Irish

Friday 25 July 2014

Asia's thirst for the black stuff helps boost Diageo

Peter Flanagan

Published 01/02/2013|05:00

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SALES of Guinness rose marginally between July and December last year, as drinkers outside Europe took in more of the black stuff.

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According to the stout's parent company Diageo, Guinness sales rose 2pc in the first half of its fiscal year, but improved by 7pc in "fast-growth" markets in Africa and Asia.

Diageo Ireland boss David Smith said Guinness's growth was reflected across its wider Irish business.

"Globally, Guinness achieved 15pc net sales growth in Indonesia and North Asia. East Africa and Africa regional markets grew sales 4pc.

"In our more developed markets, Guinness saw a 1pc decline in net sales. In Europe, Great Britain and Ireland continued to be challenging with tough trading conditions. In Ireland, Guinness held its share at 32pc and our spirits business held its share at 36pc," he added.

Bushmills whiskey "performed well" in Ireland, as net sales increased 28pc, while in the US sales increased 13pc.

For Baileys meanwhile, sales rose 1pc, driven by a near 40pc increase in Africa which offset a decline in Western Europe.

Exported

In a sign of just how much the market for Guinness has expanded beyond Ireland and the UK, Diageo said 70pc of all Guinness now brewed in St James's Gate is exported, while that figure jumps to 90pc for Baileys.

"Despite tough market conditions we remain committed to the Irish market and we are investing in supporting pubs and building our brands," said Mr Smith.

Diageo's performance in Ireland comes against a background of huge decline in the drinks market here. The pub and restaurant trade is down by about a quarter since 2007.

Globally, Diageo said it improved sales by about 5pc during the first six months of its year, as growth in emerging markets offset declines in its European core.

Company chief executive Paul Walsh said the results "reflected the global strength of our brands", which include the likes of Johnnie Walker whisky and Smirnoff Vodka as well as its Irish brands.

"Our expanding reach to emerging middle-class consumers in faster growing markets was the key driver of our volume growth, while net sales growth was driven by our pricing strategy and premiumisation, especially in the US.

"This drove gross margin expansion, which together with our continued focus on operating efficiencies, delivered operating margin improvement," Mr Walsh added.

"This is a strong set of results, confirming our medium-term guidance and supporting our decision to increase the interim dividend by 9pc."

Analysts agreed with Mr Walsh's assessment, as shares rose more than 2pc in London. The stock is up 37pc in the last year.

"This bipolarity and chronic weakness in southern Europe is striking and endorses Diageo's strategy of diversification into emerging markets," said Martin Deboo, an analyst at Investec Securities in London.

Irish Independent

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