates of exchange for the relevant period, except for
substantial transactions that were translated at the rate on the date of
the transaction. Exchange differences arising on the retranslation to
closing rates are taken to the other reserve within retained earnings as
other comprehensive income and expense.
The company opted to re-present its share capital, share premium
and other capital reserves at closing rate for the comparative periods
therefore exchange differences arising on revaluation to year end
closing rate at 30 June 2023 were taken to the other reserve within
retained earnings. From 1 July 2023, as Diageo plc changed its
functional currency, the share capital, share premium, capital
redemption reserve, merger reserve and retained earnings are
recorded in US dollar, hence no such revaluation arises in the year
ended 30 June 2024.
At 30 June 2023 the company’s other comprehensive income
includes income/losses in relation to post-employment benefits and the
exchange differences arising on the retranslation of the opening
balance sheet and the change in net assets during the period to the
year end closing rate. The foreign exchange rates used in the
translation of financial statements for the comparative years, expressed
in US dollar per £1, were as follows:
2023
2022
Assets and liabilities(1)
0.79
0.83
Income statement(2)
0.83
(1)
Closing rates
(2)
Weighted average rates
Investments in subsidiaries
Investments in subsidiaries are stated at historical cost less impairment
provisions for any permanent decrease in value. The carrying amounts
of the company’s investments are reviewed at each reporting date to
determine whether there is an indication of impairment. If such an
indication exists, then the asset’s recoverable amount is estimated.
Losses are recognised in the statement of comprehensive income and
reflected in an allowance against the carrying value. Where an event
results in the asset’s recoverable amount being higher than the
previously impaired carrying value, the original impairment may be
reversed through the statement of comprehensive income in
subsequent periods.
Dividends
Dividends payable and dividends receivable are recognised in the
financial statements in the year in which they are approved.
Share-based payments – employee benefits
The company’s accounting policy for share-based payments is the
same as set out in note 18 to the consolidated financial statements.
Where the company grants options over its own shares to the
employees of its subsidiaries, it generally recharges the cost to the
relevant group company. Where the amount is not recharged, the
value of the options is recognised as a capital contribution to the
subsidiary and increases the cost of investment.
Pensions and other post-employment benefits
The company’s accounting policy for post-employment benefits is the
same as set out in note 14 to the consolidated financial statements. The
company acts as sponsor of all UK post-employment plans for the
benefit of employees and former employees throughout the group.
There is no contractual agreement or stated policy for charging the net
defined benefit costs for the plan measured in accordance with FRS 101,
to other group companies whose employees participate in these group
wide plans. However, recharges to other group companies are made
on a funding basis and are credited against post-employment service
costs to the extent they are in respect of current service. The fair value
of the plans’ assets less the present value of the plans’ liabilities are
disclosed as a net asset or net liability on the company’s balance sheet
as it is deemed to be the legal sponsor of these plans. The net income/
charge reflects the change in the defined benefit obligation, resulting
from service in the current year, benefit changes, curtailments and
settlements. Past service costs are recognised in income. The net
interest cost is calculated by applying the discount rate to the net
balance of the defined benefit obligation and the fair value of the plan
assets and is included in the income statement. Any differences due to
changes in assumptions or experience are recognised in other
comprehensive income.
Provisions
The company’s accounting policy for provisions is the same as set out
in note 15 to the consolidated financial statements.
Taxation
The company’s accounting policy for taxation is the same as set out in
note 7 to the consolidated financial statements.
FINA NCIA L STATEMENTS continued
216
Diageo Annual Report 2024
Financial assets and liabilities
Financial assets and liabilities are initially recorded at fair value
including, where permitted by IFRS 9, any directly attributable
transaction costs. For those financial assets that are not subsequently
held at fair value, the company assesses whether there is evidence of
impairment at each balance sheet date. The company classifies its
financial assets and liabilities into the following categories: financial
assets and liabilities at amortised cost, financial assets and liabilities at
fair value through income statement and financial assets at fair value
through other comprehensive income. Where financial assets or
liabilities are eligible to be carried at either amortised cost or fair value,
the company does not apply the fair value option.
Amounts owed by group undertakings are initially measured at fair
value and are subsequently reported at amortised cost. Non-interest
bearing trade receivables are stated at their nominal value as they are
due on demand. Allowances for expected credit losses are made
based on the risk of non-payment, taking into account ageing, previous
experience, economic conditions and forward-looking data. Such
allowances are measured as either 12-month expected credit losses or
lifetime expected credit losses depending on changes in the credit
quality of the counterparty. Expected credit loss is immaterial for
amounts owed by group undertakings.
Amounts owed to group undertakings are initially measured at fair
value and are subsequently reported at amortised cost. Non-interest
bearing trade payables are stated at their nominal value as they are
due on demand. For a number of loans owed to other group
companies, the company has a contractual right to defer payment by
one year and one day and therefore these amounts are disclosed as
non-current liabilities.
Financial guarantee contract liabilities
Financial guarantee contract liabilities are measured initially at their fair
values. These liabilities are subsequently measured at the higher of the
amount determined under IFRS 9 and the amount initially recognised
(fair value) less where appropriate, cumulative amortisation of the
initial amount recognised.
Judgements in applying accounting policies and key sources
of estimation uncertainty
The preparation of financial statements requires the directors to make
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues
and expenses during the year. Actual results could differ from those
estimates.
The critical accounting policies, which the directors consider are of
greater complexity and/or particularly subject to the exercise of
estimates and judgements, are the same as those disclosed in note 1 to
the consolidated financial statements in respect of taxation, post-
employment benefits, contingent liabilities and legal proceedings.
A critical accounting estimate, specific to the company is the
assessment of the recoverable amount of the investments in
subsidiaries. Impairment reviews are carried out to ensure that the
value of the investments in subsidiaries are not carried at above their
recoverable amounts. The tests are dependent on management’s
estimates in respect of the forecasting of future cash flows, the discount
rates applicable to the future cash flows and expected growth rates.
Such estimates and judgements are subject to change as a result of
changing economic conditions and actual cash flows may differ from
forecasts.
Details are set out in note 9 to the consolidated financial statements.
2. Income statement
Note 4 to the consolidated financial statements provides details of the
remuneration of the company’s auditor for the group.
Information on Directors’ emoluments, share and other interests,
transactions and pension entitlements is included in the Directors’
remuneration report in this Annual Report.
3. Investments in subsidiary undertakings
Cost
$ million
At 30 June 2022 (re-presented)
87,968
Additions
4
Exchange differences
3,635
At 30 June 2023 (re-presented)
91,607
Additions
2
Return of capital
(1,470)
At 30 June 2024
90,139
Provision
At 30 June 2022 (re-presented)
(13,480)
Exchange differences
(556)
At 30 June 2023 (re-presented)
(14,036)
Increase in the year
—
At 30 June 2024
(14,036)
Carrying amount
At 30 June 2024
76,103
At 30 June 2023 (re-presented)
77,571
At 30 June 2022 (re-presented)
74,488
Investments in subsidiary undertakings are stated at historical cost of
$90,139 million (2023 – $91,607 million) less impairment provisions of
$14,036 million (2023 – $14,036 million).
During the year ended 30 June 2024, Guinness Limited, the
company’s wholly owned subsidiary undertaking, declared a
distribution to the company. The distribution was determined to be
return of capital up to the amount equal to the carrying value of the
company's investment in Guinness Limited.
Investments in subsidiary undertakings include $178 million (2023 –
$176 million) of costs in respect of share-based payments, granted to
subsidiary undertakings which were not recharged to the subsidiaries.
The additions comprise $2 million (2023 – $4 million) not recharged
and capitalised as cost of investment during the year ended 30 June
2024.
A list of group companies as at 30 June 2024 is provided in note 10.
4. Financial assets and liabilities
Other financial assets and liabilities are recorded at fair value through
the income statement and comprise the fair value of interest rate swaps
with subsidiary undertakings, where the company acts as an
intermediary between group companies, therefore it is not expected
that there will be any net impact on future cash flows.
Amounts owed by and to group undertakings, trade and other
receivables and trade and other payables are measured at amortised
cost.
Amounts owed by and to group undertakings are interest bearing
and unsecured. For a majority of the loans owed to other group
companies, the company has a contractual right to defer payment by
one year and one day and they are therefore classified as non-current
liabilities. Other amounts owed by and to group undertakings are
repayable on demand.
Diageo Annual Report 2024
217
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
5. Deferred tax assets and liabilities
Post-
employment
plans
Other
temporary
differences
Total
$ million
$ million
$ million
At 30 June 2022 (re-presented)
(346)
52
(294)
Changes in tax rates
32
—
32
Recognised in income statement
(16)
(1)
(17)
Recognised in other
comprehensive income and
equity
166
—
166
Exchange differences
(5)
2
(3)
At 30 June 2023 (re-presented)
(169)
53
(116)
Recognised in income statement
(11)
(3)
(14)
Recognised in other
comprehensive income and
equity
24
—
24
At 30 June 2024
(156)
50
(106)
Deferred tax on other temporary differences includes assets in respect
of the UK Thalidomide Trust liability of $49 million (2023 – $50 million)
and share-based payment liabilities of $2 million (2023 – $3 million).
6. Post-employment benefits
The movement in the net surplus for the two years ended 30 June 2024,
for all UK post-employment plans for which the company is the
sponsor, is as follows:
Plan assets
Plan liabilities
Net surplus
$ million
$ million
$ million
At 30 June 2022 (re-presented)
7,310
(5,926)
1,384
Income/(charge) before
taxation
269
(250)
19
Other comprehensive (loss)/
income
(1,468)
681
(787)
Contributions by group
companies
61
—
61
Benefits paid
(401)
401
—
At 30 June 2023 (re-presented)
5,771
(5,094)
677
Income/(charge) before
taxation
280
(275)
5
Other comprehensive (loss)/
income
(131)
36
(95)
Contributions by group
companies
38
—
38
Employee contributions
1
(1)
—
Benefits paid
(305)
305
—
At 30 June 2024
5,654
(5,029)
625
The net surplus for the UK post-employment plans of $625 million (2023
– $677 million) for which the company is a sponsor comprises funded
plans of $689 million (2023 – $745 million) disclosed as part of non-
current assets and unfunded liabilities of $64 million (2023 – $68
million) disclosed as part of non-current liabilities.
The disclosures have been prepared in accordance with IFRIC 14. In
particular, where the calculation for a plan results in a surplus, the
recognised asset is limited to the present value of any available future
refunds from the plan or reductions in future contributions to the plan,
and any additional liabilities are recognised as required.
Additional information on the UK post-employment plans and the
principal risks and assumptions applicable is disclosed in note 14 to the
consolidated financial statements.
7. Provisions
Thalidomide
$ million
At 30 June 2023 (re-presented)
203
Provisions utilised during the year
(15)
Unwinding of discounts
5
At 30 June 2024
193
The company’s commitment to the UK Thalidomide Trust is discounted
and will be utilised over the period of the commitment up to 2037.
At 30 June 2024, $15 million (2023 – $15 million) of provision is
current and $178 million (2023 – $188 million) is non-current.
8. Guarantees and letters of comfort
The company has guaranteed certain external borrowings of
subsidiaries which at 30 June 2024 amounted to $21,550 million (2023
– $20,800 million).
The company has also provided irrevocable guarantees relating to
the liabilities of certain of its Dutch subsidiaries. The company has
assessed that the likelihood of these guarantees being called is remote.
The Directors do not expect the company to be liable for any legal
obligation in respect of these guarantee agreements, and they have
been recognised at $nil value.
The company issues letter of comfort to provide sufficient funds to
directly owned subsidiary undertakings as and when required.
9. Shareholders’ funds
(a) Merger reserve
On the acquisition of a business, or of an interest in an associate, fair
values, reflecting conditions at the date of acquisition, are attributed to
the net assets acquired. Where merger relief is applicable under the UK
Companies Acts, the difference between the fair value of the business
acquired and the nominal value of shares issued as purchase
consideration is treated as a merger reserve.
(b) Own shares
At 30 June 2024, own shares comprised 3 million ordinary shares held
by employee share trusts (2023 – 3 million; 2022 – 2 million) and 209
million ordinary shares repurchased and held as treasury shares (2023
– 213 million; 2022 – 217 million).
During the year ended 30 June 2024, the group purchased
28 million ordinary shares (2023 – 38 million; 2022 – 61 million),
representing approximately 1.1% of the issued ordinary share capital
(2023 – 1.5%; 2022 – 2.4%) at an average price of 2918 pence (3644
cents) per share, and an aggregate cost of $987 million, including
transaction costs (2023 – 3616 pence (4382 cents) per share, and an
aggregate cost of $1,673 million, including $16 million of transaction
costs; 2022 – 3709 pence (4842 cents) per share, and an aggregate
cost of $2,985 million, including $21 million of transaction costs) under
the share buyback programme. The shares purchased under the share
buyback programmes were cancelled.
Information on movements in own shares is provided in note 18(c) to
the consolidated financial statements.
FINA NCIA L STATEMENTS continued
218
Diageo Annual Report 2024
(c) Retained earnings
In accordance with the Companies Act 2006, the reserves available for
distribution are measured in the functional currency of the company.
On 1 July 2023, the company changed its functional currency and the
reserves available for distribution were translated from sterling to US
dollar at the exchange rate on the date of the functional currency
change, resulting in reserves available for distribution of $9,117 million.
At 30 June 2024, $6,562 million of retained earnings is available for
the payment of dividends or purchases of own shares. Determining the
company’s reserves available for distribution is complex and requires,
in some instances, the application of judgement. The company has
determined what is realised and unrealised profits in accordance with
the Companies Act 2006 and the guidance included in ICAEW
Technical Release TECH 02/17BL ‘Guidance on realised and
distributable profits under the Companies Act 2006’. The company’s
reserves available for distribution include adjustments to retained
earnings in respect of the unrealised portion of the dividend in specie
received by the company, post-employment benefit surpluses, share-
based payment charges capitalised to investments and restriction due
to share capital in foreign currency.
Diageo Annual Report 2024
219
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
10. Group companies
In accordance with Section 409 of the Companies Act 2006 a full list of subsidiaries, partnerships, associates, joint ventures and joint
arrangements, the country of incorporation and the effective percentage of equity owned, as at 30 June 2024 are disclosed below. Unless
otherwise stated the share capital disclosed comprises ordinary shares which are indirectly held by Diageo plc.
FULLY OWNED SUBSIDIARIES
Angola
Rua Fernao de Sousa, Condominio Bengo,
Letter A, 11.s floor, Fraction A37,
neighbourhood Vila Alice, Province of
Luanda
Diageo Angola Limitada
Argentina
Bernardo de Irigoyen 972, floor 7, office A,
CABA
Diageo de Argentina S.A.
Australia
162 Blues Point Road, Level 1, NSW, 2060,
McMahons Point
Bundaberg Distilling Investments Pty Ltd(3)
Level 7, 99 Macquarie Street, Sydney, NSW
2000
Diageo Australia Limited(3)
Mr Black Spirits Pty Ltd
Whittred Street, QLD, 4670, Bundaberg
Bundaberg Distilling Company Pty. Limited(5)
Austria
Teinfaltstrasse 8, 1010, Wien
Diageo Austria GmbH
Belgium
Z.3 Doornveld 150, 1731, Zellik
Diageo Belgium N.V.
Bermuda
Victoria Place, 5th Floor, 31 Victoria Street,
Hamilton, HM10
Atalantaf Limited
Brazil
Fazenda Santa Eliza, Zona Rural, Ceará,
62.685-000, Paraipaba
Ypioca Agricola Ltda
Municipio de Itaitinga, Estado do Ceara, na
Rodovia BR 116, no 15.000, Bairro Jiboia, CEP
61.880-000
Ypioca Industrial de Bebidas S.A.
Rua Olimpiadas, 205, floor 14-15, 04551-000,
Sao Paulo
Diageo Brasil Ltda
Bulgaria
7 Iskarsko Shose Blvd., Trade Center Europe,
building 12, floor 2, 1528, Sofia
Diageo Bulgaria Ltd
Cameroon
535 rue Afcodi, Douala P.O. Box 1245
Diageo Cameroon Ltd
Canada
134 Peter Street, Suite 1501, Ontario, M5V
2H2, Toronto
Diageo Canada Holdings Inc.
Diageo Canada Inc.
Boul Henri-Bourassa E., 9225, Local A,
Quebec, H1E 1P6 , Montreal
Diageo Americas Supply Quebec
Distribution Inc.
Diageo Ireland Quebec Distribution Inc.
Chile
Avenida Apoquindo 5950, Piso 4, Oficina
04-103, Las Condes Santiago de Chile
Diageo Chile Limitada
China
41F, One Museum Place, 669 Xinzha Road,
Jingan District, Shanghai
Diageo China Limited
Fengxiang Village Fengyu Town, Eryuan
County, Dali Bai Minority Region, Yunnan
Province
Diageo Yuntuo Liquor (Dali) Co. Ltd
No. 9 Quanxing Road, Jinniu District,
Chengdu, 610036
Sichuan Chengdu Shuijingfang Group Co.
Ltd
No.28 Jiafeng Road, 2502, 5, Pudong
District, 200137, Shanghai
Diageo (Shanghai) Limited
Unit 1101, 1102, Building 16, No.1000 Jinhai
Road, Shanghai
Diageo Liquor Technology (Shanghai) Co.
Ltd
Unit B, 2nd Floor, West Logistics Center, No.
88 Linhai Avenue, Nanshan Street, Shenzhen
Diageo Supply Chain (Shenzhen) Co. Ltd
Colombia
100 Avenida Calle, 1321, Bogota
Diageo Colombia S.A.
Costa Rica
Trejos Montealegre, Edificio Escazu, Village
II, Oficinas 03-118 y 03-120, Distrito San
Rafael, San Jose
Diageo Costa Rica S.A.
Croatia
Hektoroviceva ulica 2, 10000, Zagreb
Diageo Croatia d.o.o.za usluge
Czech Republic
Namesti I. P. Pavlova 1789/5. 4th floor, 120
00, Prague 2
Diageo Czech Marketing Services LLC
Denmark
Sundkrogsgade 19, 2. 2100, Copenhagen
Diageo Denmark AS
Dominican Republic
Num. 07 Av. Jacinto Ignacio Manon, Sector
Ensanche Paraiso, Edificio Chez Space, Piso
3rd, Distrito Nacional, Santo Domingo
Diageo Dominicana S.R.L.
France
6 Avenue Franklin D. Roosevelt, 75008, Paris
Diageo France Distribution SAS
Diageo France Holdings SAS
Diageo France SAS
73, Rue de Provence, 75009, Paris
United Distillers France SAS
Germany
Reeperbahn 1, 20359, Hamburg
Belsazar GmbH
Diageo Germany GmbH
Greece
Leof. Kifisias 115, Athens, 115 24
Diageo Hellas S.A.
Guernsey
Heritage Hall, Le Marchant Street, St Peter
Port, GY1 4HY
Diageo Group Insurance Company Limited
Hong Kong
31/F, Tower two, Times Square, 1 Matheson
street Causeway Bay, Hong Kong
Diageo RTD Hong Kong Limited
Hungary
Dozsa Gyorgy ut 144, Budapest, 1134
Diageo Business Services Private Company
Limited by Shares
Diageo Hungary Finance Limited Liability
Company
Diageo Hungary Marketing Services Limited
Liability Company
India
Kempapura Main Road, Opp Nagawara
Lake, Karle SEZ Tower, 2nd floor, Karnataka,
560045, Bangalore
WeWork Platina Tower, MG Road, Haryana,
122002, Gurugram
Diageo Business Services India Private
Limited
FINA NCIA L STATEMENTS continued
220
Diageo Annual Report 2024
Marathon Futurex, A-Wing, 2601, 26th Floor,
N M Joshi Marg, Lower Parel, Mumbai, 400
013
Diageo India Private Limited
Indonesia
Jl Jend Sudirman Kav. 76-78, Sudirman
Plaza, Plaza Marein, 15th, Jakarta Selatan,
12910, Jakarta
PT Gitaswara Indonesia(8)
Ireland
Nangor House, Western Estate, Nangor
Road, Dublin, 12
Gilbeys of Ireland Unlimited Company(2)
R & A Bailey & Co Unlimited Company
UDV Ireland Group (Trustees) Designated
Activity Company(2)
St. James's Gate, Dublin 8
AGS Employee Shares Nominees (Ireland)
Designated Activity Company
Arthur Guinness Son & Company (Dublin)
Unlimited Company(2)
Diageo Ireland Finance 1 Unlimited
Company
Diageo Ireland Holdings Unlimited
Company
Diageo Ireland Unlimited Company
Diageo Turkey Holdings Limited
Guinness Storehouse Limited
R & A Bailey Pension Trustee Designated
Activity Company(2)
Italy
Strada Statale 63, 12069, Santa Vittoria
d'Alba (CN)
Diageo Operations Italy S.p.A.
Via Ernesto Lugaro 15, 10126, Torino
Diageo Italia S.p.A.
Japan
9-7-1 Akasaka, Minato-ku, Tokyo 164-0001
Diageo Japan K.K.
Kenya
L R NO 1870/1/176, Aln House, Eldama
Ravine Close, off Eldama Ravine Road,
Westlands, Nairobi
Diageo Kenya Limited
La Reunion
45 Rue Alexis De Villeneuve 97400 Saint-
Denis
Diageo Reunion SAS
Lebanon
Verdun Street, Ibiza Building, Beirut, PO Box
113-5631
Diageo LENA Off-shore SAL
Mexico
Av. Ejercito Nacional, 843-B, Torre Paseo
Acceso B, 2, Mexico City , 11520
Diageo Mexico II, S.A. de C.V.
Calle Gobernador Rafael Rebollar 95, Col
San Miguel de Chapultepec, Del Miguel
Hidalgo CP 11850, Mexico City
Casa Um, S.A.P.I. de C.V.
Carretera Atotonilco - Guadalajara,
Atotonilco el Alto, Jalisco, 47750
Diageo Mexico Comercializadora S.A. de
C.V.
Diageo Mexico S.A. de C.V.
Independencia SN Santiago, Matatlán,
Oaxaca 70440
Sombra Mezcal S. de R.L. de S.V.
Porfirio Diaz 17, Jalisco, 47750, Atotonilco el
Alto
Diageo Mexico Agavera S.A. de C.V.
Diageo Mexico Operaciones S.A. de C.V.
Diageo Mexico Spirits
Don Julio Agavera S.A. de C.V.
Mozambique
Estrada Nacional numero 1, Micanhine,
Marracuene
Diageo Supply Marracuene Lda
Netherlands
De Ruyterkades, Postbus 2852 1000cw
Amsterdam
United Distillers & Vintners (SJ) B.V.(2)
Molenwerf 12, 1014 BG, Amsterdam
Diageo Atlantic B.V.
Diageo Brands B.V.
Diageo Capital B.V.(1)
Diageo Highlands Holding B.V.
Diageo Holdings Netherlands B.V.
Diageo Nederland B.V.
Diageo Relay B.V.
Global Farming Initiative B.V.
Justerini & Brooks Importers B.V.
Selviac Nederland B.V.
New Zealand
123 Carlton Gore Road, Level 2, Newmarket,
1023, Auckland
Diageo New Zealand Limited(3)
Nigeria
Oba Akran Avenue Ikeja, 24, Lagos, PMB
21071, 100001
Diageo Brands Nigeria Ltd
Norway
Apotekergata 10, 0180 Oslo
Diageo Norway AS
Panama
Costa del Este, Ave La Rotonda, Business
Park, Torre V. piso 15 Panama City
Diageo Panama S.A.
Panama City, West Boulevard, PH ARIFA, 9th
and 10th, Santa Maria Business
Diageo Taiwan Inc.
