Diageo sales rise fuelled by emerging markets

City A.M. Reporter
Diageo, the world's biggest spirits group, beat forecasts with a seven per cent rise in underlying sales for the first three months of 2011 as strong emerging market growth offset a weak Europe.

The British maker of Smirnoff vodka, Captain Morgan rum and Guinness beer also stuck to its forecast to see higher profit growth this year than last helped by good growth seen in Asia, Latin America and Africa.

Chief executive Paul Walsh said although trading in Europe continued to be challenging, North American consumer trends were improving and its emerging markets were driven by the strength of its scotch whiskies especially around the Chinese New Year.

"We remain confident that our up weighted marketing investment together with the increased investment we have made in emerging markets in the year will continue to deliver improved performance," Walsh said in a trading update.

The London-based group's quarterly growth of 7 percent beat forecasts for an average 1.8 per cent rise in a Reuters poll of 10 brokers, which followed a 4 per cent first half (July-Dec) rise and 12 per cent growth the previous third quarter.

Diageo has seen trade picking up in 2010 and into 2011 after it suffered throughout most of 2009 as the global downturn prompted drinkers to move to cheaper tipples and wholesalers to use up stocks rather than make new orders.

The marketer of Tanqueray gin and Jose Cuervo tequila reiterated its annual target for operating profit to grow faster in the year to June 2011 than the 2 percent in the previous year, pinning its hopes on growth from emerging markets.

French rival Pernod Ricard, reporting a similar period, said its third quarter underlying sales rose five per cent.