A cautious outlook brings jitters to Diageo’s investors

By contrast, in the U.S. sales by volume were down 2 percent and net sales 3 percent lower, while in Europe volume rose 1 percent but net sales fell 2 percent.

Johnnie Walker is the company’s best-performing brand, with its Black Label version seeing double-digit sales growth worldwide thanks to strong demand in emerging markets. Smirnoff sales were lower amid "intense" competition in the vodka market and a 7 percent drop in sales in North America.

Diageo’s beer division reported mixed results. Guinness, which makes up a little over half of Diageo’s beer sales, had flat sales with strong double-digit growth in South East Asia offsetting a 2 percent decline in Europe and flat sales in Africa. If beer volumes in Africa were up, it’s because people had traded down to cheaper lagers.

In Britain and Ireland, Guinness once again gained market share, although sales were down as the on-trade continued to struggle in the face of the recession.

Many analysts considered Diageo’s results underwhelming: after all, Diageo had raised its marketing spending by 14 percent to achieve just 2 percent of organic volume growth over the year.

Diageo expects stronger growth in the coming year, once again driven by emerging markets, as there are few signs of recovery in Europe.

At the end of fiscal 2010, Diageo had cash and cash equivalents of GBP 1.45 billion (EUR 1.8 billion) and borrowings of GBP 8.18 billion (EUR 10 billion), it was reported.