Paraguay
Avda Aviadores del Chaco 2050. Edificio
World Trade Center. Torre 3 piso 11
Diageo Paraguay S.R.L.
Peru
Victor Andres Belaunde 147, Via Principal 133,
Interior 107, Piso 10, San Isidro, Lima
Diageo Peru S.A.
Philippines
10th Floor Commerce and Industry Plaza
Building, McKinley Hill Dr, Taguig, 1634
Diageo Asia Pacific Shared Services Centre
Limited Inc.
Unit 1, 17th Floor, Ore Central 9th Avenue
corner 31st Street Bonifacio Global City,
Taguig City, 1634
Diageo Export SR Inc.(2)
Diageo Philippines Free Port Inc.(2)
Diageo Philippines Inc.
North Island United Enterprise Holdings Inc.
(2)
Unit 3 G/F, 134 Legaspi Parkview
Condominium, Carlos Palanca Street cor.
Legaspi Street, Makati City
Chat Noir Co. Inc.
Poland
Przyokopowa Str. 31, PL 01 – 208 Warsaw
Diageo Polska Sp. z o.o.
Portugal
Avenida D. Joao II, No 50, piso 2, letra D,
Edificio Mar Vermelho, 1990-095 Lisboa
Diageo Portugal - Distribuidora de Bebidas,
Unipessoal, Lda
Romania
Expo Business Park, Street Aviator Popisteanu
54A, Cladirea 2, et 1-3, Sector 1, Bucharest,
012244
Diageo Balkans S.R.L.
Russia
Kaspiyskaya Street, 22, main bld. 1, bld. 5,
floor 3, apartment VII, room 31a, 115304,
Moscow
D Distribution Joint-Stock Company(2)
Diageo Brands Distributors LLC(2)
Singapore
112 Robinson Road, 1, 5th Floor, 1, Singapore
68902
Diageo Singapore Pte. Ltd
Streetcar Investment Holding Pte. Ltd
South Africa
Building 3, Maxwell Office Park, Magwa
Crescent West, Waterfall City, Midrand,
2090
Diageo Annual Report 2024
221
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Diageo South Africa (Pty) Limited
United Distillers Southern Africa (Proprietary)
Limited
South Korea
932-94, Daewol-ro, Daewol-myun, Icheon-
shi, Gyeonggi-do, Icheon, 17342
Diageo Korea Co. Ltd
Spain
Avda de la Victoria 32, Edificio Spirit, 28023,
Madrid
Diageo Espana S.A.
Sweden
Gavlegatan street 22/C, 11330, Stockholm
Diageo Sweden AB
Switzerland
Place de la Gare 12, Lausanne, 1003
Diageo Suisse S.A.
Tanzania
CRB Africa Legal Attorneys, Plot 60, Ursino
Street P.O. Box 32840, Dar es Salaam
Sumagro Limited(2)
Türkyie
Esentepe Mah. Bahar Sk. Ozdilek River Plaza
Vyndham Grand Apt. No 13/25 Sisli, Istanbul
Mey Alkollü İçkiler Sanayi ve Ticaret A.Ş.
Mey İçki Sanayi ve Ticaret A.Ş.
Ukraine
1v Pavla Tychyny avenue , 2152, Kyiv
Diageo Ukraine LLC
United Kingdom
11 Lochside Place, Edinburgh, EH12 9HA
Arthur Bell & Sons Limited(2)
Copper Dog Whisky Limited
Diageo Capital plc(1)
Diageo Scotland Limited
J & B Scotland Limited(2)
John Haig & Company Limited
The Lochnagar Distillery Limited(2)
William Sanderson and Son Limited(2)
Zepf Technologies UK Limited
16 Great Marlborough St, London, W1F 7HS
Anna Seed 83 Limited
Cellarers (Wines) Limited
Chase Distillery (Holdings) Limited
Chase Distillery Limited
Diageo (IH) Limited(2)
Diageo Distribution Company Limited
Diageo DV Limited
Diageo Eire Finance & Co(2)
Diageo Employee Shares Nominees
Limited(1),(2)
Diageo Finance plc(1)
Diageo Finance US Limited
Diageo Financing Turkey Limited
Diageo Great Britain Limited
Diageo Healthcare Limited(2)
Diageo HF Holdings Limited
Diageo Holdings Limited(1)
Diageo Holland Investments Limited(2)
Diageo Investment Holdings Limited
Diageo Overseas Holdings Limited(6)
Diageo Scotland Investment Limited
Diageo Share Ownership Trustees Limited(1),
(2)
Diageo UK Turkey Holdings Limited
Diageo UK Turkey Limited
Grand Metropolitan Capital Company
Limited
Grand Metropolitan Estates Limited
Grand Metropolitan International Holdings
Limited
Grand Metropolitan Limited
Guinness Limited(1)
Guinness Overseas Holdings Limited(1)
Guinness Overseas Limited
James Buchanan & Company Limited(2)
John Walker and Sons Limited(2)
Kanlaon Ltd
Mr Black UK Ltd
Tanqueray Gordon and Company, Limited(1)
The Distillers Company (Biochemicals)
Limited(2)
The Pimm's Drinks Company Limited(2)
Tipplesworth Limited
UDV (SJ) Holdings Limited(1)
UDV (SJ) Limited
United Distillers France Limited
3rd Floor Capital House, 3 Upper Queen
Street, Belfast
Diageo Global Supply IBC Limited
Diageo Northern Ireland Limited(1)
S & B Production Limited
61 St. James's Street, London, SW1A 1LZ
Justerini & Brooks, Limited
United States
1 Estate Annaberg & Shannon Grove, RR1
Box 9400, Kingshill, VI 00850-9703
Diageo USVI Inc.
1209 Orange Street, New Castle, Delaware
19801
DV Technology LLC
1425 South Kingstown Road, South
Kingstown, RI 02879
Diageo Loyal Spirits Corporation
1521 Concord Pike Suite 201, Wilmington, DE
19803
21 Seeds Inc.
ASL Leasing and Investment LLC
DeLeon Holdco LLC
PDX Spirits LLC
Sombra Holdings LLC
175 Greenwich Street, Three World Trade
Center, New York, NY 10007
Ballroom Acquisition, Inc.
Davos Services LLC
Diageo Americas Inc.
Diageo Americas Supply Inc.
Diageo Beer Company USA
Diageo Inc.
Diageo Investment Corporation
Diageo Latin America & Caribbean LLC
Diageo Non-Alcohol Beverages LLC
Diageo North America, Inc.(5)
Liquor Investment LLC
Soh Spirits LLC
Stirrings LLC
The Bulleit Distillery, Inc.(2)
Whisky Archive Inc.
3411 Silverside Road Tatnall Building, Ste 104
Wilmington, DE 19810
Casamigos Spirits Company LLC
Casamigos Tequila LLC
CT Staffing Services LLC
Vivanda Inc.
381 Park Avenue South, Suite 1015, New York,
NY 10016
Aviation Gin LLC
Davos Brands LLC
5444 Westheimer 1000, Houston, TX 77056
Balcones Distilling LLC
Uruguay
Pasaje Paseo De Las Carretas, 2580, oficina
1301, Montevideo
Diageo Uruguay S.A.
Venezuela
Av Intercomunal Alí Primera, Los Taques,
Estado Falcón
DV Paraguana, C.A.(2)
Av La Hormiga con Intersección de la
Carretera via Payara, C.C. Tierra Buena
Acarigua
Mull Trading C.A.(2)
Av. Circunvalacion Norte (Jose Asunsion
Rodriguez) Edificio Distribuidora Metropol,
Porlamar, Estado Nueva Esparta
Clyde Trading, C.A.(5)
Cupar Trading, C.A.(5)
Diageo Nueva Esparta, C.A.(2)
FINA NCIA L STATEMENTS continued
222
Diageo Annual Report 2024
DV Trading, C.A.(5)
Zeta Importers C.A.(5)
Ave. San Felipe Urbanización La Castellana,
Edificio Centro Coinasa, Piso 6. Caracas,
1060
Diageo Venezuela C.A.
CaIIe 1 Este, Edificio y Galpon BTP, Zona
Industrial La Caracarita, Municipio Los
Guayos, estado Carabobo
Arran Tradings, C.A.
Calle 1 con calle CaIIe 1 Este, Edificio y
Galpon BTP, Zona Industrial La Caracarita,
Municipio Los Guayos, estado Carabobo
DV Release, C.A.
Islay Trading, C.A.
L4L Trading, C.A.
Lismore Trading, C.A.
Skye Trading C.A.
Carretera Nacional Acarigua-Barquisimeto
Casa Agropecuaria Las Marias I C.A.S-N
Sector los Guayones La Miel, Lara.
Agropecuarias Las Marias I C.A.
Vietnam
No. 157, 21/8 Street, Phuoc My Ward, Phan
Rang - Thap Cham City, Ninh Thuan
Province
Diageo Vietnam
Zimbabwe
48 Midlothian Avenue, Eastlea, Harare
International Distillers - Zimbabwe (Private)
Limited(2)
SUBSIDIARIES WHERE THE EFFECTIVE
INTEREST IS LESS THAN 100%
Angola
Rua Dom Eduardo Andre Muaca, S/No,
LOTE C4, Luanda
DIREF Industria de Bebidas, Lda-Angola JV -
50.10%
British Virgin Islands
Commerce House, Wickhams Cay 1, PO Box
3140, Road Town, Tortola
Rum Creation & Products Inc.(4) - 50.00%
Sea Meadow House, Blackburne Highway,
P.O. Box 116, Road Town, Tortola
Palmer Investment Group Limited(2),(9) -
55.88%
USL Holdings Limited(2),(9) - 55.88%
China
27 Shuijing Street, Jinjiang District, Chengdu,
610065
Chengdu Shuijingfang Fangcang Liquor
Sales Co. Ltd(10) - 63.16%
41F, One Museum Place, 669 Xinzha Road,
Jingan District, Shanghai
Swellfun (Shanghai) Consulting Co. Ltd(10) -
63.16%
No. 21 Shuijing Street, Jinjiang District,
Chengdu, 610011
Chengdu Swellfun Marketing Co. Limited(10) -
63.16%
No. 38 Jiuyuan Road, Kongming Street,
Qionglai, Chengdu
Chengdu Swellfun Liquor Co. Limited(10) -
63.16%
No. 7 Guanghua Road, Chaoyang District,
Beijing, 100020
Swellfun (Beijing ) Consulting Co. Ltd(10) -
63.16%
No. 9 Quanxing Road, Jinniu District,
Chengdu, 610036
Chengdu Jianghai Trade Development Co.
Limited(10) - 63.16%
Chengdu Tengyuan Liquor Marketing Co.
Limited(10) - 63.16%
Sichuan Swellfun Co. Ltd(10) - 63.16%
No. 998, Juanxing Road, Hongguang
County, Chengdu, 610000
Chengdu Ruijin Trading Co. Limited(10) -
63.16%
Cuba
211 Avenida Malecón, entre J y K, Vedado,
Plaza de la Revolución, La Habana
Ron Santiago S.A. - 50.00%
Ghana
Guinness Brewery, Plot 1 Block L, Industrial
Area, Kaasi, P.O. Box 1536, Kumasi
Guinness Ghana Breweries PLC - 80.40%
Guatemala
Calle 8-19 zona 9, Quetzaltenango
Anejos De Altura, S.A. - 50.00%
Hungary
Dozsa Gyorgy ut 144, Budapest, 1134
Diageo Employee Ownership Program
Organization - 99.94%
India
UB Tower, 24 Vittal Mallya Road, Bangalore,
560001
Royal Challengers Sports Private Limited(9) -
55.88%
United Spirits Limited(9) - 55.88%
Indonesia
Jl. Raya Kaba-Kaba No. 88, Banjar Carik
Padang, Desa Nyambu, Kecamatan Kediri,
Kabupaten Tabanan, Provinsi Bali
PT Langgeng Kreasi Jayaprima - 80.00%
Kenya
5th Floor, Garden City Business Park, Block
A, Garden City Road, Off Exit 7, Thika
Superhighway, Nairobi, P.O. Box
30161-00100
Kenya Breweries Limited(5) - 65.00%
UDV Kenya Limited - 83.79%
Garden City Business Park, 5th Floor, P.O.
Office Box Number 30161-00100, Nairobi
East African Breweries PLC - 65.00%
Kampala Road, Industrial Area, Nairobi, P.O.
Box 41412-00100
East African Maltings Limited - 65.00%
Tusker House, Ruaraka, P.O. Box 30161,
00100 Nairobi GPO
Allsopp (East Africa) Limited(2) - 63.05%
EABL International Limited(2) - 65.00%
Tembo Properties Limited(2) - 65.00%
Lebanon
Beirut Symposium Bldg, 10th floor, Beirut,
P.O. Box 113-5250
Diageo - Lebanon SAL - 84.99%
Verdun Street, Ibiza Building, Beirut, P.O. Box
113-5631
Diageo Lebanon Holding SAL - 99.98%
Mauritius
IFS Court, Twenty Eight, Cybercity, Ebene
Asian Opportunities and Investment
Limited(2),(9) - 55.88%
Netherlands
Molenwerf 12, 1014 BG, Amsterdam
Ketel One Worldwide B.V.(4) - 50.00%
Nigeria
Oba Akran Avenue Ikeja, 24, Lagos, PMB
21071, 100001
Guinness Nigeria PLC - 58.02%
North Cyprus
Sehit Mehmet Cetin Sokak, Kucuk Sanayi
Bölgesi 4, 99450, Gazi Magusa
Turk Alkollu Icki ve Sarap Endustri Ltd -
66.00%
Philippines
Unit 1, 17th Floor, Ore Central 9th Avenue
corner 31st Street Bonifacio Global City,
Taguig City, 1634
ULM Holdings Inc.(2) - 40.00%
United Distillers & Vintners Philippines Inc(2) -
99.95%
Rwanda
Kimihurura, Gasabo, Umujyi was Kigali, 7130
Port Bell Luzira
East African Breweries Rwanda Limited -
65.00%
Seychelles
O’Brien House, 273 Le Rocher, Mahe
Seychelles Breweries Limited - 54.40%
South Sudan
Southern Sudan African Park Hotel, Juba
Town
East African Beverages (Southern Sudan)
Limited(2) - 64.35%
Diageo Annual Report 2024
223
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Tanzania
2nd Floor, East Wing TDFL Building, Ohio
street, P.O. Box 32840 Dar es Salaam
EABL (Tanzania) Limited(2) - 65.00%
Plot 117/2, Access Road, Nelson Mandela
Expressway, Chang'Ombe Industrial Area,
P.O. Box 41080, Dar es Salaam
Serengeti Breweries Limited(3) - 55.25%
Uganda
Plot 3-17 Port Bell Road, Luzira, Kampala,
P.O. Box 7130
Uganda Breweries Limited - 63.82%
Plot No 1 Malt Road, Portbell Luzira P.O. Box
3221 Kampala
International Distillers Uganda Limited -
65.00%
Tusker House, Ruaraka, P.O. Box 30161,
00100 Nairobi GPO
East African Maltings (Uganda) Limited(2) -
65.00%
United Kingdom
11 Lochside Place, Edinburgh, EH12 9HA
Lochside MWS Limited Partnership
McDowell & Co. (Scotland) Ltd(2),(9) - 55.88%
16 Great Marlborough St, London, W1F 7HS
Diageo Pension Trust Limited(1),(8) - 55.00%
Lakeside MWS Limited Liability Partnership
Seedlip Ltd - 91.00%
Shaw Wallace Overseas Limited(2),(9) -
55.88%
United Spirits (Great Britain) Limited(2),(9) -
55.88%
United Spirits (UK) Limited(2),(9) - 55.88%
USL Holdings (UK) Limited(2),(9) - 55.88%
United States
175 Greenwich Street, Three World Trade
Center, New York, NY 10007
California Simulcast Inc.(2) - 80.00%
Seedlip Inc. - 91.00%
2950 North Loop W Ste 1200 Houston, TX
77092-8808
Far West Spirits LLC - 99.00%
Venezuela
Ave. San Felipe Urbanización La Castellana,
Edificio Centro Coinasa, Piso 6. Caracas,
1060
Industrias Pampero C.A. - 96.80%
Vietnam
621 Pham Van Chi Street, District 6, Ho Chi
Minh City
Vietnam Spirits and Wine Ltd - 55.00%
ASSOCIATES
Australia
50 Bertie Street, Port Melbourne, Victoria
3207
New World Whisky Distillery PTY Limited -
30.00%
Denmark
Stauningvej 38, 6900 Skjern
Stauning Whisky Holding ApS - 40.00%
France
24/32 rue Jean Goujon, 75008 Paris
Moët Hennessy International - 34.00%
Moët Hennessy, SAS - 34.00%
Hungary
Soroksari ut 26, Budapest, 1095
Zwack Unicum plc - 26.00%
India
E-47/5., Okhla Industrial Area, Phase II, New
Delhi, South Delhi, DL 110020
Nao Spirits & Beverages Private Limited -
30.00%
Italy
Via Tortona 15, 20144, Milan
Niococktails S.R.L. - 49.00%
Japan
845-3 Kaminokawa, Hiyoshi-cho Hioki-shi,
Kagoshima
Komasa Kanosuke Distillery Company Ltd -
12.50%
Netherlands
Ceresstraat 1, 4811 CA Breda
Canbrew B.V.(4) - 28.16%
Spain
Calle General Vara del Rey 5, 1 Piso, 26003
Logroño, La Rioja
El Bandarra, S.L. - 25.00%
Calle Malí, 7 La Laguna, 38320 Santa Cruz
de Tenerife
Compania Cervecera De Canarias, S.A. -
20.00%
United Kingdom
354 Castlehill, The Royal Mile, Edinburgh,
EH1 2NE
The Scotch Whisky Heritage Centre Limited -
29.00%
39-45 Bermondsey Street, London, SE1 3XF
London Botanical Drinks Limited - 20.00%
64 New Cavendish Street, London, W1G 8TB
Pulpex Limited - 28.93%
8 King Edward Street, Oxford, OX1 4HL
Still On The Hill Limited - 28.57%
Ballindalloch Castle, Ballindalloch, Banffshire
AB37 9AX
Ballindalloch Distillery LLP - 33.33%
Harbourside Brewery, Tretoil Farm, Bodmin,
Cornwall, PL30 5BA
The Southwest Fermentorium Limited -
25.00%
Here 470 Bath Road, Arnos Vale, Bristol, BS4
3AP
Caleno Drinks Ltd - 20.00%
International House, 64 Nile Street, London,
England, N1 7SR
Las Olas Limited - 33.33%
The Biscuit Factory, 4-6 Anderson Place, EH6
5NP, Edinburgh
Freshwater Spirits Company Ltd - 25.00%
United States
1045 Dodge Lane Fallon, NV 89406
Nevada Spirits DE, LLC - 24.19%
1209 Orange Street, Wilmington, DE 19801
Gourmet Grade LLC - 19.41%
1521 Concord Pike Suite 201, Wilmington, DE
19803
Browned Butter Bottling LLC - 40.00%
16192 Coastal Highway, Lewes, Delaware
19958
Ironroot Republic Holdings LLC - 31.95%
1935 W. Irving Park Chicago, IL 60613
Ritual Beverage Company LLC - 30.05%
251 Little Falls Drive, Wilmington, Delaware
19808
VineLab Inc. - 26.22%
545 Johnson Avenue, Brooklyn, NY 11237
Analog Liquid LLC - 27.78%
6220 Avalon Boulevard, Suite 220,
Alpharetta, GA 30009
Pronghorn Initiative Holdings, LLC - 49.00%
65 SE Washington Street Portland, OR 97214
House Spirits Distillery LLC - 29.85%
735 10th Street, Fortuna, CA 95540
Redwood Spirits LLC - 25.00%
8601296, TT Administrative Services LLC, 888
SW Fifth Avenue, Ste 1600, Portland,
Oregon, 97204
Wilderton LLC - 27.78%
Vietnam
94 Lo Duc Street, Pham Dinh Ho Ward, Hai
Ba Trung District, Ha Noi City
Hanoi Liquor and Beverage Joint Stock
Company (Halico) - 45.57%
JOINT VENTURES
Costa Rica
Heredia-Flores Llorente, Cervecería de Costa
Rica, Edificio Corporativo de FIFCO
HA&COM Bebidas del Mundo, S.A. -
50.00%
India
G-8, First Floor, Hauz Khas, 110016, New
Delhi
Inspired Hospitality Private Limited - 15.00%
United Kingdom
9 Wheatfield Road, EDINBURGH, EH11 2PX
FINA NCIA L STATEMENTS continued
224
Diageo Annual Report 2024
Lothian Distillers Limited - 50.00%
The North British Distillery Company Limited
- 50.00%
JOINT OPERATIONS(12)
China
804A, 488 Middle Yincheng Road,
Shanghai, Pilot Free Trade Zone
Moët Hennessy Diageo (China) Co. Ltd(11) -
67.00%
Dominican Republic
Segunda (2da) Street, Los Platanitos,
Santiago
Industria de Licores Internationales S.A. -
60.86%
France
105 Boulevard de la Mission Marchand,
Courbevoie, 92400
Moët Hennessy Diageo SAS - 0.05%
Hong Kong
Level 54, Hopewell Centre, 183 Queen's
Road East, Hong Kong
Moët Hennessy Diageo Hong Kong
Limited(11) - 67.00%
Japan
13F Jimbocho Mitsui Building, 1-105
Kandajimbocho, Chiyoda-ku, Tokyo
Moët Hennessy Diageo K.K.(11) - 67.00%
Macau
Avenida Comercial de Macau, nos 251ª-301,
AIA Tower, Level 20, Macau
Moët Hennessy Diageo Macau Limited(11) -
67.00%
Malaysia
Unit 30-01, Level 30, Tower A, Vertical
Business Suite, Avenue 3, Bangsar South, No.
8, Jalan Kerinchi, 59200 Kuala Lumpur
Moët Hennessy Diageo Malaysia Sdn Bhd.(11)
- 67.00%
Netherlands
Molenwerf 12, 1014 BG, Amsterdam
Diageo-Moët Hennessy B.V.(5) - 67.00%
Singapore
83 Clemenceau Ave, 09-01 UE Square,
Singapore 239920
Moët Hennessy Diageo Singapore Pte. Ltd(11)
- 67.00%
Thailand
No. 944, Mitrtown Office Tower, 12th Floor,
Rama 4 Road, Wangmai, Pathumwan,
Bangkok, 10330
Diageo Moët Hennessy (Thailand) Limited(7) -
63.02%
Ukraine
Chervonoarmiyska Street, bld. 9/2, apt. 70,
Kyiv
Seagram Ukraine Limited(2) - 60.90%
United Kingdom
Persimmon House, Fulford, York YO19 4FE
Trafalgar Metropolitan Homes Limited -
50.00%
(1)
Directly owned by Diageo plc.
(2)
Dormant company.
(3)
Ownership held in class of A shares.
(4)
Ownership held in class of B shares.
(5)
Ownership held in class of A shares and B shares.
(6)
Ownership held in preference shares.
(7)
Operation is managed by Diageo.
(8)
Companies controlled by the group based on
management's assessments.
(9)
Based on 55.88% equity investment in USL that
excludes 2.38% owned by the USL Benefit Trust.
(10) Additional 0.34% via Treasury shares at 30 June 2024
(11)
Operation is managed by Moët Hennessey.
(12) Diageo shares joint control over these entities under
shareholders' agreements, and Diageo's rights to
profit, assets and liabilities of the companies are
dependent on the performance of the group's brands
rather than the effective equity ownership of the
companies.
