Diageo toasts the taste of Scotch as emerging markets sales surge

By MARTIN FLANAGAN
Published on Friday 10 February 2012 00:00

SCOTCH whisky was the star turn of robust half-time results from spirits giant Diageo yesterday, as strong sales growth in emerging markets offset difficult trading in debt-laden Europe.

Diageo, Scotland’s biggest whisky company employing more than 3,500 people here, said Scotch was its best-performing category, with volume growth of 8 per cent and net sales growth of 14 per cent.

It meant that Scotch delivered more than half of the total net sales rise at the company in the six months to end‑December.

Paul Walsh, group chief executive, hailed a “standout performance” from Johnnie Walker, whose volumes jumped 8 per cent and net sales 15 per cent.

Buchanan’s whisky also did well, with volume growth of 22 per cent and a sales increase of 27 per cent, while White Horse in Russia grew net sales 17 per cent after its first marketing campaign in that country.

Scotch whisky’s eye-catching performance compared with volume rises of 8 per cent in Guinness, 6 per cent in Tanqueray gin, 4 per cent in Smirnoff vodka and 3 per cent in Captain Morgan rum.

Walsh said Scotch sales had benefited from “continued consumer confidence at higher income levels in emerging markets”, leading to particularly good sales of deluxe brands like Johnnie Walker Blue.

He added: “Scotch is now worth £125 a second in export revenue [to the UK]. And we are by far the largest player in that.”

Diageo’s underlying operating profits rose 9 per cent to £1.9 billion from £1.7bn in the same trading half of the previous year. The dividend is lifted 7 per cent to 16.60p from 15.5p.

Diageo said emerging markets such as Russia, Turkey, Latin America, Africa and Asia continued to perform well for the group. Operating profits rose 19 per cent in Latin America, and 20 per cent in both Africa and Asia Pacific.

Emerging markets now account for 40 per cent of Diageo’s revenues and the group, the world’s biggest spirits business, is targeting 50 per cent in the mid-term.

Walsh said Europe and the UK had stabilised in a “flat, holding situation” as regards sales, but that the region’s performance was being held back by poor trading in some eurozone nations such as Spain, Greece and Ireland.

Volumes in the UK were down 0.3 per cent. Andrew Morgan, president of Diageo Europe, said: “In the UK we would have hoped to see more improvement in consumer spending than we are doing.”

He also said he expected challenging conditions to persist in Europe given the economic pressures. “It’s hard yards for the foreseeable future,” Morgan added.

Diageo also provided evidence of North America’s gradual economic recovery, with flat volumes but net sales up 5 per cent, and operating profits up 5 per cent.

Diageo’s shares closed up 6.5p at 1,468p. They have jumped over a third since the company’s annual results last August before hitting a new record high of 1,484p on Wednesday.

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