Diageo’s sales grow despite Europe faltering

10 February, 2011

Diageo has reported an 4% increase in organic net sales growth for H2 of 2010, despite a drop of 3% in Europe.

Growth for the world’s largest drinks group came in the shape of emerging markets, with double digit increases in Latin America and the Caribbean (17%), Global Travel and Middle East (15%), Africa (10%) and significant growth in Asia Pacific (7%).

European net sales were affected by ‘economic weakness’, especially in Greece, Iberia and Ireland, where there was a 13% net decline.

The UK’s net sales grew by 1%, but significant gains in Europe came from Diageo’s Eastern European markets and Russia, with net sales growth of 20% reflecting the group’s 50% increase in marketing spend in the region.

Chief executive of Diageo, Paul Walsh said: “Despite the economic weakness in much of Europe, our first half performance gives me increased confidence that we will improve on the organic operating profit growth we delivered in fiscal 2010.”

The growth of Diageo’s African market was driven by beer sales in East Africa and by scotch in South Africa, while the 7% growth in Asia Pacific was led in no small part by the continued growth of scotch brand Johnnie Walker, which achieved double digit growth in the region.

Latin America and the Caribbean also benefited from strong performance from scotch brands, delivering double-digit volume growth.

North America improved in net sales by 3%, with "innovation" contributing significantly.

A return to volume growth was also recorded in the region and ‘mix improvement’ was led by the growth of US spirits and a recovery in Canada.

By category, spirits drove net sales growth with an increase of 5%. Leading the way was scotch with an increase of 6% and vodka which rose by 8%.

Notable brand growth came in the form of Johnnie Walker, with a 10% net sales rise, helped by a 23% increase in Asia.

While for Smirnoff – the worlds biggest international spirits brand - net sales were down 1%, due to an “intensely competitive” European market and a loss of share in the US “as the level of off-trade price promotion increased its relative share”.