11. Post balance sheet events
On 24 July 2024, Diageo announced its agreement with LVMH to exit from their joint operation Moët Hennessy Diageo France, and the termination
of the existing distribution agreements in place for France of all remaining Diageo brands, effective from 1 January 2025. In respect of the
termination, the parties have agreed Diageo to pay a settlement amount, that will be accounted for in the year ending 30 June 2025.
Diageo Annual Report 2024
225
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Unaudited financial information
1. Definitions and reconciliation of non-GAAP measures to GAAP measures
Diageo’s strategic planning process is based on certain non-GAAP
measures, including organic movements. These non-GAAP measures
are chosen for planning and reporting, and some of them are used for
incentive purposes. The group’s management believes that these
measures provide valuable additional information for users of the
financial statements in understanding the group’s performance. These
non-GAAP measures should be viewed as complementary to, and not
replacements for, the comparable GAAP measures and reported
movements therein.
It is not possible to reconcile the forecast tax rate before
exceptional items, forecast organic net sales growth and forecast
organic operating profit growth to the most comparable GAAP
measure as it is not possible to predict, without unreasonable effort,
with reasonable certainty, the future impact of changes in exchange
rates, acquisitions and disposals and potential exceptional items.
Volume
Volume is a performance indicator that is measured on an equivalent
units basis to nine-litre cases of spirits. An equivalent unit represents
one nine-litre case of spirits, which is approximately 272 servings. A
serving comprises 33ml of spirits, 165ml of wine, or 330ml of ready to
drink or beer. Therefore, to convert volume of products other than
spirits to equivalent units, the following guide has been used: beer in
hectolitres, divide by 0.9; wine in nine-litre cases, divide by five; ready
to drink and certain pre-mixed products that are classified as ready to
drink in nine-litre cases, divide by ten.
Organic movements
Organic information is presented using US dollar amounts on a
constant currency basis excluding the impact of exceptional items,
certain fair value remeasurements, hyperinflation and acquisitions and
disposals. Organic measures enable users to focus on the
performance of the business which is common to both years and
which represents those measures that local managers are most
directly able to influence.
Calculation of organic movements
The organic movement percentage is the amount in the row titled
‘Organic movement’ in the tables below, expressed as a percentage
of the relevant absolute amount in the row titled ‘Year ended 30 June
2023 adjusted’. Organic operating margin is calculated by dividing
operating profit before exceptional items by net sales after excluding
the impact of exchange rate movements, certain fair value
remeasurements, hyperinflation and acquisitions and disposals.
(a) Exchange rates
Exchange in the organic movement calculation reflects the adjustment
to recalculate the reported results as if they had been generated at the
prior period weighted average exchange rates.
Exchange impacts in respect of the external hedging of intergroup
sales by the markets in a currency other than their functional currency
and the intergroup recharging of services are also translated at prior
period weighted average exchange rates and are allocated to the
geographical segment to which they relate. Residual exchange
impacts are reported as part of the Corporate segment. Results from
hyperinflationary economies are translated at forward-looking rates.
(b) Acquisitions and disposals
For acquisitions in the current period, the post-acquisition results are
excluded from the organic movement calculations. For acquisitions in
the prior period, post-acquisition results are included in full in the prior
period but are included in the organic movement calculation from the
anniversary of the acquisition date in the current period. The
acquisition row also eliminates the impact of transaction costs that
have been charged to operating profit in the current or prior period in
respect of acquisitions that, in management’s judgement, are
expected to be completed.
Where a business, brand, brand distribution right or agency
agreement was disposed of or terminated in the reporting period, the
group, in the organic movement calculations, excludes the results for
that business from the current and prior period. In the calculation of
operating profit, the overheads included in disposals are only those
directly attributable to the businesses disposed of, and do not result
from subjective judgements of management.
(c) Exceptional items
Exceptional items are those that in management’s judgement need to
be disclosed separately. Such items are included in the income
statement caption to which they relate, and form part of the segmental
reporting, and are excluded from the organic movement calculations.
Management believes that separate disclosure of exceptional items
and the classification between operating and non-operating items
further helps investors to understand the performance of the group.
Changes in estimates and reversals in relation to items previously
recognised as exceptional are presented consistently as exceptional in
the current year.
Exceptional operating items are those that are considered to be
material and unusual or non-recurring in nature and are part of the
operating activities of the group, such as one-off global restructuring
programmes which can be multi-year, impairment of intangible assets
and fixed assets, indirect tax settlements, property disposals and
changes in post-employment plans.
Gains and losses on the sale or directly attributable to a
prospective sale of businesses, brands or distribution rights, step up
gains and losses that arise when an investment becomes an associate
or an associate becomes a subsidiary and other material, unusual
non-recurring items that are not in respect of the production,
marketing and distribution of premium drinks, are disclosed as
exceptional non-operating items below operating profit in the income
statement.
Exceptional current and deferred tax items comprise material and
unusual or non-recurring items that impact taxation. Examples include
direct tax provisions and settlements in respect of prior years and the
remeasurement of deferred tax assets and liabilities following tax rate
changes.
(d) Fair value remeasurement
Fair value remeasurements in the organic movement calculation
reflect an adjustment to eliminate the impact of fair value changes in
biological assets, earn-out arrangements that are accounted for as
remuneration and fair value changes relating to contingent
consideration liabilities and equity options that arose on acquisitions
recognised in the income statement.
UNAUDITED FINANCIAL INFORM ATION
Diageo Annual Report 2024
227
Additional information
Contents
Unaudited financial information
227
Cautionary statement
237
Non-financial reporting boundaries and methodologies
238
Independent Limited Assurance Report to the Directors of
Diageo plc on selected information
258
Other additional information
262
226
Diageo Annual Report 2024
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Adjustment in respect of hyperinflation
The group's experience is that hyperinflationary conditions result in
price increases that include both normal pricing actions reflecting
changes in demand, commodity and other input costs or
considerations to drive commercial competitiveness, as well as
hyperinflationary elements and that for the calculation of organic
movements, the distortion from hyperinflationary elements should be
excluded.
Cumulative inflation over 100% (2% per month compounded)
over three years is one of the key indicators within IAS 29 to assess
whether an economy is deemed to be hyperinflationary. As a result,
the definition of 'Organic movements' includes price growth in
markets deemed to be hyperinflationary economies, up to a
maximum of 2% per month while also being on a constant currency
basis. Corresponding adjustments have been made to all income
statement related lines in the organic movement calculations.
In the tables presenting the calculation of organic movements,
'hyperinflation' is included as a reconciling item between reported
and organic movements and that also includes the relevant IAS 29
adjustments.
Organic movement calculations for the year ended 30 June 2024 were as follows:
North America
million
Europe
million
Asia
Pacific
million
Latin America
and Caribbean
million
Africa
million
Corporate
million
Total
million
Volume (equivalent units)
Year ended 30 June 2023 reported
52.4
51.3
80.8
26.2
32.7
—
243.4
Reclassification
—
0.5
(0.5)
—
—
—
—
Disposals(1)
—
(0.1)
(6.2)
—
(1.3)
—
(7.6)
Year ended 30 June 2023 adjusted
52.4
51.7
74.1
26.2
31.4
—
235.8
Organic movement
(2.3)
(0.6)
0.6
(4.1)
(1.9)
—
(8.3)
Acquisitions and disposals(1)
—
0.2
0.2
—
2.6
—
3.0
Year ended 30 June 2024 reported
50.1
51.3
74.9
22.1
32.1
—
230.5
Organic movement %
(4)
(1)
1
(16)
(6)
—
(4)
North America
$ million
Europe
$ million
Asia
Pacific
$ million
Latin America
and Caribbean
$ million
Africa
$ million
Corporate
$ million
Total
$ million
Sales
Year ended 30 June 2023 reported (re-presented)
8,859
7,245
6,484
2,714
2,864
104
28,270
Exchange
6
132
59
11
28
1
237
Reclassification
—
62
(62)
—
—
—
—
Disposals(1)
—
(7)
(377)
—
(196)
—
(580)
Hyperinflation
—
(185)
—
—
—
—
(185)
Year ended 30 June 2023 adjusted
8,865
7,247
6,104
2,725
2,696
105
27,742
Organic movement
(351)
415
320
(487)
258
13
168
Acquisitions and disposals(1)
3
30
35
—
131
—
199
Exchange
(3)
(294)
(139)
172
(632)
5
(891)
Hyperinflation
—
626
—
22
25
—
673
Year ended 30 June 2024 reported
8,514
8,024
6,320
2,432
2,478
123
27,891
Organic movement %
(4)
6
5
(18)
10
12
1
UNA UDITED FINANCIAL INFORMATION continued
228
Diageo Annual Report 2024
North America
$ million
Europe
$ million
Asia
Pacific
$ million
Latin America
and Caribbean
$ million
Africa
$ million
Corporate
$ million
Total
$ million
Net sales
Year ended 30 June 2023 reported (re-presented)
8,109
4,303
3,841
2,159
2,039
104
20,555
Exchange
6
56
55
13
21
1
152
Reclassification
—
62
(62)
—
—
—
—
Disposals(1)
—
(4)
(126)
—
(131)
—
(261)
Hyperinflation
—
(71)
—
—
—
—
(71)
Year ended 30 June 2023 adjusted
8,115
4,346
3,708
2,172
1,929
105
20,375
Organic movement
(206)
124
164
(459)
235
13
(129)
Acquisitions and disposals(1)
2
30
30
—
131
—
193
Exchange
(3)
(59)
(85)
105
(539)
5
(576)
Hyperinflation
—
363
—
21
22
—
406
Year ended 30 June 2024 reported
7,908
4,804
3,817
1,839
1,778
123
20,269
Organic movement %
(3)
3
4
(21)
12
12
(1)
North America
$ million
Europe
$ million
Asia
Pacific
$ million
Latin America
and Caribbean
$ million
Africa
$ million
Corporate
$ million
Total
$ million
Marketing
Year ended 30 June 2023 reported (re-presented)
1,631
765
655
355
235
22
3,663
Exchange
(1)
8
4
—
(3)
2
10
Reclassification
—
1
(1)
—
(12)
—
(12)
Disposals(1)
—
—
(13)
—
(5)
—
(18)
Hyperinflation
—
(7)
—
—
—
—
(7)
Year ended 30 June 2023 adjusted
1,630
767
645
355
215
24
3,636
Organic movement
(10)
34
16
(70)
35
2
7
Acquisitions and disposals(1)
5
22
5
—
4
—
36
Exchange
2
10
(15)
21
(50)
3
(29)
Hyperinflation
—
40
—
—
1
—
41
Year ended 30 June 2024 reported
1,627
873
651
306
205
29
3,691
Organic movement %
(1)
4
2
(20)
16
8
—
Diageo Annual Report 2024
229
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
North America
$ million
Europe
$ million
Asia
Pacific
$ million
Latin America
and Caribbean
$ million
Africa
$ million
Corporate
$ million
Total
$ million
Operating profit before exceptional items
Year ended 30 June 2023 reported (re-presented)
3,222
1,312
1,104
783
289
(397)
6,313
Exchange(2)
27
(2)
29
42
110
45
251
Reclassification
—
47
(47)
—
—
—
—
Fair value remeasurement of contingent
considerations, equity option and earn-out
arrangements
(122)
(30)
—
(1)
—
—
(153)
Acquisitions and disposals(1)
2
17
(32)
—
(38)
—
(51)
Hyperinflation
—
19
—
—
—
—
19
Year ended 30 June 2023 adjusted
3,129
1,363
1,054
824
361
(352)
6,379
Organic movement
(142)
(15)
60
(302)
86
9
(304)
Acquisitions and disposals(1)
(12)
(14)
7
—
27
—
8
Fair value remeasurement of contingent
considerations, equity option and earn-out
arrangements
128
27
—
—
—
—
155
Fair value remeasurement of biological assets
—
—
—
(16)
—
—
(16)
Exchange(2)
133
26
(58)
(5)
(332)
(23)
(259)
Hyperinflation
—
(8)
—
1
(11)
—
(18)
Year ended 30 June 2024 reported
3,236
1,379
1,063
502
131
(366)
5,945
Organic movement %
(5)
(1)
6
(37)
24
3
(5)
Organic operating margin % (3)
Year ended 30 June 2024
37.8
30.2
28.8
30.5
20.7
n/a
30.0
Year ended 30 June 2023
38.6
31.4
28.4
37.9
18.7
n/a
31.3
Organic operating margin movement (bps)
(79)
(121)
35
(746)
194
n/a
(130)
(1)
Acquisitions and disposals that had an effect on organic volume, sales, net sales, marketing and operating profit growth in the year ended 30 June 2024, are detailed on page 231.
(2) The impact of movements in exchange rates on reported figures for operating profit was principally in respect of the unfavourable exchange impact of the weakening of the Nigerian
naira, the Turkish lira and the Kenyan shilling, partially offset by the favourable impact of the Mexican peso and sterling against the US dollar.
(3)
Organic operating margin calculated by dividing Operating profit before exceptional items by net sales.
(i)
For the reconciliation of sales to net sales, see page 45.
(ii) Percentages and margin movements are calculated on rounded figures.
UNA UDITED FINANCIAL INFORMATION continued
230
Diageo Annual Report 2024
In the year ended 30 June 2024, the acquisitions and disposals that affected volume, sales, net sales, marketing and operating profit were as
follows, as per footnote (1) on the previous page:
Volume
EU million
Sales
$ million
Net sales
$ million
Marketing
$ million
Operating
profit
$ million
Year ended 30 June 2023 (re-presented)
Acquisitions
Balcones Distilling
—
—
—
—
2
Don Papa Rum
—
—
—
—
20
—
—
—
—
22
Disposals
USL Popular brands
(5.9)
(277)
(43)
—
(6)
Archers brand
(0.1)
(7)
(4)
—
(3)
Windsor
(0.3)
(100)
(83)
(13)
(26)
Guinness Cameroun S.A.
(1.3)
(196)
(131)
(5)
(38)
(7.6)
(580)
(261)
(18)
(73)
Acquisitions and disposals
(7.6)
(580)
(261)
(18)
(51)
Year ended 30 June 2024
Acquisitions
Mr Black
—
3
2
1
(4)
Balcones Distilling
—
—
—
4
(8)
Gordon's
1.2
105
105
4
8
Don Papa Rum
0.2
30
30
22
(14)
1.4
138
137
31
(18)
Disposals
Windsor
0.2
35
30
5
7
Guinness Cameroun S.A.
1.4
26
26
—
19
1.6
61
56
5
26
Acquisitions and disposals
3.0
199
193
36
8
Earnings per share before exceptional items
Earnings per share before exceptional items is calculated by dividing profit attributable to equity shareholders of the parent company before
exceptional items by the weighted average number of shares in issue.
Earnings per share before exceptional items for the years ended 30 June 2024 and 30 June 2023 are set out in the table below:
2024
2023
$ million
re-presented
$ million
Profit attributable to equity shareholders of the parent company
3,870
4,445
Exceptional operating and non-operating items
14
402
Exceptional tax items and tax in respect of exceptional operating and non-operating items
24
(226)
Exceptional items attributable to non-controlling interests
104
(173)
Profit attributable to equity shareholders of the parent company before exceptional items
4,012
4,448
Weighted average number of shares
million
million
Shares in issue excluding own shares
2,234
2,264
Dilutive potential ordinary shares
5
7
Diluted shares in issue excluding own shares
2,239
2,271
cents
cents
Basic earnings per share before exceptional items
179.6
196.5
Diluted earnings per share before exceptional items
179.2
195.9
Diageo Annual Report 2024
231
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Free cash flow
Free cash flow comprises the net cash flow from operating activities aggregated with the net cash expenditure paid for property, plant and
equipment and computer software that are included in net cash flow from investing activities.
The remaining components of net cash flow from investing activities that do not form part of free cash flow, as defined by the group’s
management, are in respect of the acquisition and sale of businesses and loans to associates and other investments that do not meet the definition
of cash and cash equivalents.
The group’s management regards a portion of the purchase and disposal of property, plant and equipment and computer software as
ultimately non-discretionary since ongoing investment in plant, machinery and technology is required to support the day-to-day operations,
whereas acquisition and sale of businesses are discretionary.
Where appropriate, separate explanations are given for the impacts of acquisition and sale of businesses, dividends paid and the purchase of
own shares, each of which arises from decisions that are independent from the running of the ongoing underlying business.
The Directors and management have redefined free cash flow to exclude the adjustment for cash paid or received in respect of loans and other
investments. The group's management believes the redefined free cash flow definition is a more appropriate measure of the ongoing cash
generation of the group. The presentation of free cash flow for the year ended 30 June 2023 has been aligned to free cash flow for the year ended
30 June 2024.
Free cash flow reconciliations for the years ended 30 June 2024 and 30 June 2023 are set out in the table below:
2024
2023
$ million
re-presented
$ million
Net cash inflow from operating activities
4,105
3,636
Disposal of property, plant and equipment and computer software
14
16
Purchase of property, plant and equipment and computer software
(1,510)
(1,417)
Free cash flow
2,609
2,235
UNA UDITED FINANCIAL INFORMATION continued
232
Diageo Annual Report 2024
Operating cash conversion
Operating cash conversion is calculated by dividing cash generated from operations excluding cash inflows and outflows in respect of exceptional
items, dividends received from associates, maturing inventories, provisions, other items and post-employment payments in excess of the amount
charged to operating profit by operating profit before depreciation, amortisation, impairment and exceptional operating items.
The measure is excluding any hyperinflation adjustment above the organic treatment of hyperinflationary economies. The ratio is stated at the
budgeted exchange rates for the respective year and is expressed as a percentage.
Operating cash conversion for the years ended 30 June 2024 and 30 June 2023 were as follows:
2024
2023
$ million
re-presented
$ million
Profit for the year
4,166
4,479
Taxation
1,294
1,163
Share of after tax results of associates and joint ventures
(414)
(443)
Net finance charges
885
712
Non-operating items
70
(364)
Operating profit
6,001
5,547
Exceptional operating items
(56)
766
Fair value remeasurements
(141)
(153)
Depreciation, amortisation and impairment(1)
678
597
Hyperinflation adjustment
6
(33)
Retranslation to budgeted exchange rates
248
512
6,736
7,236
Cash generated from operations
6,065
5,744
Net exceptional cash paid(2)
185
30
Post-employment payments less amounts included in operating profit(1)
18
31
Net movement in maturing inventories(3)
577
693
Provision movement
29
81
Dividends received
(269)
(271)
Other items(1)
(88)
17
Hyperinflation adjustment
(23)
(34)
Retranslation to budgeted exchange rates
216
461
6,710
6,752
Operating cash conversion
99.6%
93.3%
(1)
Excluding exceptional items.
(2)
Exceptional cash payments in operating cash flow for various litigation matters were $102 million (2023 – $nil), for distribution termination fee was $55 million (2023 – $nil), for the
supply chain agility programme was $26 million (2023 – $14 million) and for winding down our Russian operations was $2 million (2023 – $16 million).
(3)
Excluding non-cash movements such as exchange and the impact of acquisitions and disposals.
Return on average invested capital
Return on average invested capital is used by management to assess the return obtained from the group’s asset base and is calculated to aid
evaluation of the performance of the business.
The profit used in assessing the return on average invested capital reflects operating profit before exceptional items attributable to equity
shareholders of the parent company plus share of after tax results of associates and joint ventures after applying the tax rate before exceptional
items for the fiscal year. Average invested capital is calculated using the average derived from the consolidated balance sheets at the beginning,
middle and end of the year. Average capital employed comprises average net assets attributable to equity shareholders of the parent company for
the year, excluding net post-employment benefit assets/liabilities (net of deferred tax) and average net borrowings.
The Directors and management have redefined the return on average invested capital to exclude the previous adjustment in respect of average
integration and restructuring costs (net of tax) and goodwill at 1 July 2004 from average invested capital. The presentation of return on average
invested capital for the year ended 30 June 2023 has been aligned with the year ended 30 June 2024.
Diageo Annual Report 2024
233
F I N A N C I A L S T A T E M E N T S
G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Calculations for the return on average invested capital for the 30 June 2024 and 30 June 2023 are set out in the table below:
2024
2023
$ million
re-presented
$ million
Operating profit
6,001
5,547
Exceptional operating items
(56)
766
Profit before exceptional operating items attributable to non-controlling interests
(192)
(207)
Share of after tax results of associates and joint ventures
414
443
Tax at the tax rate before exceptional items of 23.2% (2023 – 23.0%)
(1,475)
(1,554)
4,692
4,995
Average net assets (excluding net post-employment benefit assets/liabilities)
11,270
10,914
Average non-controlling interests
(1,941)
(2,001)
Average net borrowings
20,361
18,297
Average invested capital
29,690
27,210
Return on average invested capital
15.8%
18.4%
Adjusted net borrowings to adjusted EBITDA
Diageo manages its capital structure with the aim of achieving capital efficiency, providing flexibility to invest through the economic cycle and
giving efficient access to debt markets at attractive cost levels. The group regularly assesses its debt and equity capital levels to enhance its capital
structure by reviewing the ratio of adjusted net borrowings (net borrowings plus post-employment benefit liabilities before tax) to adjusted EBITDA
(earnings before exceptional operating items, non-operating items, interest, tax, depreciation, amortisation and impairment).
Calculations for the ratio of adjusted net borrowings to adjusted EBITDA for the years ended 30 June 2024 and 30 June 2023 are set out in the
table below:
2024
2023
$ million
re-presented
$ million
Borrowings due within one year
2,885
2,142
Borrowings due after one year
18,616
18,649
Fair value of foreign currency derivatives and interest rate hedging instruments
42
40
Lease liabilities
604
564
Less: Cash and cash equivalents
(1,130)
(1,813)
Net borrowings
21,017
19,582
Post-employment benefit liabilities before tax
429
471
Adjusted net borrowings
21,446
20,053
Profit for the year
4,166
4,479
Taxation
1,294
1,163
Net finance charges
885
712
Depreciation, amortisation and impairment (excluding exceptional accelerated depreciation and impairment)
678
597
Exceptional accelerated depreciation and impairment
(185)
700
EBITDA
6,838
7,651
Exceptional operating items (excluding accelerated depreciation and impairment)
129
66
Non-operating items
70
(364)
Adjusted EBITDA
7,037
7,353
Adjusted net borrowings to adjusted EBITDA
3.0
2.7
UNA UDITED FINANCIAL INFORMATION continued
234
Diageo Annual Report 2024
Tax rate before exceptional items
Tax rate before exceptional items is calculated by dividing the total tax charge before tax charges and credits in respect of exceptional items, by
profit before taxation adjusted to exclude the impact of exceptional operating and non-operating items, expressed as a percentage. The measure
is used by management to assess the rate of tax applied to the group’s operations before tax on exceptional items.
The tax rates from operations before exceptional and after exceptional items for the years ended 30 June 2024 and 30 June 2023 are set out in
the table below:
2024
2023
$ million
re-presented
$ million
Taxation on profit (a)
1,294
1,163
Tax in respect of exceptional items
(24)
158
Exceptional tax credit
—
68
Tax before exceptional items (b)
1,270
1,389
Profit before taxation (c)
5,460
5,642
Non-operating items
70
(364)
Exceptional operating items
(56)
766
Profit before taxation and exceptional items (d)
5,474
6,044
Tax rate after exceptional items (a/c)
23.7 %
20.6 %
Tax rate before exceptional items (b/d)
23.2 %
23.0 %
Other definitions
Volume share is a brand’s retail volume expressed as a percentage of
the retail volume of all brands in its segment. Value share is a brand’s
retail sales value expressed as a percentage of the retail sales value of
all brands in its segment. Unless otherwise stated, share refers to value
share.
