New markets offset Europe's dulled spirits for Diageo

Diageo, Scotland's biggest whisky company and owner of the iconic Johnnie Walker walking man brand, strode through recession-hit economies over the summer with the help of a strong performance in emerging markets.

The group, which has a 31 per cent Scotch whisky market share and employs some 3,500 people north of the Border, met City forecasts with an overall 5 per cent rise in first-quarter group sales.

Paul Walsh, the company's chief executive, said growth was largely driven by a good performance in Latin America, Africa and Asia Pacific, but that markets in Greece and Spain remained tough, reflecting debt crises in both those south European countries.

The Footsie-quoted maker of products such as J&B scotch whisky, Smirnoff vodka, Captain Morgan rum and Guinness also stuck to its forecast to see higher profit growth this year than the 2 per cent booked in 2009. It said Russia, Latin America, Africa and Asia were expected to offset difficult conditions in Europe. North America posted stronger growth than in the previous year.

Walsh admitted in the trading update ahead of yesterday's annual shareholder meeting: "The consumer environment in Europe is slightly weaker than we expected in the prior year."

Analysts said Diageo's strong recovery in sales reflected a very poor comparative first quarter last year when sales fell 6 per cent in the midst of destocking caused by the global economic downturn.

The European region produces nearly a third of the group's profit. Spain is one of Diageo's three key markets in Europe along with Britain and Ireland, which together make up over half of the company's European sales.

At Diageo's annual results in August, Walsh, marking a decade as chief executive, said the group had seen 5 per cent net sales growth in Scotch in the trading year to end-June and 5 per cent growth in beer, including Guinness.

At Johnnie Walker, where hundreds of jobs have been axed at plants in Kilmarnock and Glasgow, there was a 12 per cent net sales rise in the trading year, with volumes up 11 per cent. There was no fresh breakdown of figures for individual brands in the latest update.

Walsh said: "Our first-quarter performance is in line with our expectations with good volume growth and a modest improvement in the level of price/mix."

He added: "As expected we faced a challenging trading environment in Greece, and in Spain net sales were down markedly in comparison to the first quarter last year."