Guinness’s future lies outside Britain and Ireland
Drinks giant Diageo said the future of its Guinness beer lies outside its traditional markets of Britain and Ireland.
Growth of Guinness in Africa, especially Nigeria, helped global volumes climb 2 percent in Diageo’s financial year 2007 (ending 30 June 2007) with sales 3 percent ahead.
Sales in Britain fell 3 percent and in Ireland by 7 percent in the year to June, while Diageo’s international region, which covers Africa and Asia, saw sales rise 15 percent. Nigeria pushed aside Ireland to be the beer’s number two market after Britain.
Beer accounts for around 10 percent of Diageo’s profits and Guinness around half of that. Four major markets - Britain, Ireland, the United States and Nigeria - account for some 60 percent of Guinness volume, with the first two over 40 percent.
Diageo, the world’s largest producer and distributor of alcoholic drinks, reported a 22 percent fall in full-year net profit, as taxes proved a drag on growth in sales and profits.
However, the company said that earnings growth will accelerate this year from premium brands such as Johnnie Walker scotch whisky and Smirnoff vodka outside Europe. Diageo posted a net profit of GBP 1.49 billion (USD 2.99 billion) for the full year, down from GBP 1.9 billion in the previous year.
Revenue rose 2.2 percent to GBP 9.9 billion (USD 19.9 billion), as increased sales of premium brands in the United States, Brazil and Asia compensated for slowing demand for beer in Europe.
Scotch sales grew 13 percent, led by Johnnie Walker. Smirnoff vodka sold over 23 million 12-bottle cases to stay as the world’s No 1 selling spirit. However, the Tanqueray and Gordon’s gin group increased to GBP 65 million pounds the damage it did to operating profit from currency movements for the current year.
Diageo reiterated it will return GBP 1 billion to shareholders via a share buyback programme in the current year.
Diageo shares trade on 16.7 times forecast June 2008 earnings, according news agency data, a discount to rival Pernod Ricard on 17.2 times. The French group’s underlying sales grew faster at 9.1 percent in the year to June 2007 and earnings are set to grow above 20 percent.
Although Diageo produces consistent growth, many investors seem to prefer Pernod, not least for its willingness to take part in industry takeovers.