Net sales are sales less excise duties. Diageo incurs excise duties
throughout the world. In the majority of countries, excise duties are
effectively a production tax which becomes payable when the product
is removed from bonded premises and is not directly related to the
value of sales. It is generally not included as a separate item on
external invoices; increases in excise duties are not always passed on
to the customer and where a customer fails to pay for a product
received, the group cannot reclaim the excise duty. The group therefore
recognises excise duty as a cost to the group.
Price/mix is the number of percentage points difference between
the organic movement in net sales and the organic movement in
volume. The difference arises because of changes in the composition of
sales between higher and lower priced variants/markets or as price
changes are implemented.
Shipments comprise the volume of products sold to Diageo’s
immediate (first tier) customers. Depletions are the estimated volume of
the onward sales made by Diageo's immediate customers. Both
shipments and depletions are measured on an equivalent units basis.
References to emerging markets include Poland, Eastern Europe,
Türkiye, Latin America and Caribbean, Africa and Asia Pacific
(excluding Australia, Korea and Japan).
References to ready to drink also include ready to serve products,
such as pre-mixed cans in some markets.
References to beer include cider, flavoured malt beverages and
some non-alcoholic products such as Malta Guinness.
The results of Hop House 13 Lager are included in the Guinness
figures.
There is no industry-agreed definition for price tiers and for data
providers such as IWSR, definitions can vary by market. Diageo bases
price tier definitions on a methodology that uses external metrics
(including market pricing data from Nielsen, IRI etc., as well as the
IWSR segmentation) for benchmarking and internal pricing metrics for
a consistent segmentation.
References to the disposal of the USL Popular brands include non-
exhaustively the Haywards, Old Tavern, White Mischief, Honey Bee,
Green Label and Romanov brands.
References to the group include Diageo plc and its consolidated
subsidiaries.
Diageo Annual Report 2024
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G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
2. Contractual obligations and other commitments
Payments due by period
Less than
1 year
$ million
1-3 years
$ million
3-5 years
$ million
More than
5 years
$ million
Total
$ million
As at 30 June 2024
Long-term debt obligations
2,388
4,992
4,258
9,812
21,450
Interest obligations
791
1,043
789
1,866
4,489
Credit support obligations
14
—
—
—
14
Purchase obligations
2,413
1,009
389
37
3,848
Commitments for short-term leases and leases of low-value assets
16
6
1
—
23
Provisions and other non-current payables
101
225
187
192
705
Lease obligations
114
178
117
310
719
Capital commitments
780
3
—
—
783
Other financial liabilities
198
—
—
—
198
Total
6,815
7,456
5,741
12,217
32,229
Long-term debt obligations comprise the principal amount of borrowings (excluding foreign currency swaps) with an original maturity of greater
than one year. Interest obligations comprise interest payable on these borrowings and are calculated based on the fixed amounts payable and
where the interest rate is variable on an estimate of what the variable rates will be in the future. Credit support obligations represent liabilities to
counterparty banks in respect of cash received as collateral under credit support agreements. Purchase obligations include various long-term
purchase contracts entered into for the supply of raw materials, principally bulk whisk(e)y, cereals, cans and glass bottles. Contracts are used to
guarantee the supply of raw materials over the long-term and to enable a more accurate prediction of costs of raw materials in the future. For
certain provisions, discounted numbers are disclosed.
Corporate tax payable of $136 million and deferred tax liabilities of $2,947 million are not included in the table above, as the ultimate timing of
settlement cannot be reasonably estimated.
Management believe that it has sufficient funding for its working capital requirements.
3. Off-balance sheet arrangements
Neither Diageo plc nor any member of the Diageo group has any off-balance sheet financing arrangements that currently have or are reasonably
likely to have a material future effect on the group’s financial condition, changes in financial condition, results of operations, liquidity, capital
expenditure or capital resources.
UNA UDITED FINANCIAL INFORMATION continued
236
Diageo Annual Report 2024
Cautionary statement concerning forward-looking statements
This document contains ‘forward-looking’ statements. These statements
can be identified by the fact that they do not relate only to historical or
current facts and may generally, but not always, be identified by the
use of words such as “’will”, “anticipates”, “should”, “could”, “would”,
“targets”, “aims”, “may”, “expects”, “intends” or similar expressions
statements. In this document, such statements include those that
express forecasts, expectations, plans, outlook, objectives and
projections with respect to future matters, including information related
to Diageo’s fiscal 25 outlook, Diageo’s medium-term guidance,
Diageo’s supply chain agility programme, future Total Beverage
Alcohol market share ambitions and any other statements relating to
Diageo’s performance for the year ending 30 June 2025 or thereafter.
Forward-looking statements involve risk and uncertainty because they
relate to events and depend on circumstances that will occur in the
future. There is a number of factors that could cause actual results and
developments to differ materially from those expressed or implied by
these forward-looking statements, including factors that are outside
Diageo's control, which include (but are not limited to):
(i) economic, political, social or other developments in countries and
markets in which Diageo operates, including geopolitical instability as a
result of Russia's invasion of Ukraine and the conflict in the Middle East
and macroeconomic events that may affect Diageo’s customers,
suppliers and/or financial counterparties; (ii) the effects of climate
change, or legal, regulatory or market measures intended to address
climate change; (iii) changes in consumer preferences and tastes,
including as a result of disruptive market forces, changes in
demographics and evolving social trends (including any shifts in
consumer tastes towards at-home occasions, premiumisation, small-
batch craft alcohol, or lower or non-alcoholic products and/or
developments in e-commerce); (iv) changes in the domestic and
international tax environment that could lead to uncertainty around the
application of existing and new tax laws and unexpected tax
exposures; (v) changes in the cost of production, including as a result of
increases in the cost of commodities, labour and/or energy due to
inflation and/or supply chain disruptions; (vi) any litigation or other
similar proceedings (including with tax, customs, competition,
environmental, anti-corruption or other regulatory authorities); (vii) legal
and regulatory developments, including changes in regulations relating
to environmental issues and/or e-commerce; (viii) the consequences of
any failure of internal controls; (ix) the consequences of any failure by
Diageo or its associates to comply with anti-corruption, sanctions, trade
restrictions or similar laws and regulations, or any failure of Diageo’s
related internal policies and procedures to comply with applicable law
or regulation; (x) Diageo’s ability to make sufficient progress against or
achieve its ESG ambitions; (xi) cyber-attacks and IT threats or any other
disruptions to core business operations; (xii) contamination,
counterfeiting or other circumstances which could harm the level of
customer support for Diageo’s brands and adversely impact its sales;
(xiii) Diageo’s ability to maintain its brand image and corporate
reputation or to adapt to a changing media environment; (xiv)
fluctuations in exchange rates and/or interest rates; (xv) Diageo’s ability
to successfully execute its strategic business transformation projects;
(xvi) Diageo’s ability to derive the expected benefits from its business
strategies, including Diageo’s investments in e-commerce and its luxury
portfolio; (xvii) increased competitive product and pricing pressures,
including as a result of introductions of new products or categories that
compete with Diageo’s products and consolidations by competitors and
retailers; (xviii) increased costs for, or shortages of, talent, as well as
labour strikes or disputes; (xix) movements in the value of the assets
and liabilities related to Diageo’s pension plans; (xx) Diageo’s ability to
renew supply, distribution, manufacturing or licence agreements (or
related rights) and licences on favourable terms, or at all, when they
expire; or (xxi) any failure by Diageo to protect its intellectual property
rights.
In preparing the ESG-related information contained in this
document, Diageo has made a number of key judgements, estimations
and assumptions and the processes and issues involved are complex.
The ESG-related forward looking statements should be treated with
special caution, as ESG and climate data, models and methodologies
are often relatively new, are rapidly evolving and are not of the same
standard as those available in the context of other financial information,
nor are they subject to the same or equivalent disclosure standards,
historical reference points, benchmarks, market consensus or globally
accepted accounting principles. In particular, it is not possible to rely on
historical data as a strong indicator of future trajectories in the case of
climate change and its evolution. Outputs of models, processed data
and methodologies are also likely to be affected by underlying data
quality, which can be hard to assess and we expect industry guidance,
market practice, and regulations in this field to continue to change.
There are also challenges faced in relation to the ability to access data
on a timely basis and the lack of consistency and comparability
between data that is available. This means the ESG-related forward-
looking statements and ESG metrics discussed in this document carry
an additional degree of inherent risk and uncertainty, and therefore, our
actual results and developments could differ materially from those
expressed or implied by the ESG-related forward-looking statements in
this document.
In light of the uncertainty as to the nature of future policy and market
responses to climate change, including between regions, and the
effectiveness of any such responses, Diageo may have to re-evaluate its
progress and adapt its approach towards its ESG ambitions,
commitments and targets in the future, update the methodologies it
uses or alter its approach to ESG and climate analysis and may be
required to amend, update and recalculate its ESG disclosures and
assessments in the future, as market practice and data quality and
availability develop rapidly.
All oral and written forward-looking statements made on or after the
date of this document and attributable to Diageo are expressly
qualified in their entirety by the cautionary statements contained or
referred to in this section. Further details of potential risks and
uncertainties affecting Diageo are described in our filings with the
London Stock Exchange and the US Securities and Exchange
Commission (SEC), including in our Annual Report on Form 20-F for the
year ended 30 June 2024.
Any forward-looking statements made by or on behalf of Diageo
speak only as of the date they are made. Diageo expressly disclaims
any obligation or undertaking to publicly update or revise these
forward-looking statements other than as required by applicable law.
The reader should, however, consult any additional disclosures that
Diageo may make in any documents which it publishes and/or files
with the SEC.
All readers, wherever located, should take note of these disclosures.
This document includes names of Diageo’s products, which constitute
trademarks or trade names which Diageo owns, or which others own
and license to Diageo for use. All rights reserved. © Diageo plc 2024.
The information in this document 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.
This document may include information about Diageo’s target debt
rating. A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time by
the assigning rating organisation. Each rating should be evaluated
independently of any other rating.
Past performance cannot be relied upon as a guide to future
performance.
References in this document to information on websites are included
as an aid to their location and such information is not incorporated in,
and does not form part of, this document unless otherwise noted.
Diageo Annual Report 2024
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S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Reporting boundaries and methodologies
The non-financial reporting boundaries and
methodologies outlined here relate to the social
and environmental performance disclosures set
out in the Annual Report and the ESG Reporting
Index. Any exceptions, differences or deviations
from or limitations on these general reporting
methodologies and boundaries are explicitly
noted alongside the respective metrics in the
subsequent tables that follow.
General reporting methodology and boundaries,
covering both non-environmental and
environmental metric reporting
Our non-financial reporting presents relevant information that is based
on the data available at the time of publication, while being
transparent about its limitations.
I. Reporting period
Our reporting covers the financial year ended 30 June 2024 unless
indicated otherwise.
II. Scope
Unless stated otherwise(1), the scope of all non-financial data disclosed
in the Annual Report and the ESG Reporting Index encompasses the
performance of Diageo plc's worldwide operations and its subsidiaries,
along with the proportionate contribution of results from significant
joint ventures, associates and joint operations. Deviations from the
reporting scope depend on the nature of each performance metric
and any differences are explained for each performance metric
below.
We have defined reporting boundaries for those targets and metrics
which are part of our ‘Spirit of Progress’ action plan, including those
under the banner “Doing Business the Right Way”. The reporting
boundaries for all metrics and targets are based on the nature of each
indicator and, in the case of our greenhouse gas (GHG) emissions
metrics, with reference to the Greenhouse Gas Protocol.
Environmental data and health and safety data is collected and
reported for all operational sites and office sites with more than 50
employees where we have operational control ('direct operations')(2).
The environmental impacts associated with leased facilities where we
do not have operational control or have less than 50 employees are
excluded and considered immaterial to the company’s overall
impacts. The environmental and health and safety impacts associated
with leased or third-party manufacturing units, where we have a lease
arrangement under International Financial Reporting Standards (IFRS),
are excluded from our direct operations data.
(1)
Non-financial information, including baseline information, excludes the performance
attributable to one of our business units in Greater China due to local regulatory
restrictions. We believe the exclusion of this data does not materially impact our non-
financial performance.
(2)
We define operational control using the definition of accounting standards for most of
our ESG metrics. For greenhouse gas emissions, our definition is aligned with the
Greenhouse Gas Protocol. Any exceptions, limitations and judgements, including
around interpretation of the GHG protocol, are explained under each performance
metric.
All company-owned vehicles, specifically all vehicles used and re-
fuelled on Diageo’s premises, are included in direct operation
greenhouse gas emissions (Scope 1 and 2). The emissions associated
with leased vehicles not under our control are included in our indirect
greenhouse gas emissions (Scope 3). In limited instances, Diageo has
ownership of some benefit cars which are not used and re-fuelled on
Diageo operational sites. The emissions associated with these cars are
included in our indirect greenhouse gas emissions (Scope 3).
Net zero emissions are reached when anthropogenic (i.e. human-
caused) emissions of greenhouse gases into the atmosphere are
balanced by anthropogenic removals over a specified period. A
science based approach to net zero covers greenhouse gas emission
Scope 1, 2 and 3 with direct abatement of approximately 90% from
our emissions baseline and up to 10% of high-quality certified carbon
offsets to neutralise hard-to-abate residual emissions to close the gap
to zero.
‘Carbon neutral’ or ‘carbon neutrality’ refers to an outcome in which
greenhouse gas emissions have been neutralised, through a
combination of emissions reduction efforts and the purchase of carbon
offsets/credits, resulting in no net release of carbon dioxide. Any
carbon offset purchases for discrete carbon neutral claims are
specifically for certification and are not included in annually reported
Diageo greenhouse gas emission footprint.
III. Baseline and targets
The financial year ended 30 June 2020 is our baseline year and
applies to the majority of our ‘Spirit of Progress‘ ambitions. If a different
baseline year is used, this is described in the following pages. The
baseline year is used as the basis for calculating progress against our
ambitions. We aim to achieve each ambition by fiscal 30, unless
otherwise stated in the following pages.
Material changes to environmental reporting boundaries and
methodologies are reviewed at 2030 grain-to-glass Strategic Business
Review meetings that are chaired by the President, Global Supply
Chain & Procurement and Chief Sustainability Officer. The Executive
Working Group - a group that leads discussion on ESG topics and our
'Spirit of Progress' plan - also reviews material changes to the
reporting boundaries and methodologies on an annual basis.
IV. Acquisitions, new sites and divestments
Acquisitions are included in the consolidated reporting for all metrics
from the date when control transfers or as soon as practically feasible
and no later than one year after that date. This duration varies as each
new acquisition has unique systems and processes that must be
integrated.
New sites or site extensions are included in the scope of all metrics
from the date commissioning commences.
In the case of divestments, data associated with the divestment is
removed from the baseline, intervening years and current year unless
otherwise stated in the following pages.
V. Restatements
We may restate prior years’ data due to structural changes in our
operations, including from acquisitions and divestments;
improvements in data quality and calculation methods and material
changes to relevant policies.
To determine whether we need to restate prior years’ data, we
examine whether the qualitative or quantitative impacts of the
changes are material to the users of our reporting.
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Diageo Annual Report 2024
For a restatement of environmental data, we restate the data for the
baseline year and intervening years.
In the case of our environmental data, we may restate prior years’
data to reflect updates to GHG emission factors, in line with the GHG
Protocol recommendations and for any changes in reporting policy
that result in a change to the baseline of more than 1%. We also
restate prior years’ data where structural changes regarding
outsourcing and insourcing have an impact of more than 1%. In
certain cases, where historical data is unavailable, the environmental
impacts for the baseline year and intervening years are extrapolated
from current environmental impact data, based on production
patterns and other relevant factors.
Any other restatement for all metrics is triggered by a benchmark
threshold of 5%.
VI. Reliability and accuracy of data
We have systems, processes and controls that govern the collection,
review and validation of non-financial data included in this report.
Reporting boundaries and methodologies are reviewed and updated
where appropriate each year by leadership teams. We are continually
strengthening our data collection processes and underlying controls.
Whilst we seek to capture all information as accurately as possible, it is
neither feasible nor practical to measure all data with absolute
certainty. Where we have made estimates or exercised judgement, this
is highlighted within the reporting methodologies for each indicator
under ‘Limitations’.
The metrics with the symbol Δ are subject to independent limited
assurance by PricewaterhouseCoopers LLP – see pages 258-261 of this
document and pages 118-121 of the ESG Reporting Index.
Some of our listed subsidiaries also publish sustainability information
either as standalone reports or as part of their annual report.
A non-exhaustive set of examples of this reporting are linked below:
• United Spirits Limited
• Sichuan Swellfun Co.,Ltd
• East African Breweries Ltd
• Guinness Nigeria plc
VII. Reporting systems
We use four main systems to collect, validate and analyse reported
data.
• Human Resources data is reported at site level primarily using
Workday, our global information management systems. HR data is
collected on a monthly basis for all Workday markets. Non-
Workday markets data is manually captured offline. Both Workday
and non-Workday markets data are then consolidated.
• Health and Safety information for performance measures is
collected locally, on a monthly basis, using site held incident reports.
This is collated and analysed using a web-based information
management system.
• Environmental data is collected on key measures of environmental
performance monthly at site and market level and consolidated for
group reporting monthly. Data is collated and analysed using a
web-based environmental management system.
• Market-level ‘Spirit of Progress‘ data: Where ‘Spirit of Progress‘
programmes are managed at a local level, data is collated every
quarter. The data is compiled at market, regional and global levels,
alongside our other ‘Spirit of Progress‘ goals and is reviewed by
general managers, functional leadership teams, the 2030 grain-to-
glass Strategic Business Review (SBR) and the Executive Committee
during quarterly meetings.
Scope and methodology of physical and transition
climate risk scenario analysis reported on pages
61-66
Scenario analysis of physical risks
Important note on scenario analysis
Climate risk scenario analysis has limitations: it is not a predictor of the
future and it is limited by the assumptions used, which themselves are
subject to uncertainty. No single scenario is likely to materialise and
we are all likely to be exposed to both physical and transition risks as
the world continues to warm as a consequence of emissions already in
the atmosphere. The pathway to reducing emissions is also highly
variable, as governments and industry pursue a variety of means, such
as introducing regulation and developing new technologies.
Nevertheless, scenario analysis is a powerful tool to understand how
our business could be impacted under certain plausible but severe
future conditions and it allows us to understand where risks and
opportunities are most likely to materialise, to understand trends and
to integrate these into our strategy.
Following the recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD), we conducted scenario analysis to
determine the likely financial impact of the most important physical
risks on our assets and operations. The physical risks we identified of
most importance were:
1. Water supply: Inability to produce brands due to constrained water
supply as a result of drought caused by climate change.
2. Agricultural material supply: Increased cost of raw materials due to
scarcity caused by changes in growing conditions caused by
climate change.
3. Site integrity: Inability to produce products, or damage to stored
products due to acute weather events (floods or storms).
4. Disruption to agricultural material supply: Inability to receive
agricultural materials due to acute weather events (floods or
storms).
Using available climate data and natural catastrophe-modelling
techniques, our climate resilience partners calculated projected
Estimated Annual Losses (EALs) and Value at Risk (VaR) for the present
day and two future time periods (2030 and 2050) under two climate
scenarios. For most climate variables, these climate scenarios include
a ‘moderate’ emissions reduction pathway (RCP4.5 or SSP245) and a
‘worst-case’ pathway (RCP 8.5 or SSP 585). The results were expressed
as:
Present day and projected EALs driven by:
• The impact of drought, river floods and tropical windstorms on
owned and third-party-operated production assets.
• The impact of floods and tropical windstorms on supplier assets
(glass and cans).
and present day and projected VaR associated with:
• The exposure of production assets to water stress.
• The exposure of production and supplier assets to tropical
windstorms.
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ADDITIONAL INFORMATION
A summary of the scope of our physical and transition risk assessments and scenario analysis
Timeframe
Short term (0-5yrs)
Medium term (2030)
Long term (2050)
Geography
All Diageo and key third-party operations in North America, Scotland (fiscal 21); India, Africa, Mexico and Türkiye
(fiscal 22); Asia Pacific, Europe and Latin America and Caribbean (fiscal 23). In fiscal 24, we assessed a further 13
new acquisitions or important third-party sites to complete our assessment.
Risk types
Physical risks
Water (availability, quality, temperature), temperature,
flooding, landslide, wildfires, wind, humidity
Transition risks and opportunities
Temperature scenarios
+4 to +5ºC (extreme)
RCP 8.5'
+2 to +3ºC
(moderate)
RCP 4.5'
1.5ºC to 2ºC (Paris agreement)
RCP 2.6'
Scope
Raw materials
1,200+ suppliers'
sites
Key raw materials*
(wheat, barley,
maize, cane and
beet sugar, vanilla,
aniseed, grapes,
broken rice,
sorghum, agave,
dairy, hops)
*+4 to +5ºC
scenario only
Processing
Approximately 250
Diageo and third-
party operations
sites
Detailed
assessments of 39
sites
Distribution
Key road, rail routes
Key sea ports (69)
Risks reviewed
Policy and legal risks
Technology risks
Market risks
Reputation risks
Opportunities
Resource efficiency
Energy source
Products and services
Markets
Scenario analysis
Energy
Transport
Packaging
Raw materials
Scenario analysis
Pack weight
reduction
Circular offerings
Scenario analysis of transition risks
Over fiscal years 21-24, we conducted scenario analyses of the impact
on our financial performance of transition risks, stemming from a Paris-
aligned scenario. Our modelling is based on a successful transition to
a low-carbon economy to limit the temperature rise to 1-2⁰C by 2100
and assumes a variety of decarbonisation challenges and
opportunities relating to ingredients, energy, packaging and transport
costs and changes in demand for our products (to 2030 and 2050).
Over the course of several years, we have refined the model and
incorporated data relating to our entire business, including production
volume, sales, raw materials and packaging costs and projected
growth rates by category and market, to inform future scenarios.
In modelling the financial impact of a successful transition to a low-
carbon economy, we considered two scenarios:
1. A baseline scenario which incorporates stated policies and national
targets that are already in place and have detailed measures for
their realisation; and
2. A transition scenario that assumes the world successfully reaches net
zero emissions by 2050. This scenario considers necessary changes
in the global energy sector and associated changes across all other
sectors of the economy that can reasonably be modelled.
Both scenarios rely on a combination of internal assumptions (e.g.
production costs, sales and margin growth rates, product mix, etc.)
and external factors (e.g. carbon pricing, increased green energy
production and decarbonisation of industry). External models
available from the International Energy Agency, the Intergovernmental
Panel on Climate Change and other institutions were supplemented
where necessary by our expert partners' internal models. Together,
these models gave us a range of plausible assumptions designed to
capture a trajectory of changes in demand, costs, prices, regulation,
technology and capital investments in relevant markets and business
segments, that could result in the world achieving net zero emissions
by 2050. We looked at how combinations of these changes might
affect us both positively (increased demand for sustainable products)
and negatively (higher costs) and estimated the combined effect on
our cash flow to both 2030 and 2050. Outlined in the table on page
241 below are the materials that most affect our input costs, which may
go up or down depending on the situation. We have modelled costs
based on our exposure to global versus local changes; for example,
glass and aluminium are procured globally, while the cost of energy,
for example, is local. For each scenario, we then estimated the prices
of major input costs, where relevant by geography and modelled the
impact they would have on our operating profit.
