Emerging markets boost Diageo’s sales
Diageo, the world’s number one drinks group, said its net profit rose by 17.5 percent in its first half (ended 31 December 2010) with strong sales growth in Asia/Pacific and other emerging markets. Diageo reported on 10 February 2011 that better trading in Latin America, Africa and Asia had helped to offset weaker sales in Europe where consumers moved to cheaper drinks. These market regions make up about a third of Diageo’s earnings.
For the first six months of its current financial year, the maker of Johnnie Walker whisky, Smirnoff vodka and Guinness stout announced an 18 percent rise in net profit to GBP 1.19 billion (USD 1.9 billion) from GBP 1.02 billion a year earlier. Revenue rose 2 percent to GBP 5.3 billion.
Sales volume was up 2 percent in North America but down 2 percent in Europe. Asia/Pacific volume rose 8 percent and other international markets produced a 9 percent gain.
Growth in its international and Asia Pacific markets was offset by continued weakness in Europe, particularly in Greece, Iberia and Ireland, where net sales fell 13 percent.
Ireland played a key role in a 4 percent drop in net sales of Diageo’s beer brands, where weakness in the on-trade, particularly in rural areas, saw sales of Guinness decline, it was reported.
Net sales of Diageo’s products in Britain were up 1 percent, but margins were eroded, and Russia and Eastern Europe saw net sales improve 20 percent.
Overall, its international and Asia Pacific units showed a rise in volume of 9 percent and 8 percent respectively. European volumes contracted by 2 percent and net sales dipped by 3 percent. In North America, volume rose 2 percent, while net sales were up 3 percent.
In order to raise its profile in growing emerging markets, Diageo at the end of January 2011 struck a deal in Vietnam by taking a 24 percent stake in Hanoi Liquor Joint Stock Company (Halico), Vietnam’s largest branded spirits distiller for GBP 33 million (USD 51.6 million) in cash. Halico has Vodka Hanoi as its main brand.
Diageo said it will help its Vietnamese partner in innovation, branding and logistics.
The London and New York-listed company is to develop its spirits business in the country separately, including promotion of Johnnie Walker, Smirnoff and Baileys.
Vietnam is seen as a promising market, with Halico seeing double-digit growth in the past four years.