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Input costs assessed in the scenario analysis by geography
Region
Global
United
Kingdom
United
States
Canada
Mexico
Türkiye
India
Africa
Asia
Pacific
LAC
Ireland
Glass
l
Aluminium
l
Land transport
l
Ocean transport
l
Energy
l
l
l
l
l
l
l
l
l
Electricity
l
l
l
l
l
l
l
l
l
Raw materials:
Barley
l
Wheat
l
Maize
l
Rice
l
Sorghum
l
Sugar
l
Vanilla
l
Aniseed
l
Agave
l
Grapes
l
Hops
l
Dairy
l
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S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Promote positive drinking
Target
Scale up our SMASHED partnership and educate 10 million young people, parents and teachers on the dangers
of underage drinking
Performance measures
• Number of people educated on the dangers of underage drinking through a Diageo-supported education
programme
• Number of people who confirmed changed attitudes on the dangers of underage drinking following participation in
a Diageo-supported education programme
Definition
SMASHED is our flagship underage drinking programme, developed and delivered in partnership with Collingwood
Learning (Collingwood) and sponsored by Diageo. Our SMASHED partnership aims to change attitudes to underage
drinking through live theatre performances, workshops and interactive online learning experiences.
Live: A live or virtual theatre performance in schools or other community setting, with interactive workshops for students,
resources for teachers and parents, and comprehensive evaluations.
Online: An innovative and engaging e-learning course, telling the SMASHED story through film clips, with interactive
learning tools, student assessment and teacher support.
Offline: SMASHED Online programme can also be delivered offline through PowerPoint and film clips.
People educated: Target age group (10-17), who have participated in the live or online learning experience.
Completions for online are counted only on course completion, and live completion is counted when the individuals, as
recorded by the teacher, have completed the session, which is then confirmed by the local delivery partner.
Changed attitudes: A young person who confirmed a changed attitude is someone who responds to the post-survey
question by stating that they are less likely to drink underage. This is supported by evidenced progression through pre-
and post-performance surveys against all other learning outcomes, with the ‘less likely to drink underage’ results as the
core indicator.
Reporting period
1 June to 31 May. The complexity of gathering data from hundreds of schools globally with different academic years
means there is a lag in reporting information from our live programmes. Each financial year we include data from 1
June to 31 May. The baseline year for the reporting of cumulative progress is our financial year ended 30 June 2018.
Scope exception
When SMASHED is delivered by a third party and is partially funded by Diageo, we only claim the proportion of people
educated that our funding contributes to.
NON-FINA NCIAL REPORTING BOUNDARIES AND METHODOLOGIES continued
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Target (continued)
Scale up our SMASHED partnership and educate 10 million young people, parents and teachers on the dangers
of underage drinking
Data preparation and
measurement
The number of people educated is supplied by in-country delivery partners to Collingwood through teachers and online
records. We have assumed that teachers are an impartial and accurate provider of student numbers, with clear
knowledge of the groups allocated to SMASHED. We have also assumed that students participating in SMASHED live
and online have adequate literacy skills to understand and complete written evaluation forms.
SMASHED Live operates pre- and post-evaluation surveys of the target audience of young learners.
The following sampling criteria have been established to measure attitude change:
• Assess at least 20% of programme participants through pre- and post-evaluation surveys.
• The participants that make the 20% sample must be selected randomly.
• If the sample is less than 200 people, the same participants must take the pre- and post-evaluation surveys.
The number of people who confirmed changed attitude is calculated by projecting the results of the survey, for those
who have confirmed in the post-survey question that they are less likely to drink underage, to the total number of
people educated for the events run.
From September 2022, where an audience numbers over 500 students in one session, we categorised these as ‘large
scale special events’. Where large scale events were run if there are a sufficient number of facilitators (ratio 1:200
students) then the full number of people educated were included. If the number of facilitators present is below this ratio,
then the number of people in attendance were capped at the large-scale event number.
From October 2023, we extended capping of our participants to a 1:200 teacher to student ratio across all sizes of
events and formats. This enhancement balances the need for large gathering programme delivery with maintaining
impactful instruction and participation.
The data, alongside supporting evidence is supplied by delivery partners and then consolidated and reviewed by
Collingwood before being shared with Diageo for review and reporting.
Limitations
We consider double counting to be highly unlikely, given the SMASHED activity is only delivered once to any audience
within the curricular requirements for the year and our delivery partners also ensure additional quality measures, which
are detailed below. No unique personal identifiers are collected, for data privacy reasons.
• Where two programmes are available, we mitigate the risk of duplication by offering programmes strategically to
different school areas.
• Our delivering markets self-declare duplication risks proactively. These self-reported risks of duplication have been
omitted from reported figures.
• We request all markets document steps they take to avoid duplication of audience participation year-on-year with
an annual deduplication statement. Output from these statements provide a tailored, specific, and culturally
appropriate approach to avoiding double counting.
• We have assumed that the number of students expected to either repeat a year group or change secondary schools
is negligible, based on the most recent statistics from third parties.
Target
Extend our UNITAR partnership, and promote changes in attitudes to drink driving, reaching five million people
by 2030
Performance measure
Number of people educated about the dangers of drink driving
Definition
Our Wrong Side of the Road (WSOTR) digital learning resource with the United Nations Institute for Training and
Research (UNITAR), primarily delivered online, is designed to help people understand the consequences of drink
driving by listening to the repercussions for people who decided to get behind the wheel after drinking. All stories
shared via WSOTR are real and aim to help prevent other people from making the same mistakes. The purpose is to
show the effects that this decision can have on the individual and the people around them, helping viewers to consider
what would happen if they were in a similar situation.
We have also introduced a pilot programme called Sober versus Drink Driving. This is a gamification approach to
educating people about how alcohol impacts core driving skills. The intention is to demonstrate how drinking impacts
their ability to control the vehicle. We have initiated a trial in six markets and also in one of our brand homes, the
Guinness Storehouse in St. James’ Gate, Dublin.
People educated: Any individual who completes the WSOTR training or Sober versus Drink Driving. Completions for
online or in person training are only counted on course completion. Adaptations of the programmes are only made for
language translation.
Scope exception
For programmes that are partially funded by Diageo, we only claim the proportion of people educated that our
funding contributes to.
Reporting period
1 July to 30 June. Our baseline year is fiscal 22.
Data preparation and
measurement
Data preparation depends on the format of the training. For online trainings, completions are reported daily based on
Diageo’s own system or via third parties who must provide back-up data. For offline trainings, data is reported
quarterly and reviewed by the Diageo global team.
Limitation
-
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S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Governance and ethics
Performance measure
Code of Business Conduct mandatory training
Definition
Annually, we request all Diageo employees to complete the Code of Business Conduct e-learning. This requires
employees to confirm their commitment to their compliance and ethics accountabilities, and certify that they have
read, understood, and complied with our Code of Business Conduct and supporting global policies.
Scope exception
Employees on long-term leave e.g. family leave, sickness leave.
Data preparation and
measurement
We deliver the Code of Business Conduct e-learning through our global online training tool, Diageo My Learning Hub,
which holds participation and completion records for the course. Participation and completion records are reported to
market and function leadership teams and reviewed by Business Integrity leads.
Limitation
-
Performance measure
Reported and substantiated breaches
Definition
Reported breaches are potential breaches of our Code of Business Conduct, policies or standards made known to the
business, either via our SpeakUp service or brought to our attention internally. Substantiated breaches are those reports
that ultimately result in sufficient evidence being gathered to support the concern raised and if dismissal occurred,
these employees would be recorded as a Code-related leaver.
Scope exception
-
Data preparation and
measurement
We restate the number of substantiated breaches and Code-related leavers from previous years to include the
outcomes of those reports made in one financial year, but for which the investigation and any associated disciplinary
actions are not closed until the following financial year. This enables us to make a full and accurate year-on-year
comparison.
Limitation
-
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Our people
Health and safety
Performance measure
Lost-time accident frequency rate (LTAFR)
Definition
LTAFR is the number of lost time accidents (LTAs) for employees and contractors who work under Diageo’s direct
supervision. The calculation is based on actual working hours and is expressed as a rate per 1,000 full-time equivalent
(Occupational Health and Safety (OH&S) FTE). OH&S FTE differs from our employee based FTE; it includes contractors.
Direct supervision exists when Diageo directly defines the contractors’ deliverables and the methods and processes by
which the work is performed.
We define an LTA as any work-related incident resulting in injury or illness, where a healthcare professional or Diageo
recommends one or more full days away from work, or where a job restriction or modification prevents the employee
from conducting their routine tasks and activities and from working a full shift.
We consider an injury or illness to be work-related when an event or exposure in the work environment (including
people working at home) either caused or contributed to the resulting condition, or significantly aggravated a
medically documented and treated pre-existing injury or illness.
Scope exception
If the injured person did not report the accident on the same shift to their immediate line manager and/or Diageo
point of contact, this accident is not in scope as work-related.
Data preparation and
measurement
We collect and report safety data for all locations (manufacturing, corporate office, remote commercial and remote
home working) where we have operational control, including all office sites.
Each month, locations are required to collate and submit details associated with all incidents, accidents and LTAs, as
well as OH&S FTE data for their site. Contractor agencies provide data on the hours worked by each contractor under
Diageo’s direct supervision. This is then combined with Diageo employee data to calculate the total OH&S FTE data for
the month. Data is submitted by locations onto our global reporting platform on a monthly basis.
Limitation
We do not report LTAFR for independent contractors because of the difficulty and administrative burden in accurately
recording headcount.
Performance measure
Total recordable accident frequency rate (TRAFR)
Definition
TRAFR includes all work-related fatalities, lost time accidents and medical treatment cases for Diageo employees
wherever they carry out their work-related activities. It includes fatalities and lost time accidents for all contractors (not
only those under our direct supervision) and outsourced service providers while on Diageo premises. It also includes
medical treatment cases for all site-based contractors. The calculation is based on actual working hours and is
expressed as a rate per 1,000 OH&S workers.
Definition for ‘Injury or illness’ as under LTAFR.
Scope exception
The exception is the same as under LTAFR.
Working hours are excluded from the calculation for contractors visiting Diageo premises for a short period of time.
Data preparation and
measurement
The data preparation is the same as LTAFR.
Limitation
We do not report medical treatment cases for contractors visiting Diageo premises on a temporary basis.
Performance measure
Number of fatalities
Definition
A fatality includes any work-related fatality of an employee or contractor under our direct supervision in their day-to-
day work environment (on or off our premises), or any work-related fatality suffered by an outsourced service provider
or contractor not under our direct supervision while on our premises.
We consider a fatality to be work-related when an event or exposure in the work environment (including people
working at home) either caused or contributed to the event.
Scope exception
-
Data preparation and
measurement
The data preparation is the same as LTAFR.
Limitation
-
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S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Performance measure
Lost-time injury frequency rate (LTIFR)
Definition
Lost-time injury frequency rate (LTIFR) is a standard Occupational Safety and Health Administration (OSHA) metric that
measures the number of lost-time injuries occurring in a workplace per one million hours worked.
Scope exception
The scope exception is the same as LTAFR.
Data preparation and
measurement
The data preparation is the same as LTAFR.
Limitation
We do not report LTIFR for independent contractors because of the difficulty and administrative burden in accurately
recording headcount.
Performance measure
Lost-time injury rate (LTIR)
Definition
LTIR is a standard OSHA metric that calculates the number of lost-time injuries occurring in a workplace per 200,000
hours worked.
Scope exception
The scope exception is the same as LTAFR.
Data preparation and
measurement
The data preparation is the same as LTAFR.
Limitation
We do not report LTIR for independent contractors because of the difficulty and administrative burden in accurately
recording headcount.
Performance measure
Employee Engagement Index
Definition
The Employee Engagement Index is calculated as the percentage of respondents who answer positively to three
questions in our Your Voice survey: I am proud to work for Diageo; I would recommend Diageo as a great place to
work; I am extremely satisfied with Diageo as a place to work.
Scope exception
Contractors and employees on long-term leave are excluded.
Reporting period
The data was collected between 2 and 26 April 2024, so the results are based on feedback from participants in that
particular window.
Data preparation and
measurement
The index is calculated from an anonymous annual survey run by an independent third-party.
Limitation
-
Employee profile data
Performance measures
Average number of employees by region by gender
Average number of employees by role by gender
Definition
Employees on a full-time equivalent basis who are directly
employed by Diageo have been allocated to the region in
which they reside.
Employees on a full-time equivalent basis who are directly
employed by Diageo have been allocated to the role in
which they occupy.
We define Executive as a member of the Executive
Committee; senior manager (Senior Leaders, Level 2 and
Level 3) as those in top leadership positions excluding
Executive Committee members; line manager as all
Diageo employees (excluding Executive Committee and
senior managers) with one or more direct reports; and
supervised employee as all remaining Diageo employees
who have no direct reports.
Scope exception
All Diageo employees on a full-time equivalent basis are in
scope for this performance measure. However, people
data from joint ventures and associates where Diageo
does not have operational control are not included.
All Diageo employees are in scope for this performance
measure. However, people data from joint ventures and
associates where Diageo does not have operational
control are not included.
Data preparation and
measurement
Total employee data comprises our average number of
FTE employees across 12 months. The average is
calculated based on the FTE numbers from the last day of
each month over the past year.
Employee type includes Regular, Graduates and Fixed
Term Contract (FTC) across all markets.
Total employee data comprises our average number of
FTE employees across 12 months except Executives, which
are reported as of 30 June 2024 because of the small
population size. The average is calculated based on the
FTE numbers from the last day of each month over the
past year.
Employee type includes Regular, Graduates and Fixed
Term Contract (FTC) across all markets.
Limitations
Joint operations are included but, where Diageo does not
have operational control, only high-level regional data is
available.
Markets where our global HR system, Workday, is not in
place are reliant on manual data collection or, in some
cases, we may not be able to obtain data.
Data on family leave is only available for markets where
we have implemented our global HR system, Workday.
Joint operations are included but, where Diageo does not
have operational control, only high-level regional data is
available.
Markets where our global HR system, Workday, is not in
place are reliant on manual data collection or, in some
cases, we may not be able to obtain data.
Data on family leave is only available for markets where
we have implemented our global HR system, Workday.
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Champion inclusion and diversity
Ambition
Champion gender diversity, with an ambition to achieve 50% representation of women in leadership roles by
2030
Performance measure
Percentage of female leaders globally
Definition
Leadership roles comprise Executive Committee members (Exec), Senior Leaders (SL), Level 2 (L2) and Level 3 (L3)
roles, some of which will be vacant at any point in time. Employee type includes those on regular and fixed-term
contracts. Gender data is disclosed by employees themselves on a voluntary basis on our online Human Resources
system (Workday).
Scope exception
Non-Executive Directors and extended workers (agency workers, independent contractors, freelancers and consultants)
are not in scope, nor are joint ventures, joint operations not managed by Diageo or associates where Diageo does not
have operational control.
Data preparation and
measurement
The performance measure is calculated as the average of filled leadership roles at the end of each of the four quarters
across the fiscal year. The total leadership population is calculated from markets that collect gender information
through Workday, enabling all employees in scope to self-disclose this information.
Limitation
Where employees have chosen not to declare their gender, this information is excluded from the gender representation
data.
Ambition
Champion ethnic diversity with an ambition to increase representation of leaders from ethnically diverse
backgrounds to 45% by 2030
Performance measure
Percentage of ethnically diverse leaders globally
Definition
Leadership roles comprise Executive Committee members (Exec), Senior Leaders (SL), Level 2 (L2) and Level 3 (L3)
roles, some of which will be vacant at any point in time. Employee type includes those on regular and fixed-term
contracts.
We define ethnically diverse as those ethnic groups who are, or were historically, systematically under-represented,
disenfranchised and/or economically excluded.
Ethnically diverse people can be a majority or a minority in a country.
We determined eight categories of ethnicity, considering Diageo’s market footprint, historic underrepresentation and
alignment across regions: Asian, Black, Hispanic/Latin American, Indian, Indigenous, Middle Eastern and Turkish,
Mixed and Other Ethnic Groups.
Based on a third-party study commissioned by Diageo, ‘Hispanic/Latin American’ is adopted as a term to categorise
all people originating from the Latin America and Caribbean (LAC) region, including both indigenous and historically
migrant populations. For the purposes of this data gathering exercise, all employees identifying as White with a LAC
nationality have been recorded as Hispanic/Latin American.
Scope exception
Non-Executive Directors and extended workers (agency workers, independent contractors, freelancers and consultants)
are not in scope, nor are joint ventures, joint operations not managed by Diageo or associates where Diageo does not
have operational control. While Workday is live across all geographies in which leaders are based, ethnicity data
collection is not legally available in Denmark, France, Italy, Portugal, Spain and Sweden. Any leaders based in these
locations are not in scope.
Data preparation and
measurement
The performance target is calculated as the average of filled leadership roles at the end of each of the four quarters
across the fiscal year.
Ethnicity is selected by individuals within the leadership population from a pre-defined list that encompasses those
ethnic types most readily seen within the specific country, based on local census and governmental data. Ethnicity data
is disclosed by employees on a voluntary basis on Workday. The relevant ethnicity fields are based on the country in
which the individual is employed to ensure all are culturally relevant.
Employees based in India are not able to submit ethnicity data through Workday due to cultural sensitivities.
Nationality is obtained by the local HR team through official identification documents during the onboarding process.
For India-based employees not of Indian nationality, the local HR director confirms their ethnicity through a confidential
conversation with the individual.
Non-LAC nationals are mapped to their identified ethnicity.
Limitation
Employees who declined to self-identify or have not disclosed their ethnicity are not counted as ethnically diverse.
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S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Ambition
Provide business and hospitality skills to 200,000 people, increasing employability and improving livelihoods
through Learning for Life and our other skills programmes
Performance measure
Number of people reached through Learning for Life and other skills programmes
Definition
Our hospitality skills training programmes, including Learning for Life, aim to increase participants’ employability,
improve livelihoods and support a thriving hospitality sector.
Our entrepreneurship programmes provide business skills related to Diageo’s activities with the aim of supporting
participants to start their own business.
Our training courses are delivered in different ways: physical, live online sessions or via e-learning. Our training
curriculums includes technical skills, life skills, sustainability and inclusion and diversity.
People reached through Learning for Life: Participants are counted when an individual successfully completes the
curriculum, evidenced by either online training system records or classroom records.
Scope exception
Only markets running business and hospitality programmes are in scope.
Data preparation and
measurement
We collate the number of beneficiaries of Learning for Life and other skills programmes through participant
programme completion records (collected face-to-face or via our online training systems) maintained by Diageo
programme managers or third-party delivery partners.
Limitations
Accuracy relies on the quality of data provided by our third-party delivery partners.
For entrepreneurship programmes to be included, the metric owner applies judgment in determining whether the
initiatives are appropriate to be included under the definition of providing business or hospitality skills related to our
value chain.
Third-party delivery partners avoid double counting through checking the name of the participants on programme
registration forms in the case of physical trainings or using unique identifiers for online trainings and e-learnings. Even
with these procedures, there remains a limited risk of double counting which we will be addressing through increased
controls in the future.
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Pioneer grain-to-glass sustainability
Preserve water for life
Target
Reduce water use in our operations with a 40% improvement in water use efficiency in water-stressed areas and a 30%
improvement across the company
Performance measures
• Water efficiency index - water-stressed areas
• Water efficiency index - across the company
Additional
performance measures
Percentage change in water efficiency index from the prior year and from the baseline
Note: This metric is used in all new Long Term Incentive Plans awarded from fiscal 24 onwards.
Definition
We prepare and report water withdrawal (use) using internally developed reporting methodologies based on the GRI Standards.
Water withdrawal (use) includes water obtained from ground water, surface water, mains supply and water delivered to
the site by tanker, less any clean water provided directly from a site to local communities. Also excluded from reported
water withdrawal data is uncontaminated water abstracted and returned to the same source under local consent, water
abstracted from the sea and rainwater collection.
Water efficiency for distillation is measured as water use per litre of pure alcohol (LPA) distilled for finished products only.
Water efficiency for brewing and packaging is measured as water use per litre packaged.
When preparing the water efficiency index, the change in water efficiency for distillation and the change in water
efficiency for brewing and packaging are weighted by the proportion of water used (m3) by all sites in each production
type relative to the total water use, and added together. This is then compared to the baseline and prior year.
For water-stressed only: We classify a site as in water-stressed areas if the site is in a location which meets the definition
of ‘water-stressed’, which is identified through a combination of sources, including the World Resources Institute (WRI)
Aqueduct tool, UN definitions, internal water risk survey information and external reviews by independent hydrologists.
An assessment to identify our sites located in water-stressed areas is completed every two years. We include any new-
build or acquired sites and exclude any sites divested. All sites identified as water-stressed up until the 2025 water risk
assessment will be included in the scope of our current 2030 water efficiency commitment for water-stressed areas.
Newly classified water-stressed sites are retrospectively applied to the fiscal 20 baseline, including the water use and
distilled, brewed or packaged production volumes. Similarly, sites reclassified as no longer water-stressed are removed
from the fiscal 20 baseline. This approach ensures consistency in tracking performance, versus the more stretching target
of 40% improvement for water-stressed sites.
For reference, the water efficiency index formula is: 100 – (((% Change in Water efficiency, l/l distilled*% of water withdrawals for
distillation) + (% Change in Water efficiency, l/l brewing and packaging*% of water withdrawals for brewing and
packaging))*100).
Scope exception
The volume of water used on land under our operational control in Mexico and Türkiye is reported separately from water
used in our direct operations and not included in our water efficiency calculations.
Data preparation and
measurement
Water withdrawal (use) is measured primarily from meter readings and invoices. In limited cases, estimates are used.
Distilled, brewed and packaged production volumes are based on production records.
All sites (including offices, warehouses, maltings, etc.) are mapped to either distillation or brewing and packaging, based
on their prevailing production type. This mapping is reviewed annually and applied in determining the:
• water use distillation (m3);
• water use brewing and packaging, (m3);
• proportion of total water abstracted for each production type (%); and
• water efficiency for distillation (l/LPA) and brewing and packaging, (l/l).
Water efficiency index performance is attributed to the prevailing production type and excludes the production from the
secondary production process in the calculations (e.g. a site with distillation and packaging processes allocated to
distillation only considers the distilled production and excludes the packaged production in the calculations).
We measure water withdrawal (use), litres of pure alcohol and litres of packaged product by site and aggregate them at
the production type level.
Limitation
In limited cases (e.g. failure or malfunction of water meters), estimates are used for water withdrawals.
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S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Target
Reduce water use in our operations with a 40% improvement in water use efficiency in water-stressed areas and a
30% improvement across the company
Performance measure
• Water use efficiency per litre of product packaged (Litres/Litre) - across the company
• Water use efficiency per litre of product packaged (Litres/Litre) - water-stressed areas
Additional performance
measure
Percentage improvement in litres of water used per litre of product packaged from the prior year and from the
baseline.
Note: This metric is used in Long Term Incentive Plans for those awarded prior to fiscal 24.
Definition
We prepare and report water withdrawal (use) using internally developed reporting methodologies based on the GRI
Standards.
Water withdrawal includes water obtained from ground water, surface water, mains supply and water delivered to the
site by tanker, less any clean water provided back to local communities directly from a site. Uncontaminated water
abstracted and returned to the same source under local consent, water abstracted from the sea and rainwater
collection, are excluded from reported water withdrawal data.
For water-stressed only: We classify a site as in water-stressed areas if the site is in a location which meets the definition
of ‘water-stressed’ which is identified through a combination of sources, including the World Resources Institute (WRI)
Aqueduct tool, UN definitions, internal water risk survey information and external reviews by independent hydrologists.
An assessment to identify our sites located in water-stressed areas is completed approximately every two years. We
include any new-build or acquired sites and exclude any sites divested. All sites identified as water-stressed up until the
2025 water risk assessment will be included in the scope of our current 2030 water efficiency commitment for water-
stressed areas.
Newly classified water-stressed sites are retrospectively applied to the fiscal 20 baseline, including the water use and
packaged volumes. Similarly, sites reclassified as no longer water-stressed are removed from the fiscal 20 baseline. This
approach ensures consistency in tracking performance, versus the more stretching target of 40% improvement for
water stressed sites.
Scope exception
The volume of water used on land under our operational control in Mexico and Türkiye is reported separately from
water used in our direct operations and not included in our water efficiency calculations.
Data preparation and
measurement
Water withdrawal (use) is measured primarily from meter readings and invoices. In limited cases, estimates are used.
Water efficiency per litre of packaged product is calculated by dividing total water withdrawal by the total packaged
volume. We use litres of packaged product as the measure for comparison, because this indicates how much water
has been used relative to the amount of finished product that has been packaged. We measure litres of packaged
product by site and aggregate them at group level.
Limitation
In limited cases (e.g. failure or malfunction of water meters), estimates are used for water withdrawals.
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Target
Replenish more water than we use for our operations for all of our sites in water-stressed areas by 2026
Performance measures
Annual volumetric replenishment capacity of projects developed (m3)
Cumulative volumetric replenishment capacity of projects developed from fiscal 16 to fiscal 24
Definition
Our ambition is to replenish more water than we use in sites at our defined water-stressed areas, based on 2026
projected production volume.
Our definition of replenishment (or volumetric water benefit) is aligned with the World Resources Institute’s (WRI)
definition. Replenishment activities beneficially modify the hydrology and address shared water challenges and
improve water stewardship outcomes.
We classify areas as water-stressed if our site is in a location which meets the definition of ‘water-stressed’ through a
combination of sources, including the World Resources Institute (WRI) Aqueduct tool (at the Minor Basin level), UN
definitions, internal water risk survey information and external reviews by independent hydrologists.
An assessment to identify our sites located in water-stressed areas is completed approximately every two years. We
include any new-build or acquired sites and exclude any sites divested.
Newly classified water-stressed sites are subsequently included in our ambition. Similarly, sites reclassified as no longer
water-stressed are removed from the ambition. This approach ensures consistency in tracking performance versus our
projected volumes for water-stressed sites which we expect will be in production in fiscal 26.
To be considered within the annual volumetric replenishment capacity, replenishment projects need to be in a relevant
water-stressed area (e.g. a site’s water basin and/or water-stressed water basins from which we source local raw
materials).
Scope exception
As the target date for the water replenishment programme is fiscal 26, any newly identified sites in water-stressed areas
in our fiscal 25 water risk assessment will be out of scope for the replenishment programme. Any site located in a
water-stressed area using under 1000 m3 of water is considered de minimis and out of scope.
Reporting period
The complexity of gathering data from different project partners means there is a lag in reporting information our
projects. Each financial year we include data from 1 June to 31 May. The baseline year is fiscal 16.
Data preparation and
measurement
The methodology for calculating the volume of water replenished is based on the WRI’s ‘Volumetric Water Benefit
Accounting: A Method For Implementing and Valuing Water Stewardship Activities (2019)’, which informs the Diageo
Water Replenishment Programme Technical Protocol 2021. Replenishment capacity created by replenishment projects
is calculated using Diageo’s Water Replenishment Programme Technical Protocol 2021. The Diageo Water
Replenishment Implementation Guide 2022 provides instructions for markets on how to implement the Technical
Protocol. The Water Replenishment Implementation Guide and Technical Protocol are reviewed on an as-needed basis.
Implementation partners are appointed in our water-stressed areas based on their expertise in particular project types
which based on the risk assessments and consultations with local communities, NGOs and authorities, we believe will
deliver the most impact. These implementation partners are responsible for project delivery.
Data required to calculate the indicative volume of water replenished is collected by the project’s implementation
partner. An estimate of volumes is made at the inception of the project, and then validated when the project becomes
operational. This data is then validated by an external validator and confirmed by the Diageo Head of Environment. All
current year validated replenished volumes are summed together across all projects, which is the annual replenishment
volumetric capacity added in the year.
The current year annual replenishment volumetric figure (in m3) is then added to previous volumetric figures, net of any
volumes which represent over delivery at any of our water stressed sites to arrive at a cumulative replenishment
volumetric total since 2020. This amount is compared to projected fiscal 26 water usage. The estimated site water
usage for fiscal 26 is restated every year to reflect latest estimates and previous fiscal actuals.
When projects are delivered by a third party and partially funded by Diageo, to avoid double counting, we only claim
the proportion of volumetric capacity attributable to Diageo.
Limitation
Our cumulative replenishment figure includes historic projects where natural changes in the amount of water
replenished can occur over time.
We reassess these projects using a risk-based approach, testing that the projects continue to deliver the replenishment
capacity which was validated at the commissioning phase. Where there are significant changes (greater than 5%) of
original replenishment capacity, this is updated in the current year cumulative figure.
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G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Target
Engage in collective action in all of our priority water basins to improve water accessibility, availability and quality and
contribute to a net positive water impact
Performance measure
Percentage of priority water basins with collective action participation
Definition
We identify priority water basins by using a Diageo criticality assessment (based on expert judgement and water
consumption volumes) and by those facing high water risk, according to the WRI Aqueduct tool. We select these
basins, where Diageo sites are located, as we believe they would benefit most from Diageo participating in collective
action to address shared water challenges.
Water collective action incorporates multi-stakeholder water stewardship initiatives and/or projects that include
partnership with government entities, local communities, NGOs, civil society organisations and other stakeholders in
the basin.
The way we engage in collective action is dependent on what is required from the different initiatives that we are
involved in. Our main role is usually the contribution of funds and strategic input but we also play additional roles to
deliver effective collective action. The roles include, but are not limited to, financing projects, convening stakeholders to
join existing or to start new initiatives, basin and project modelling, project implementation, catchment monitoring and
evaluation, policy and regulatory engagement, water advocacy, institutional capacity building and/or training. We
also contribute to the global development of guidance and models for best practice, multi-stakeholder collective
action.
Scope exception
This metric only includes our priority water basins as defined above. Where collective action activity is deemed to be
minimal, we do not count this activity as collective action engagement in that priority water basin.
Data preparation and
measurement
Evidence of collective action participation in priority water basins is collected at the country level and reviewed by the
Diageo global metric owner.
Limitation
Judgment is applied when determining what is considered to be greater than minimal collective action engagement.
The action we engage in are multi-stakeholder and multi-year; impact is measured over time. We reflect on the
collective impact, and our individual contributions in making the judgment that our engagements were greater than a
minimal threshold.
Accelerating to a low-carbon world
Target
Become net zero carbon in our direct operations (Scope 1 and 2)
Performance measures
• Percentage change in absolute greenhouse gas emissions (direct and indirect greenhouse gas emissions by weight
(market/net based)) from the prior year and the fiscal 2020 year baseline
• Direct greenhouse gas emissions by weight (market/net based) (1,000 tonnes CO2e)
• Indirect greenhouse gas emissions by weight (market/net based) (1,000 tonnes CO2e)
• Total direct and indirect greenhouse gas emissions by weight (market/net based) (1,000 tonnes CO2e)
• Market based (net) intensity ratio of GHG emissions (grams CO2e per litre of packaged product)
• Direct greenhouse gas emissions by weight (location/gross based) (1,000 tonnes CO2e)
• Indirect greenhouse gas emissions by weight (location/gross based) (1,000 tonnes CO2e)
• Total direct and indirect greenhouse gas emissions by weight (location/gross based) (1,000 tonnes CO2e)
• Location based (gross intensity) ratio of GHG emissions (grams CO2e per litre of packaged product)
Definition
Scope 1 and 2 greenhouse gas emissions are presented as the absolute greenhouse gas emissions (Direct – Scope 1
emissions from on-site energy consumption of fuel sources and Indirect – Scope 2 emissions from purchased electricity
and heat) in 1,000 tonnes CO2e using market-based and location-based reporting methodologies. Market-based and
location-based greenhouse gas emission intensity ratio is calculated as grammes per CO2e per litre, using direct
operations packaged product volume in litres.
Scope exception
We exclude minor quantities of Scope 1 greenhouse gas emissions up to 0.5% of a site’s emissions, to a maximum of
50 tonnes CO2e per emission source, as well as the greenhouse gas emissions associated with biogas flaring, since
they are determined to be immaterial to our overall impacts.
Biological/biogenic CO2 emissions from the combustion of bioenergy and from direct operations processes such as
fermentation to create alcohol, are outside of scope and are reported separately. However, bioenergy CO2e emissions
associated with methane and nitrous oxides that are not absorbed in bioenergy feedstock growth, are included in
Scope 1 emissions.
We do not include carbon offsets or credits in the Scope 1 and 2 GHG emissions market-based or location-based
approach.
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Data preparation and
measurement
We calculate CO2e emissions data based on direct measurement of energy use (meter readings/invoices) for the
majority of sites.
Market-based and location-based emissions
We externally report Scope 1 and 2 greenhouse gas emissions using metric tonnes of CO2e to compare the emissions
from the seven main greenhouse gases based on their global warming potential. We base our CO2e reduction targets
and reporting protocols (since 2007) on market-based emissions. We also calculate our emissions using the location-
based approach, where direct operations greenhouse gas emissions are reported without the benefit of indirectly
supplied renewable energy.
Direct (Scope 1) emissions
We report fuel consumption by fuel type at site level using the environmental management system. Using calorific
values, the fuel is then converted to energy consumption, in kilowatt hours (kWh), by fuel type and is multiplied by the
relevant CO2e emission factor to derive total CO2e emissions. Scope 1 emission factors for fuels are typically average
fuel CO2e emissions factors and calorific values (the latest available at the end of the period) from the UK Government
Department for Energy Security and Net Zero (DESNZ). For market-based emissions calculations, we apply product-
specific factors where available. Energy attribute certificates (EACs), derived from our distillery by-product feedstock
and processed by a third party to generate biomethane, form a component of our decarbonisation, together with
purchased renewable gas EACs (i.e. from certificate-backed biomethane supplied indirectly through the natural gas
grid). For location-based emissions calculations, we apply product-specific factors, where available, but the specific
emission factors associated with EACs are not used (i.e. indirectly supplied renewable gas through grid is reported
using standard, natural gas grid emission factors).
Indirect (Scope 2) emissions
We report greenhouse gas emissions from electricity (Scope 2) as market-based emissions and as location-based
emissions in line with the WRI/WBCSD GHG Protocol Scope 2 guidance 2015. For market-based emissions, electricity
consumption recorded on our environmental management system is multiplied by emissions factors specified in EACs,
contracts, power purchase agreements and supplier utility emissions, as detailed in the GHG Protocol’s Scope 2
guidance. We use GHG Protocol Scope 2 to ensure EACs and associated financial instruments meet the required
standards. GHG emission factors relating to indirect, Scope 2 emissions are updated with latest available by end of the
period. For location-based emissions, grid imported electricity consumption recorded on our environmental
management system is multiplied by regional or sub-national emission factors (where available) to calculate Scope 2
location-based GHG emissions. These include, for example, The Commission for Regulation of Utilities (CRU) (Ireland),
DESNZ (United Kingdom), the National Inventory Report (Canada), US eGRID (United States) and the Indian power
sector report (India). In all other cases, country or sub-regional factors are provided by the International Energy Agency
(IEA). Location-based emission factors are reviewed annually and updated with latest available at the end of the
period.
Fugitive and owned agricultural [Scope 1] emissions
We calculate fugitive emissions based on the amount of emitted ozone-depleting substances and fluorinated gases,
multiplied by the relevant emission factor to represent the global warming potential in tonnes of CO2e. Annually, each
site reports the quantity (mass) of each material/gas emitted based on any added/topped-up amount, reported via
the environmental management system. The mass of each emitted ozone-depleting substance and fluorinated gas is
multiplied by the relevant emission factor and then added together to report the equivalent GHG emissions in tonnes of
CO2e.
We calculate agricultural emissions from direct operations owned and operated by Diageo based on fertiliser use. The
annual quantity (mass) of inorganic fertiliser is multiplied by the percentage of nitrogen content and by the relevant
GHG emission and conversion factors (e.g. nitrogen to nitrous oxide, nitrous oxide GHG emission factor) to determine
the equivalent tonnes CO2e emissions.
Scope 1 and Scope 2 data aggregation
For market-based: Total direct and indirect greenhouse gas emissions by weight (market/net based) (1,000 tonnes
CO2e) is the aggregation of Scope 1 and 2 GHG emissions with fugitive and owned agriculture emissions to calculate
total direct operations market-based emissions. The percentage reduction in absolute greenhouse gas emissions (direct
and indirect greenhouse gas emissions by weight (market/net based)) from the prior year is a percentage change
calculation with reference to the corresponding prior year figure.
Our net zero emissions target for 2030 remains consistent with earlier reporting protocols and is based on market-
based emissions.
For location-based: We aggregate location-based Scope 1 and 2 GHG emissions with fugitive and owned agriculture
emissions (as detailed in the market-based approach above) to calculate direct operations total location-based
emissions.
GHG emission intensity ratios
Total, aggregated direct operations market-based and location-based emissions (as detailed above) are divided,
respectively, by the volume of direct operations packaged product reported in the same period. The market-based and
location-based emissions are converted to grammes of CO2e and the volume of packaged product is reported in litres
to generate relevant GHG emission intensity ratios in g CO2e/litre packaged.
Limitation
Where invoices or site meter readings are not available, for example, due to timing differences or metering issues, we
estimate consumption.
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ADDITIONAL INFORMATION
Performance measure
Percentage change in absolute greenhouse gas emissions (ktCO2e) from the prior year
Definition
Scope 3 emissions are indirect greenhouse gas (GHG) emissions generated by activities upstream or downstream of
our operations that are not accounted for as Scope 1 and 2 GHG emissions.
Scope 3 greenhouse gas emissions are assessed for relevance across 15 value chain categories and sub-categories
and for Diageo, these are deemed relevant:
• Category 1: Purchased raw materials, packaging and third party manufacturers.
• Category 2: Capital goods.
• Category 3: Fuels and energy-related activities.
• Category 4: Upstream and downstream logistics and distribution.
• Category 5: Waste generated in operations.
• Category 6: Business travel.
• Category 7: Employee commuting, including the emissions associated with leased and a limited number of Diageo
owned vehicles not accounted for in Scope 1 and Scope 2 GHG emissions.
• Category 11: Use of products sold.
• Category 12: End of life of products sold.
We do not include carbon offsets or credits in Scope 3 GHG emissions.
Scope exception
Any categories of Scope 3 emissions not listed in the definition above are out of scope for reporting. These are either
excluded on the basis of materiality or a lack of reliable data.
Reporting period
All Scope 3 data is included for the current fiscal, with the exception of transportation and distribution (category 4). We
have moved the reporting period from a one-year lag to now including data from June - May.
Target
Reduce our value chain (Scope 3) carbon emissions by 50%
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Data preparation and
measurement
We externally report Scope 3 GHG emissions using metric tonnes of CO2e to compare the emissions from the four
greenhouse gases – carbon dioxide (CO2), methane (CH4), nitrous oxide (N2O) and hydrofluorocarbons (HFCs) –
included in our calculations, based on their global warming potential.
Diageo uses a combination of consumption and spend based activity data to determine Scope 3 GHG emissions for all
categories deemed relevant. The Diageo GHG Emission Factors Master Database contains the specific emission factor
used and the associated source file.
This activity data is multiplied by relevant emission factors sourced from industry-average databases, unless there are
supplier specific factors. Where relevant, the supplier specific factors are preferred over industry-average database
factors. Emission factors are updated annually based on updates to the industry-average databases and with
published emission factors from suppliers.
Inflation and Exchange Rate Adjustment
For all spend-based calculations in the Scope 3 inventory, the emission factors used are based on 2019/2020 US dollars.
In alignment with the GHG Protocol Scope 3 Calculation Guidance (Section 1, page 33), spend values are adjusted to
reflect the differences in market values between the year of the spend based factors (2019) and the current period using
country-specific inflation and exchange rates so the emission factor can be appropriately applied. The spend values are
deflated by multiplying the current year spend by a ratio of the consumer price indices (CPI) of 2019/20 and the current
year. The CPI values are obtained from S&P Global per country that Diageo has operations in, and it was assumed that all
spend per site was acquired in, and thus subject to inflation of, the country of the site. The exchange rates are obtained
with guidance from Diageo’s internal accounting department.
Diageo use two calculation methods:
1) The average data method:
The average data as described in the GHG Protocol Scope 3 Calculation Guidance are used to calculate these
emissions. The quantity of relevant goods or services purchased in the reporting year is multiplied by the secondary
(e.g. industrial average) emission factors (e.g. average emissions per unit good or service). Cradle-to-Tiers 1 supplier
emission factors of the purchased goods or services per unit of mass are used (e.g. kg CO2e /kg).
The average data method is represented by the following equation:
CO2e emissions for purchased goods or services = Σ(mass of purchased good or service (kg) x emission factor of
purchased good or service per unit of mass (kg CO2e/kg)).
This method is applied for the following scope 3 categories:
• Category 1: Purchased goods and services.
• Category 3: Fuel and energy-related activities.
• Category 4: Upstream transportation and distribution.
• Category 5: Waste generated in operations.
• Category 6: Business travel.
• Category 7: Upstream leased assets.
• Category 11: Use of sold products.
• Category 12: End of life treatment of sold products.
2) The spend-based data method:
The spend-based data method is used to calculate these emissions. The spend on relevant capital goods purchased in the
reporting year is multiplied by the spend-based emission factor (e.g. average emissions per unit spent).
The calculation method is represented by the following equation:
CO2e emissions for capital goods = Σ (spend on capital goods (USD) x emission factor of purchased capital good per
economic value (kg CO2e/USD))
This method is applied for the following scope 3 categories:
• Category 2: Capital Purchase goods and services.
For the transportation and distribution (category 4) calculation, we have updated the GHG factors to the latest Global
Logistics Emissions Council (GLEC) factors.
The latest Global Warming Potential (GWP – 2021 IPCC report) are used in Diageo’s GHG calculation and the Biogenic
GHG emissions are not included.
Limitations
Due to inherent limitations related to measurement uncertainty and/or the availability of actual activity data, we utilise
Diageo and/or industry average activity data for certain purchased goods or services. Due to limited primary
greenhouse gas factors from suppliers, secondary greenhouse gas factor sources are used, such as industry recognised
emission factors and others. As such, Scope 3 greenhouse gas emissions reporting is inherently limited and processes
to refine data calculations are constantly under review.
Target
Reduce our value chain (Scope 3) carbon emissions by 50%
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ADDITIONAL INFORMATION
Target
Use 100% renewable energy across all our direct operations
Performance measure
• Change in percentage of renewable energy across our direct operations from the prior year
• Total direct (renewable and non-renewable) energy consumption (TJ)
• Direct energy efficiency (MJ/litre packaged)
• Indirect energy efficiency (MJ/litre packaged)
• Total direct and indirect energy efficiency (MJ/litre packaged)
Definition
We report total energy use and renewable energy use in megawatt hours (MWh) and/or terajoules (TJ). Total energy
and renewable energy use are determined from direct and indirect energy consumption; energy generated on our sites
and purchased energy. We determine direct energy (renewable/non-renewable) from the quantity of different fuel
types (in metric tonnes, litres) of renewable and non-renewable fuels and by applying the relevant calorific value (either
from DESNZ or the supplier). We measure indirect energy (renewable/non-renewable) in MWh and/or TJ from energy
utilities or suppliers and/or by applying the relevant EACs.
We include directly connected renewable energy generated on or near our sites, where all energy is used on site and
no EACs are created (e.g. roof-mounted solar panels with all generated renewable electricity used on site).
Scope exception
We exclude minor energy sources that account for less than 0.5% of a site's overall Scope 1 and 2 emissions, up to a
maximum of 50 t CO2e of individual emission source. They are considered immaterial to our overall impact.
Data preparation and
measurement
We report total energy and renewable energy in MWh and/or TJ. We calculate direct and indirect energy data based
on the direct measurement of energy use (meter readings/invoices for volumes of fuel supplied).
We report fuel consumption by fuel type at site level using the environmental management system. Using calorific
values, the fuel is then converted to energy consumption, in kWh, by fuel type and classified as either renewable or
non-renewable based on fuel type or source. EACs, derived from our distillery by-product feedstock and processed by
a third-party to generate biogas, together with purchased renewable gas EACs, are applied to relevant natural gas
supplied to sites via a common carrier pipeline/network.
All indirect energy generated and used on site, along with purchased indirect energy supplied through the grid is
classified as renewable by the allocation of EACs, contracts, power purchase agreements and supplier-specific utility
factors, where relevant.
To calculate the percentage of renewable energy use, we divide total renewable energy (direct and indirect energy
supplies (in MWh)) by total energy use, comprising all reported energy sources (MWh).
Direct energy efficiency (MJ/L); indirect energy efficiency (MJ/L) and total energy efficiency (MJ/L) are determined
from total direct energy (MJ), total indirect energy (MJ) and total energy (MJ) and divided by the volume of packaged
product (litres).
Limitation
Energy data is calculated based on direct measurement of energy use (meter readings/invoices) for the majority of
sites. Where invoices are not available, for example, due to timing differences, consumption is estimated.
Target
Continue our work to increase recycled content in our packaging (increasing the percentage of recycled content
in our packaging to 60%)
Performance measure
Change in percentage of recycled content (by weight)
Definition
We determine recycled content by establishing the percentage weight of non-virgin materials used to generate the
packaging components.
Scope exception
—
Data preparation
We collate packaging material volume data for the total volume of packaging purchased. We collect recycled content
data through quarterly supplier questionnaires and then consolidate and internally verify it.
Limitation
Reporting relies on suppliers' technical information, timely completion of quarterly questionnaires and supporting
supplementary information.
Target
Continue our work to reduce total packaging (delivering a 10% reduction in packaging weight)
Performance measure
Percentage reduction of total packaging (by weight)
Definition
We determine changes to packaging weight by quantifying the weight reduction in grammes multiplied by the number
of product codes (SKUs) affected, on an annualised basis.
Scope exception
—
Data preparation
We collate packaging material volume data for total volume of packaging purchased and weight. We verify weight
data through quarterly supplier questionnaires.
Limitation
Reporting relies on suppliers' technical information, timely completion of quarterly questionnaires and supporting
supplementary information.
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Target
Develop regenerative agriculture programmes in five key sourcing landscapes
Performance measure
Number of regenerative agriculture programmes
Definition
We define our key sourcing landscapes as locations from which we source our most material crops, in terms of product
dependency (e.g. agave for tequila), volumes sourced and contribution to our Scope 3 GHG footprint.
The programmes include:
• On-the-ground programmes with farmers to test and integrate regenerative and low-carbon practices in crop
production systems
• On-farm measurements and data collection protocols to track improvements in soil health, soil carbon, biodiversity,
water stewardship and farm profitability
• Collaborative programmes with our suppliers, other commodity off-takers, expert agronomists, technology providers,
NGOs or specialist organisations
Our regenerative agriculture programmes currently expand across three crop systems and three geographies including
barley in Ireland for our beer category (Guinness), wheat and barley for our scotch and grain neutral spirit categories
in the United Kingdom and agave for our tequila category in Mexico. We are also building partnerships across
additional agricultural sourcing hubs to advocate for regenerative landscape transitions including Telangana state in
India for broken rice, Kentucky and Tennessee in the United States for corn and rye and Kenya, Ghana and Nigeria
across sorghum smallholder value chains.
Scope exception
Where programme activity is in early stages of deployment in a particular sourcing area, we do not include this
sourcing area as covered by a regenerative agriculture programme.
Data preparation
Data is consolidated for each pilot programme. Tracking and reporting on improvements against key outcomes is
managed centrally.
Limitation
Judgement is applied when determining what is considered to be greater than minimal programme activity. The
investments we make could be through a consortium, and include other stakeholders. Impact is typically measured
over time. Our approach is to assess the impact of our individual contributions in relation to the overall investment
impact in determining whether our contributions were greater than a minimal level of programme activity.
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ADDITIONAL INFORMATION
Independent Limited Assurance Report
to the Directors of Diageo plc on
selected information
Our limited assurance conclusion
Based on the procedures we have performed, as described under the “Summary of work performed” and the “Key Assurance Matters” sections
below, and the evidence we have obtained, nothing has come to our attention that causes us to believe that the information marked with the
symbol △ in Diageo plc’s (‘Diageo’s’) Annual Report for the year ended 30 June 2024 (the “Report”) and summarised below (together, the ‘Subject
Matter Information’), has not been prepared, in all material respects, in accordance with Diageo’s Non-financial Reporting Boundaries and
Methodologies (the ‘Reporting Criteria’) set out on pages 238 - 257 of the Annual Report.
What we were engaged to assure
The Subject Matter Information needs to be read and understood together with the Reporting Criteria which Diageo’s Directors are solely
responsible for selecting and applying. The Subject Matter Information set out in the table below and the Reporting Criteria set out on pages 238 -
257 of the Annual Report:
Subject Matter Information
(for the year ended 30 June 2024 unless otherwise stated)
Reported
figure
Location of Subject
Matter Information
in the Report
Environmental and Safety indicators:
Water use efficiency per litre of product packaged (litres/litre) - across the company(1)
4.1
page 68
Percentage change in litres of water used per litre of product packaged from the prior year - across the
company(3)
(2.8) %
page 68
Water use efficiency per litre of product packaged (litres/litre) - water-stressed areas(1)
3.2
page 68
Percentage change in litres of water used per litre of product packaged from the prior year - water-
stressed areas(3)
(6.6) %
page 68
Water Efficiency Index - across the company(1)
84.4
page 68
Water Efficiency Index - water-stressed areas(1)
78.7
page 68
Percentage change in water efficiency index from the prior year – across the company(3)
(3.7) %
page 67
Percentage change in water efficiency index from the prior year – water stressed areas(3)
(6.2) %
page 67
Percentage change in absolute greenhouse gas emissions (direct and indirect greenhouse gas
emissions by weight (market / net based)) from the prior year(3)
(10.7) %
page 70
Total direct and indirect greenhouse gas emissions by weight (market/net based) (1,000 tonnes
CO2e)(1)
358
page 70
Market based (net) intensity ratio of greenhouse gas emissions (g CO2e per litre of packaged product)(1)
96
page 70
Lost time accident frequency rate per 1,000 full-time employees (FTEs)(1)
1.06
page 58
Smashed indicators (for the period 1 June 2023 to 31 May 2024):
Number of people educated on the dangers of underage drinking through a Diageo supported
education programme(1)
2.2 million
page 1 and page 51
Number of people who confirmed changed attitudes on the dangers of underage drinking following
participation in a Diageo supported education programme(1)
1.8 million
page 51
Inclusion and Diversity indicators:
The percentage of female leaders globally(2)
44 %
page 1 and page 59
The percentage of ethnically diverse leaders globally(2)
46 %
page 1 and page 59
Water Replenishment indicator:
Annual volumetric replenishment capacity of projects developed (m3)(1)
1,230,000
page 68
The footnotes refer to our assessment of materiality discussed in the 'Materiality' section of this report.
The scope of our work did not extend to information in respect of earlier periods or to any other information included in, or linked from, the Report.
Our work
Professional standards applied
We performed a limited assurance engagement in accordance with International Standard on Assurance Engagements 3000 (Revised)
‘Assurance Engagements other than Audits or Reviews of Historical Financial Information’, and, in respect of the greenhouse gas (GHG) emissions,
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in accordance with International Standard on Assurance Engagements 3410 ‘Assurance Engagements on Greenhouse Gas Statements’, issued by
the International Auditing and Assurance Standards Board.
Our independence and quality control
We have complied with the Institute of Chartered Accountants in England and Wales Code of Ethics, which includes independence and other
requirements founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional
behaviour, that are at least as demanding as the applicable provisions of the International Code of Ethics for Professional Accountants (including
International Independence Standards) issued by the International Ethics Standards Board for Accountants (IESBA Code).
We apply International Standard on Quality Management (UK) 1 and accordingly maintain a comprehensive system of quality management
including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and
regulatory requirements.
Summary of work performed
We performed a limited assurance engagement. Because the level of assurance obtained in a limited assurance can vary, we give more detail
about the procedures performed, so that the intended users of the Subject Matter Information can understand the nature, timing and extent of
procedures we performed as context for our conclusion. These procedures performed vary in nature and timing from, and are less in extent than
for, a reasonable assurance engagement. Consequently, the level of assurance obtained in a limited assurance engagement is substantially lower
than the assurance that would have been obtained had a reasonable assurance engagement been performed.
In performing our assurance procedures, which were based on our professional judgement, we performed the following:
• evaluated the suitability in the circumstances of Diageo’s use of the Reporting Criteria as the basis for preparing the Subject Matter Information
including the associated reporting boundaries;
• through enquiries, obtained an understanding of Diageo’s control environment, processes and systems relevant to the preparation of the Subject
Matter Information. Our procedures did not include evaluating the suitability of design, obtaining evidence about their implementation or testing
operating effectiveness of particular control activities;
• evaluated whether Diageo’s methods for developing certain estimates are appropriate and had been consistently applied, noting that our
procedures did not involve testing the data on which the estimates are based or separately developing our own estimates against which to
evaluate Diageo’s estimates;
• compared year on year movements and obtained explanations from management for significant differences we identified;
• performed limited substantive testing on a selective basis of the Subject Matter Information, which is aggregated from information submitted by
Diageo’s operational sites. We undertook site visits at 10 of Diageo’s operational sites which we selected based on their inherent risk, materiality
and unexpected fluctuations in the site level Subject Matter Information since the prior period. Testing involved, on a sample basis, agreeing
arithmetical accuracy of calculations, and agreeing data points to or from source information to check that the underlying subject matter had
been appropriately evaluated or measured, recorded, collated and reported;
• the Subject Matter Information related to the Water Replenishment indicator is aggregated from the specific water replenishment projects
undertaken by Diageo. In order to understand the key processes and controls for reporting, we made management enquiries and performed
limited substantive testing on a selective basis by sampling 4 out of 30 projects, based on their inherent risk and materiality to the annual
volumetric water replenishment capacity. This specifically focused on understanding how projects are selected and implemented by
implementation partners on behalf of Diageo. This testing checked that underlying information had been appropriately evaluated or measured,
recorded, collated and reported;
• performed limited substantive testing on a selective basis of the Subject Matter Information related to the Smashed and Inclusion and Diversity
indicators. This testing was performed to check that underlying information was complete and accurate, and had been appropriately evaluated
or measured, recorded, collated and reported; and
• evaluated the disclosures in, and overall presentation of, the Subject Matter Information.
Materiality
We are required to plan and perform our work to address the areas where we have identified that a material misstatement of the Subject Matter
Information is likely to arise. We set certain quantitative thresholds for materiality. These, together with qualitative considerations, helped us to
determine the nature, timing and extent of our procedures in support of our conclusion. We believe that it is important that the intended users have
the information they need to understand the concept and the level of materiality to place our conclusion in context. Based on our professional
judgement, we determined materiality for the Subject Matter Information as follows:
Overall
materiality
Materiality may differ depending upon the nature of the Subject Matter Information. We apply professional judgement to consider
the most appropriate materiality benchmark for each aspect of the Subject Matter Information, having considered how the intended
users may use the information.
The benchmark approach for each aspect of the Subject Matter Information is indicated in the “What we were engaged to assure”
table by one of the following numbers;
(1) This metric is an absolute number or a ratio. A benchmark materiality of 5% has been applied.
(2) This metric is a percentage. A benchmark materiality of 2.5% has been applied.
(3) This metric is an absolute number or a ratio. A benchmark materiality of 5% has been applied.
We also agreed to report to the Directors misstatements (‘reportable misstatements’) identified during our work at a level below overall materiality,
as well as misstatements below that lower level that in our view warranted reporting for qualitative reasons. The Directors are responsible for
deciding whether adjustments should be made to the Subject Matter Information in respect of those items.
Key Assurance Matters
Key Assurance Matters are those areas of our work that in our professional judgement required particular focus and attention, including those
which had the greatest effect on the overall assurance strategy, the allocation of resources, and directing the efforts of the engagement team.
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ADDITIONAL INFORMATION
We considered the following area to be a Key Assurance Matter and discussed it with Diageo’s management.
Clarity and application of the organisational boundary criteria
Nature of the issue
The Subject Matter Information has been prepared using internally generated Reporting Criteria that draw on
aspects of sustainability reporting frameworks, such as the GHG Protocol Corporate Standard. This approach to
developing Reporting Criteria is accepted practice in the UK.
As part of their Reporting Criteria, Diageo defines and applies an ‘operational control’ approach to identify its
organisational boundary which determines what should be included within their environmental and safety
reporting. Due to the nature and complexity of certain arrangements, management uses judgement in
determining whether Diageo has operational control. For example, management judgement has been applied in
assessing operational control for leased manufacturing units, third party manufacturing units, joint ventures,
associates, assets under construction and commissioning, acquisitions and disposals.
In the current period, Diageo has updated their Reporting Criteria to provide further clarity and highlight the
judgements made to improve understandability for users of what is included within the organisational boundary.
Changes to organisational boundaries can have a significant impact on the reported Subject Matter Information
which is why we have determined this to be an area of audit focus.
How our work addressed the
Key Assurance Matter
The following procedures have been performed to address the identified risk:
• Considered the appropriateness of Diageo’s Reporting Criteria with respect to its organisational boundary,
taking into consideration relevant sustainability reporting frameworks;
• Tested the application of the organisational boundary as defined by the updated Reporting Criteria.
Element(s) of the Subject
Matter Information most
significantly impacted
Environmental and safety indicators referenced above within the table in the “What we were engaged to assure”
section.
Challenges of non-financial information
The absence of a significant body of established practice upon which to draw to evaluate and measure non-financial information allows for
different, but acceptable, evaluation and measurement techniques that can affect comparability between entities, and over time.
Non-financial information is subject to more inherent limitations than financial information, given the characteristics of the underlying subject
matter, how relevant data used for reporting is obtained and aggregated, and the methods used for measuring or evaluating it. The precision of
different measurement techniques may also vary.
Reporting on Other Information
The other information comprises all of the information in the Report other than the Subject Matter Information and our assurance report. The
Directors are responsible for the other information. As explained above, our conclusion does not extend to the other information and, accordingly,
we do not express any form of assurance thereon. In connection with our assurance of the Subject Matter Information, our responsibility is to read
the other information. In doing so, we consider whether the other information is materially inconsistent with the Subject Matter Information or our
knowledge obtained during the assurance engagement, or otherwise appears to contain a material misstatement of fact. If we identify an
apparent material inconsistency or material misstatement of fact, we are required to perform procedures to conclude whether there is a material
misstatement of the Subject Matter Information or a material misstatement of the other information, and to take appropriate actions in the
circumstances.
Responsibilities of the Directors
The Directors of Diageo are responsible for:
• determining appropriate reporting topics and selecting or establishing suitable criteria for measuring or evaluating the underlying subject matter;
• ensuring that those Reporting Criteria are relevant and appropriate to Diageo and the intended users of the Report;
• the preparation of the Subject Matter Information in accordance with the Reporting Criteria including designing, implementing and maintaining
systems, processes and internal controls over the evaluation or measurement of the underlying subject matter to result in Subject Matter
Information that is free from material misstatement, whether due to fraud or error;
• documenting and retaining underlying data and records to support the Subject Matter Information; and
• producing the Report that provides a balanced reflection of Diageo’s performance in this area and discloses, with supporting rationale, matters
relevant to the intended users of the Report; and
• producing a statement of Directors’ responsibility.
Our responsibilities
We are responsible for:
• planning and performing the engagement to obtain limited assurance about whether the Subject Matter Information is free from material
misstatement, whether due to fraud or error and in accordance with the Reporting Criteria;
• forming an independent conclusion, based on the procedures we have performed and the evidence we have obtained; and
• reporting our conclusion to the Directors of Diageo.
INDEPENDENT LIMITED ASSURANCE REPORT ON SELECTED SUBJECT MATTER continued
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Use of our report
Our report, including our conclusion, has been prepared solely for the Directors of Diageo in accordance with the agreement between us dated 29
November 2023 (as varied) (the “agreement”). To the fullest extent permitted by law, we do not accept or assume responsibility or liability to
anyone other than the Board of Directors and Diageo for our work or our report except where terms are expressly agreed between us in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
29 July 2024
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G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
Other additional
information
Spirits and investments
Spirits are produced in distilleries located worldwide. The group owns
31 Scotch whisky distilleries in Scotland, two whisky distilleries in
Canada, and five in the United States. Diageo produces Smirnoff
internationally. Ketel One and Cîroc vodkas are purchased as finished
products from The Nolet Group and Maison Villevert, respectively. Gin
distilleries are in both the United Kingdom and in Santa Vittoria, Italy.
Baileys is produced in the Republic of Ireland and Northern Ireland.
Irish whiskey is distilled at the Roe & Co distillery in Dublin. Rum is
distilled in the US Virgin Islands and in Australia, Venezuela, and
Guatemala and is blended and bottled in the United States, Canada,
Italy, and the United Kingdom. Raki is produced in Türkiye, Chinese
white spirits are produced in Chengdu, in the Sichuan province of
China, cachaça is produced in Ceará State in Brazil and tequila in
Mexico. The Chase Distillery in England produces vodka and gin.
Maturing inventories increased by $532 million in fiscal 24 to
support the future growth of scotch. Maturing scotch inventory
increased by $387 million, with a total balance of $4,862 million in
fiscal 24. Whisk(e)y inventories were $6,290 million in fiscal 24, mainly
used for Scotch whisky production accounting for 77% of total
matured whisky.
2024
2023
Category
$ million
$ million
Whisk(e)y
6,290
5,777
- From this attributable to scotch
4,862
4,475
Other
1,542
1,523
Total maturing inventory
7,832
7,300
Diageo’s maturing Scotch whisky is stored in warehouses in Scotland
(Clackmannanshire area between Blackgrange, Cambus West and
Menstrie, where we are holding approximately 43% of the group’s
maturing Scotch whisky), its maturing Canadian whisky in Valleyfield
and Gimli in Canada, its maturing American whiskey in Kentucky and
Tennessee in the United States and maturing Chinese white spirits in
Chengdu, China.
The iconic lost distillery of Port Ellen re-opened in March 2024,
marking the final phase of our £185 million ($234 million) investment in
the Scotch Whisky and Tourism sectors in Scotland. Work also
continues to expand our warehousing facilities at Midtown in
Clackmannanshire. Alongside the new warehouses being built, there is
also investment in state-of-the-art automation of warehousing.
In China, the Eryuan malt whisky distillery fully opened in mid-2024
($76.7 million investment). It will develop the highest quality China
single origin whisky, placing China firmly on the global whisky
producer’s map.
In North America, further capacity expansion projects are now
underway to support future growth, including the C$245 million ($179
million) construction of Crown Royal distillery in Canada to supplement
existing manufacturing operations.
Diageo’s end-to-end tequila production is in Mexico, with more
than $500 million being invested to expand our manufacturing
footprint through new facilities in the state of Jalisco to support growth.
As part of our expansion and our investments in the tequila category,
we have different digital transformation projects at the El Charcón
production site to meet the growing demand in tequila and the
expansion of our operations. Projects include additional technology
support and automation of our new bottling line on site, which will be
dedicated to Casamigos tequila, allowing us to operate 24/7.
Diageo owns a controlling equity stake in United Spirits Limited
(USL) which is one of the leading alcoholic beverage companies in
India, selling close to 61 million equivalent units (reported) in fiscal 24
of Indian-Made Foreign Liquor (IMFL) and imported liquors. USL has a
significant market presence across India and operates 11 owned sites,
as well as a network of leased and third-party manufacturing facilities.
USL owns several Indian brands, such as McDowell’s (Indian whisky,
rum, and brandy), Black Dog (Scotch), Signature (Indian whisky),
Royal Challenge (Indian whisky), Godawan (Indian Single Malt) and
Antiquity (Indian whisky).
Beer and investments
Diageo’s principal brewing facility is at the St James’s Gate brewery in
Dublin, Ireland. Additionally, at the end of fiscal 24 Diageo owned
breweries in several African countries: Nigeria, Kenya, Ghana,
Tanzania, Uganda, and the Seychelles. On 11 June 2024, Diageo
announced the agreement to sell its 58.02% shareholding in Guinness
Nigeria plc to N-Seven Nigeria Ltd., part of the Tolaram Group. For
more information see note 8 to the Financial Statements.
Guinness flavour extract is shipped from Ireland to all overseas
Guinness brewing operations, which use the flavour extract to brew
beer locally. Guinness is transported from Ireland to Great Britain in
bulk to the Runcorn facility, where the kegging, bottling and canning
of Guinness Draught takes place.
Projects are underway to support future beer growth. In July 2022,
Diageo announced plans to invest €200 million ($214 million) in
Littleconnell, Newbridge, Co. Kildare. Construction began in summer
2024 and the plan is for brewing to start in 2026. Furthermore, in the
second half of 2023, Diageo completed the €25 million ($27 million)
investment in a new production area at St. James’s Gate increasing
the brewing capacity of Guinness 0.0. The £41 million ($52 million)
investment to expand and optimise capacity at our beer packaging
facilities in Belfast and Runcorn is progressing well. The new canning
line in Belfast and upgraded bottling capability in Runcorn are now
completed. The final upgrade of canning in Runcorn will be completed
in early 2025.
In May 2024, plans were announced to invest over €100 million
($107 million) to decarbonise St. James’s Gate brewery in Dublin. The
investment underpins the goal to accelerate to net zero carbon
emissions for the site and will transform energy and water
consumption with the aim to make it one of the most efficient
breweries in the world by 2030.
The Diageo Beer Category Third-Party Operations Team provide
technical services to facilitate the delivery of over three million
hectolitres of beer and ready to drink products supplied through over
50 partner breweries and beverage packaging facilities worldwide.
The team's focus is on assuring the consistent quality of Diageo brands
produced at third-party facilities and enhancing Diageo value through
supporting the start-up of new partnerships and delivery of innovation
projects. In addition to supporting Guinness and beer, the team has an
expanding role in supporting the third-party manufacturing of ready to
drink and spirits in Asia-Pacific and Africa.
Flavoured malt beverages (FMB) are made from an original base
containing malt, but then stripped of malt character, and flavoured.
This product segment is implemented mainly in the United States,
Canada, and the Caribbean.
Ready to drink (RTD)
Diageo produces a range of ready to drink products mainly in the
United Kingdom, Italy, across Africa, Australia, the United States and
Canada.
Raw materials and supply agreements
The group has several long-term contracts for purchasing raw
materials, including glass, other packaging, spirits, cream, rum and
grapes. Forward contracts are in place for the purchase of cereals and
packaging materials to minimise the effects of short-term price
fluctuations. Despite macroeconomic uncertainty and volatility, price
pressure is easing, and some key commodities are now starting to
become deflationary. Our long-term hedging means there is a lag in
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cost of sales benefit generated from a commodity price decrease. The
Red Sea conflict, weather patterns and geo-political tensions, coupled
with volatile but strong consumer demand, are the key drivers of
constraints we are managing.
Cereals, including barley, wheat, corn, and sorghum, are used in
our scotch and beer production and in our spirits brands through
purchased neutral spirit. Agave, a key raw material for our tequila
brands, is sourced from Mexico. Cream, the principal raw material for
Irish cream liqueur, is sourced from Ireland. Grapes and aniseed are
used in the production of raki, and are sourced from suppliers in
Türkiye. Other raw materials purchased in significant quantities to
produce spirits and beer are molasses, sugar, and several flavours
(such as juniper berries, agave, chocolate, and herbs). These are
sourced from suppliers across the globe.
Many products are supplied to customers in glass bottles. Glass in
purchased from a variety of multinational and local suppliers. The
largest suppliers are Ardagh Packaging in the United Kingdom and
Owens-Illinois in the United States.
Like other consumer goods companies, we maintain stocks in
markets to compensate for extended lead times and demand
volatility. Diageo is managing well through the current levels of
uncertainty and constraints in our supply chain by expanding our
supplier base and maintaining agility in our logistics networks.
Competition
Diageo’s brands compete primarily on the basis of quality and
price. Its business is built on getting the right product to the right
consumer for the right occasion, and at the right price, including
through taking into account ever evolving shopper landscapes,
technologies and consumer preferences. Diageo also seeks to recruit
and re-recruit consumers to its portfolio of brands, including through
meaningful consumer engagement, sustainable innovation and
investments in its brands.
In spirits, Diageo’s major global competitors are Pernod Ricard,
Beam Suntory, Bacardi and Brown-Forman, each of which has several
brands that compete directly with Diageo’s brands. In addition,
Diageo faces competition from regional and local companies in the
countries in which it operates.
In beer, Diageo also competes globally, as well as on a regional
and local basis (with the profile varying between regions) with several
competitors, including AB InBev, Molson Coors, Heineken,
Constellation Brands and Carlsberg.
Research and development
Innovation forms an important part of Diageo’s growth strategy,
playing a key role in positioning its brands for continued growth in
both developed and emerging markets. The strength and depth of
Diageo’s brand range also provides a solid platform from which to
drive sustainable innovation that leads to new products and
experiences for consumers, whether or not they choose to drink
alcohol. Diageo focuses its innovation on its strategic priorities and the
most significant consumer opportunities, including the development of
global brand extensions and new-to-world products, and continuously
invests to deepen its understanding of evolving trends and consumer
socialising occasions to inform product and packaging development,
ranging from global brand redesigns to cutting edge innovations.
Supporting this, the Diageo group has ongoing programmes to
develop new beverage products which are managed internally by the
innovation and research and development function.
Trademarks and other intellectual property
Diageo produces, sells and distributes branded goods, and is therefore
substantially dependent on the maintenance and protection of its
trademarks. All brand names mentioned in this document are
protected by trademarks. The Diageo group also holds trade secrets,
as well as has substantial trade knowledge related to its products. The
group believes that its significant trademarks are registered and/or
otherwise protected (insofar as legal protection is available) in all
material respects in its most important markets. Diageo also owns
valuable patents and trade secrets for technology and takes all
reasonable steps to protect these rights.
Seasonality
The beverage alcohol industry is subject to seasonality in each major
category. Our spirits sales are typically highest during the second
quarter of our fiscal year, primarily due to seasonal holiday buying in
our largest markets.
Employees
Many of our employees are represented by unions, with a variety of
collective bargaining agreements in place. We believe our
relationships with the unions that represent our employees are
satisfactory in all material respects.
Regulations and taxes
Diageo’s worldwide operations are subject to extensive regulatory
requirements relating to production, product liability, distribution,
importation, marketing, promotion, sales, pricing, labelling,
packaging, advertising, antitrust, labour, pensions, compliance and
control systems and environmental issues.
In the United States, the beverage alcohol industry is subject to
strict federal and state government regulations. At the federal level, the
Alcohol and Tobacco Tax and Trade Bureau, or TTB, of the US
Treasury Department oversees the US beverage alcohol industry,
including through regulating and collecting taxes on the production of
alcohol within the United States and regulating trade practices. In
addition, individual US states, as well as some local authorities in US
jurisdictions in which Diageo sells or produces its products, administers
and enforces industry-specific regulations and may apply additional
excise taxes and, in many states, sales taxes. Federal, state and local
regulations cover virtually every aspect of Diageo's US operations,
including production, importation, distribution, marketing, promotion,
sales, pricing, labelling, packaging and advertising.
Spirits and beer are subject to national import and excise duties in
many markets around the world. Most countries impose excise duties
on beverage alcohol products, although the form of such taxation
varies significantly from a simple application to units of alcohol by
volume, to advanced systems based on the imported or wholesale
value of the product. Several countries impose additional import duty
on distilled spirits, often discriminating between categories (such as
Scotch whisky or bourbon) in the rate of such tariffs. Within the
European Union, such products are subject to different rates of excise
duty in each country, but within the overall European Union framework
there are minimum rates of excise duties that must first be applied to
each relevant category of beverage alcohol. The UK introduced a new
alcohol duty system in August 2023 which simplified the previous duty
regime. Further consequential amendments to the administration of
this system, though expected in the second half of 2024, are not yet
published. If implemented, these could impact Diageo’s business
activities.
Import and excise duties can have a significant impact on the final
pricing of Diageo’s products to consumers. These duties can affect a
product’s revenue or margin, both by reducing consumption and/or
by encouraging consumers to switch to lower-taxed categories of
beverages. The group devotes resources to encouraging the equitable
taxation treatment of all beverage alcohol categories and to reducing
government imposed barriers to fair trading.
The advertising, marketing and sale of alcohol are subject to
various restrictions in markets around the world. These range from a
complete prohibition of alcohol in certain cultures and jurisdictions,
such as in certain states in India, to the prohibition of the import into a
certain jurisdiction of spirits and beer, and to restrictions on the
advertising style, media and content. In a number of countries,
television is a prohibited medium for the marketing of spirits brands,
while in other countries, television advertising, while permitted, is
carefully regulated. Many countries also strictly regulate the use of
internet-based advertising and social media in connection with alcohol
sales. Any further prohibitions imposed on advertising or marketing,
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G O V E R N A N C E R E P O R T
S T R A T E G I C R E P O R T
ADDITIONAL INFORMATION
particularly within Diageo’s most significant markets, could have an
adverse impact on beverage alcohol sales.
Labelling of beverage alcohol products is also regulated in many
markets, varying from the required inclusion of health warning labels
to manufacturer or importer identification, alcohol strength and other
consumer information. As well as producer, importer or bottler
identification, specific warning statements related to the risks of
drinking beverage alcohol products are required to be included on all
beverage alcohol products sold in the US, in certain countries within
the EU, and in a number of other jurisdictions in which Diageo
operates.
Spirits and beer are also regulated in distribution. In many
countries, alcohol may only be sold through licensed outlets, both on-
and off-trade, varying from government- or state-operated monopoly
outlets (for example, in the off-trade channel in Norway, certain
Canadian provinces, and certain US states) to the system of licensed
on-trade outlets (for example, licensed bars and restaurants) which
prevails in much of the Western world, including in the majority of US
states, in the UK and in much of the EU. In a number of states in the
US, wholesalers of alcoholic beverages must publish price lists
periodically and/or must file price changes in some instances up to
three months before they become effective. In a response to public
health concerns, some governments have imposed or are considering
imposing minimum pricing on beverage alcohol products and may
consider raising the legal drinking age, further limiting the number,
type or opening hours of retail outlets and/or expanding retail
licensing requirements.
Regulatory decisions and changes in the legal and regulatory
environment could also increase Diageo’s costs and liabilities and/or
impact on its business activities.
Taxation
This section provides a descriptive summary of certain US federal
income tax and UK tax consequences that are likely to be material to
the holders of the ordinary shares or ADSs, but only those who hold
their ordinary shares or ADSs as capital assets for tax purposes. It does
not purport to be a complete technical analysis or a listing of all
potential tax effects relevant to the ownership of the ordinary shares or
ADSs, and does not address the potential application of the provisions
of the Internal Revenue Code of 1986, as amended, known as the
Medicare contribution tax. This section does not apply to any holder
who is subject to special rules, including:
• certain financial institutions;
• a dealer in securities or foreign currency;
• a trader in securities that elects to use a mark-to-market method of
tax accounting for securities holdings;
• a tax-exempt organisation;
• an insurance company;
• a person liable for alternative minimum tax;
• a person that actually or constructively owns 10% or more of the
combined voting power of voting stock of Diageo or of the total
value of stock of Diageo;
• a person that holds ordinary shares or ADSs as part of a straddle or
a hedging or conversion transaction;
• a person that holds ordinary shares or ADSs as part of a wash sale
for tax purposes; or
• a US holder (as defined below) whose functional currency is not US
dollar.
If an entity or arrangement treated as a partnership for US federal
income tax purposes holds ordinary shares or ADSs, the US federal
income tax treatment of a partner will generally depend on the status
of the partner and the tax treatment of the partnership. A partner in a
partnership holding ordinary shares or ADSs should consult its tax
advisor with regard to the US federal income tax treatment of an
investment in ordinary shares or ADSs.
For UK tax purposes, this section applies only to persons who are
the absolute beneficial owners of ordinary shares or ADSs and who
hold their ordinary shares or ADSs as investments. It assumes that
holders of ADSs will be treated as holders of the underlying ordinary
shares. In addition to those persons mentioned above, this section
does not apply to holders that are banks, regulated investment
companies, other financial institutions, or to persons who have or are
deemed to have acquired their ordinary shares or ADSs in the course
of an employment or trade. This summary does not apply to persons
who are treated as non-domiciled and resident in the United Kingdom
for the purposes of UK tax law.
This section is based on the Internal Revenue Code of 1986, as
amended, its legislative history, existing and proposed regulations,
published rulings and court decisions, the laws of the United Kingdom
and the practice of His Majesty’s Revenue and Customs (HMRC), all
as currently in effect, as well as on the Convention Between the
Government of the United Kingdom of Great Britain and Northern
Ireland and the Government of the United States of America for the
Avoidance of Double Taxation and the Prevention of Fiscal Evasion
with Respect to Taxes on Income and Capital Gains (the Treaty). These
laws are subject to change, possibly on a retroactive basis.
In addition, this section is based in part upon the representations of
the Depositary and the assumption that each obligation in the Deposit
Agreement and any related agreement will be performed in
accordance with its terms. In general, and taking into account this
assumption, for US federal income tax purposes and for the purposes
of the Treaty, holders of ADRs evidencing ADSs should be treated as
the owner of the shares represented by those ADSs. Exchanges of
shares for ADRs, and ADRs for shares, generally will not be subject to
US federal income tax or to UK tax on profits or gains.
A US holder is a beneficial owner of ordinary shares or ADSs that is
for US federal income tax purposes:
• a citizen or resident for tax purposes of the United States and who is
not and has at no point been resident in the United Kingdom;
• a US domestic corporation, or other US entity taxable as a
corporation;
• an estate whose income is subject to US federal income tax
regardless of its source; or
• a trust if a US court can exercise primary supervision over the trust’s
administration and one or more US persons are authorised to
control all substantial decisions of the trust.
This section is not intended to provide specific advice and no action
should be taken or omitted in reliance upon it. This section addresses
only certain aspects of US federal income tax and UK income tax,
corporation tax, capital gains tax, inheritance tax and stamp taxes.
Holders of the ordinary shares or ADSs are urged to consult their own
tax advisors regarding the US federal, state and local, and UK and
other tax consequences of owning and disposing of the shares or
ADSs in their respective circumstances. In particular, holders are
encouraged to confirm with their advisor whether they are US holders
eligible for the benefits of the Treaty.
Dividends
UK taxation
The company will not be required to withhold tax at source when
paying a dividend.
All dividends received by an individual shareholder or ADS holder
who is resident in the UK for tax purposes will, except to the extent that
they are earned through an ISA or other regime which exempts the
dividends from tax, form part of that individual’s total income for
income tax purposes and will represent the highest part of that
income.
A nil rate of income tax will apply to the first £500 of taxable
dividend income received by an individual shareholder in the
2024/2025 tax year (the Nil Rate Amount), regardless of what tax rate
would otherwise apply to that dividend income. Following the UK
election on 4 July 2024, the Nil Rate Amount in respect of the
2025/2026 tax year may be subject to change.
Any taxable dividend income in excess of the Nil Rate Amount will
be subject to income tax at the following special rates (as at the
2024/2025 tax year):
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• at the rate of 8.75%, to the extent that the relevant dividend income
falls below the threshold for the higher rate of income tax;
• at the rate of 33.75%, to the extent that the relevant dividend
income falls above the threshold for the higher rate of income tax
but below the threshold for the additional rate of income tax; and
• at the rate of 39.35%, to the extent that the relevant dividend
income falls above the threshold for the additional rate of income
tax.
In determining whether and, if so, to what extent the relevant dividend
income falls above or below the threshold for the higher rate of
income tax or, as the case may be, the additional rate of income tax,
the individual’s total taxable dividend income for the tax year in
question (including the part within the Nil Rate Amount) will, as noted
above, be treated as the highest part of that individual’s total income
for income tax purposes.
Shareholders within the charge to UK corporation tax which are
small companies (for the purposes of the UK taxation of dividends) will
not generally be subject to tax on dividends from the company. Other
shareholders within the charge to UK corporation tax will not be
subject to tax on dividends from the company so long as the dividends
fall within an exempt class and certain conditions are met. In general,
dividends paid on shares that are ordinary share capital for UK tax
purposes and are not redeemable and dividends paid to a person
holding less than 10% of the issued share capital of the payer (or any
class of that share capital) are examples of dividends that fall within
an exempt class.
US taxation
Under the US federal income tax laws, and subject to the passive
foreign investment company (PFIC) rules discussed below, the gross
amount of any distribution (other than certain pro rata distribution of
ordinary shares) paid to a US holder by Diageo in respect of its
ordinary shares or ADSs out of its current or accumulated earnings
and profits (as determined for US federal income tax purposes) will be
treated as a dividend that is subject to US federal income taxation.
Dividends paid to certain non-corporate US holders that constitute
qualified dividend income will be taxed at the preferential rates
applicable to long-term capital gains, provided that the ordinary
shares or ADSs are held for more than 60 days during the 121-day
period beginning 60 days before the ex-dividend date and the holder
meets other holding period requirements. Dividends paid by Diageo
with respect to its ordinary shares or ADSs generally will be qualified
dividend income to US holders that meet the holding period
requirement, provided that, in the year that they receive the dividend,
we are eligible for the benefits of the Treaty. We believe that we are
currently eligible for the benefits of the Treaty and we therefore expect
that dividends on the ordinary shares or ADSs will be qualified
dividend income, but there can be no assurance that we will continue
to be eligible for the benefits of the Treaty. Under UK law, dividends
paid by the company are not subject to UK withholding tax. Therefore,
the US holder will include in income for US federal income tax
purposes the amount of the dividend received, and the receipt of a
dividend will not entitle the US holder to a foreign tax credit.
The dividend must be included in income when the US holder, in
the case of ordinary shares, or the Depositary, in the case of ADSs,
receives the dividend, actually or constructively. The dividend will not
be eligible for the dividends-received deduction generally allowed to
US corporations in respect of dividends received from other US
corporations. Dividends will generally be income from sources outside
the United States and will generally be ‘passive’ income for purposes
of computing the foreign tax credit allowable to a US holder. The
amount of the dividend distribution that must be included in income of
a US holder will be the US dollar value of the pounds sterling
payments made, determined at the spot pounds sterling/US dollar
foreign exchange rate on the date of the dividend distribution,
regardless of whether the payment is in fact converted into US dollars.
Generally, any gain or loss resulting from currency exchange
fluctuations during the period from the date the dividend payment is
distributed to the date the payment is converted into US dollars will be
treated as ordinary income or loss and will not be eligible for the
special tax rate applicable to qualified dividend income. The gain or
loss generally will be income or loss from sources within the United
States for foreign tax credit limitation purposes. Distributions in excess
of current and accumulated earnings and profits, as determined for
US federal income tax purposes, will be treated as a non-taxable
return of capital to the extent of the holder’s basis in the ordinary
shares or ADSs and thereafter as capital gain. However, Diageo does
not expect to calculate earnings and profits in accordance with US
federal income tax principles. Accordingly, a US holder should expect
to generally treat distributions Diageo makes as dividends.
Taxation of capital gains
UK taxation
A citizen or resident (for tax purposes) of the United States who has at
no time been resident in the United Kingdom will not be liable for UK
tax on capital gains realised or accrued on the sale or other disposal
of ordinary shares or ADSs, unless the ordinary shares or ADSs are
held in connection with a trade or business carried on by the holder in
the United Kingdom through a UK branch, agency or a permanent
establishment. A disposal (or deemed disposal) of shares or ADSs by a
holder who is resident in the United Kingdom may, depending on the
holder’s particular circumstances, and subject to any available
exemption or relief, give rise to a chargeable gain or an allowable loss
for the purposes of UK tax on capital gains.
US taxation
Subject to the PFIC rules discussed below, a US holder who sells or
otherwise disposes of ordinary shares or ADSs will recognise capital
gain or loss for US federal income tax purposes equal to the difference
between the US dollar value of the amount that is realised and the tax
basis, determined in US dollars, in the ordinary shares or ADSs. Capital
gain of a non-corporate US holder is generally taxed at preferential
rates where the property is held for more than one year. The gain or
loss will generally be income or loss from sources within the United
States for foreign tax credit limitation purposes. The deductibility of
capital losses is subject to limitations.
PFIC rules
Diageo believes that ordinary shares and ADSs should not currently be
treated as stock of a PFIC for US federal income tax purposes, and we
do not expect to become a PFIC in the foreseeable future. However
this conclusion is a factual determination that is made annually and
thus may be subject to change. It is therefore possible that we could
become a PFIC in a future taxable year.
If treated as a PFIC, gain realised on the sale or other disposition of
ordinary shares or ADSs would in general not be treated as capital
gain. Instead, unless a US holder elects to be taxed annually on a
mark-to-market basis with respect to the ordinary shares or ADSs, US
holders would be treated as if the holder had realised such gain and
certain ‘excess distributions’ pro-rated over the holder’s holding period
for the ordinary shares or ADSs. To the extent gain is allocated to the
taxable year of the sale or other disposition of ordinary shares or ADSs
and to any year before Diageo became a PFIC, it would be taxed as
ordinary income. The amount allocated to each other taxable year
would be taxed at the highest tax rate in effect (for individuals or
corporations, as applicable) for each such year to which the gain was
allocated, together with an interest charge in respect of the tax
attributable to each such year. With certain exceptions, a holder’s
ordinary shares or ADSs will be treated as stock in a PFIC if Diageo
were a PFIC at any time during the holding period in a holder’s
ordinary shares or ADSs. In addition, dividends received from Diageo
will not be eligible for the special tax rates applicable to qualified
dividend income if Diageo is a PFIC (or is treated as a PFIC with
respect to the holder) either in the taxable year of the distribution or
the preceding taxable year, but instead will be taxable at rates
applicable to ordinary income. If any investor owns our shares or ADSs
during any year that we are a PFIC with respect to them, they may be
required to file IRS Form 8621.
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ADDITIONAL INFORMATION
UK inheritance tax
Subject to certain provisions relating to trusts or settlements, an
ordinary share or ADS held by an individual shareholder who is
domiciled in the United States for the purposes of the Convention
between the United States and the United Kingdom relating to estate
and gift taxes (the Convention) and who is neither domiciled in the
United Kingdom nor (where certain conditions are met) a UK national
(as defined in the Convention), will generally not be subject to UK
inheritance tax on the individual’s death (whether held on the date of
death or gifted during the individual’s lifetime) except where the
ordinary share or ADS is part of the business property of a UK
permanent establishment of the individual or pertains to a UK fixed
base of an individual who performs independent personal services. In
a case where an ordinary share or ADS is subject both to UK
inheritance tax and to US federal gift or estate tax, the Convention
generally provides for inheritance tax paid in the United Kingdom to
be credited against federal gift or estate tax payable in the United
States, or for federal gift or estate tax paid in the United States to be
credited against any inheritance tax payable in the United Kingdom,
based on priority rules set forth in the Convention.
UK stamp duty and stamp duty reserve tax
Stamp duty and stamp duty reserve tax (SDRT) may arise upon the
deposit of an underlying ordinary share with the Depositary, generally
at the higher rate of 1.5% of its issue price or, as the case may be, of
the consideration for transfer. The Depositary will pay the stamp duty
or SDRT but will recover an amount in respect of such tax from the
initial holders of ADSs. From 1 January 2024, however, new legislation
has confirmed that the 1.5% SDRT charge on a transfer of shares to a
depositary receipt issuer or to a person providing clearance services
(or their nominee or agent) does not apply where the transfer is an
integral part of a raising of capital.
Therefore, no UK stamp duty will be payable on the acquisition or
transfer of ADRs. Furthermore, an agreement to transfer ADSs in the
form of ADRs will not give rise to a liability to SDRT.
Purchases of ordinary shares (as opposed to ADRs) will be subject
to UK stamp duty, and/or SDRT as the case may be, at the rate of
0.5% of the price payable for the ordinary shares at the time of the
transfer. Stamp duty applies where a physical instrument of transfer is
used to effect the transfer. SDRT applies to any agreement to transfer
ordinary shares (regardless of whether or not the transfer is effected
electronically or by way of an instrument of transfer). However, where
ordinary shares being acquired are transferred direct to the
Depositary’s nominee, the only charge will generally be the higher
charge of 1.5% of the price payable for the ordinary shares so
acquired, subject to the applicability of any exemptions to the 1.5%
charge discussed above.
Any stamp duty payable (as opposed to SDRT) is rounded up to the
nearest £5. No stamp duty (as opposed to SDRT) will be payable if the
amount or value of the consideration is (and is certified to be) £1,000
or less. Stamp duty and SDRT are usually paid or borne by the
purchaser.
Whilst stamp duty and SDRT may in certain circumstances both
apply to the same transaction, in practice usually only one or other will
need to be paid.
US backup withholding and information reporting
Payments of dividends and sales proceeds with respect to ordinary
shares and ADSs may be reported to the IRS and to the US holder.
Backup withholding may apply to these reportable payments if the US
holder fails to provide an accurate taxpayer identification number or
certification of exempt status or fails to report all interest and dividends
required to be shown on its US federal income tax returns. Certain US
holders (including, among others, corporations) are not subject to
information reporting and backup withholding. The amount of any
backup withholding from a payment to a US holder will be allowed as
a credit against the holder’s US federal income tax liability and may
entitle the holder to a refund, provided that the required information is
timely furnished to the IRS. US holders should consult their tax advisors
as to their qualification for exemption from backup withholding and
the procedure for obtaining an exemption. Certain US holders who are
individuals (and certain specified entities), may be required to report
information relating to their ownership of non-US securities unless the
securities are held in accounts at financial institutions (in which case
the accounts may be reportable if maintained by non-US financial
institutions). US holders should consult their tax advisors regarding any
reporting obligations they may have with respect to the ordinary
shares or ADSs.
OTHER A DDITIONAL INFORMATION continued
266
Diageo Annual Report 2024
Additional
information for
shareholders
Annual General Meeting (AGM)
The AGM will be held at Hilton London Tower Bridge, 5 More London
Place, Tooley Street, London, SE1 2BY on 26 September 2024 at 2.30
pm.
Documents on display
The Annual Report on Form 20-F and any other documents filed by the
company with the US Securities Exchange Commission (SEC) may be
inspected at the SEC’s office of Investor Education and Advocacy
located at 100 F Street, NE, Washington, DC 20549-0213, USA. Please
call the SEC at 1-800-SEC-0330 for further information on the public
reference rooms and their copy charges. Filings with the SEC are also
available to the public from commercial document retrieval services,
and from the website maintained by the US Securities and Exchange
Commission at www.sec.gov.
Warning to shareholders – share fraud
Please beware of the share fraud of ‘boiler room’ scams, where
shareholders are called ‘out of the blue’ by fraudsters (sometimes claiming
to represent Diageo) attempting to obtain money or property dishonestly.
Further information on boiler room scams can be found on the Financial
Conduct Authority’s website (https://www.fca.org.uk/scamsmart/share-
bond-boiler-room-scams) but in short, if in doubt, take proper professional
advice before making any investment decision.
Electronic communications
Shareholders can register for an account to manage their
shareholding online, including being able to: check the number of
shares they own and the value of their shareholding; register for
electronic communications; update their personal details; provide a
dividend mandate instruction; access dividend confirmations; and use
the online share dealing service. To register for an account,
shareholders should visit www.diageoregistrars.com.
Dividend payments
Direct payment into bank account
Shareholders can have their cash dividend paid directly into their UK
bank account on the dividend payment date. To register UK bank
account details, shareholders can register for an online account at
www.diageoregistrars.com or call the Registrar on +44 (0)371 277
1010* to request the relevant application form. For shareholders
outside the UK, Link Group (a trading name of Link Market Services
Limited and Link Market Services Trustee Limited) may be able to
provide you with a range of services relating to your shareholding. To
learn more about the services available to you please visit the
shareholder portal at www.diageoregistrars.com or call +44 (0)371 277
1010*.
Dividend Reinvestment Plan
A Dividend Reinvestment Plan is offered by the Registrar, Link Market
Services Trustees Limited, to give shareholders the opportunity to build
up their shareholding in Diageo by using their cash dividends to
purchase additional Diageo shares. To join the Dividend Reinvestment
Plan, shareholders can call the Registrar, Link Group on +44 (0)371 277
1010* to request the relevant application form.
Dividend Currency Election
Following the group functional currency change in fiscal 23 to US
dollars, holders of ordinary shares will continue to receive their
dividends in sterling, unless they wish to elect to receive their dividends
in US dollars. To elect to receive their dividends in US dollars,
shareholders can download the relevant election form on the
shareholder portal at www.diageoregistrars.com or call +44 (0)371 277
1010*.
Exchange controls
Other than certain economic sanctions which may be in effect from
time to time, there are currently no UK foreign exchange control
restrictions on the payment of dividends, interest or other payments to
holders of Diageo’s securities who are non-residents of the UK or on
the conduct of Diageo’s operations.
There are no restrictions under the company’s articles of association or
under English law that limit the right of non-resident or foreign owners
to hold or vote the company’s ordinary shares.
Please refer to the ‘Taxation’ section on pages 263-266 for details
relating to the taxation of dividend payments.
Useful contacts
The Registrar/Shareholder queries
Link Group acts as the company’s registrar and can be contacted as
follows:
By email: Diageo@linkgroup.co.uk
By telephone: +44 (0) 371 277 1010*
In writing: Registrars – Link Group, Central Square, 29 Wellington
Street, Leeds, LS1 1DL.
* Calls are charged at the standard geographic rate and will vary by provider. Calls
outside the United Kingdom will be charged at the applicable international rate. Lines
are open 08:00 to 17:30 UK time, Monday to Friday, excluding public holidays in
England and Wales.
ADR administration
Citibank Shareholder Services acts as the company’s ADR
administrator and can be contacted as follows:
By email: citibank@shareholders-online.com
By telephone: +1 866 253 0933/ (International) +1 781 575 4555*
In writing: Citibank Shareholder Services. PO Box 43077,
Providence, RI 02940-3077
* Lines are open Monday to Friday 8:30 to 18:00 EST
General Counsel and Company Secretary
Tom Shropshire
The.cosec@diageo.com
Investor Relations
investor.relations@diageo.com
ADDITIONAL INFORM ATION FOR SHAREHOLDERS
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ADDITIONAL INFORMATION
Printed on Vision Superior, an FSC® certified mixed sources paper.
Printed by Paragon Customer Communications, an FSC®
and ISO 140001 certified company.
Consultancy and design by Black Sun Global
268
Diageo Annual Report 2024
Diageo plc
16 Great Marlborough Street
London
W1F 7HS
United Kingdom
T: +44 (0) 20 7947 9100
www.diageo.com
Registered in England No. 23307
© 2024 Diageo plc. All rights reserved.
All brands mentioned in this Annual
Report are trademarks and are registered
and/or otherwise protected in
accordance with applicable law.