Diageo reports strong US and emerging markets growth17 October 2012
UK drinks giant Diageo has reported a 5% increase in underlying sales in the first quarter.
Diageo, the world’s biggest drinks firm by sales, was boosted by higher demand for brands such as Captain Morgan’s rum and Smirnoff vodka in emerging markets and the US.
However, the 5% increase in underlying sales represents a slower in than the 9% increase reported in the same period last year.
The firm experienced challenges in Asia-Pacific, where a weak South Korean market and a delayed duty-free shipment hit sales. Asia-Pacific currently accounts for 14% of Diageo’s total sales.
Nonetheless, Diageo said that demand for its products in China was up 2%.
“Asia Pacific was disappointing and South Korea and Japan are markets we will be keeping a close eye on in future but if you are looking at the picture as a whole we are still very happy. It remains our key pick in the sector," Phil Carroll, an analyst at Shore Capital told Reuters.
Underlying sales in the US were up 5% but fell 1% in Europe. The firm once again reported solid gains in Latin America (16%) and the Caribbean (11%). Sales from emerging markets are expected to grow from 40% last year to around half by 2015.
'Diageo has delivered a solid start to the new financial year with net sales growth in line with expectations. The strength of our brands and our routes to market, coupled with the investments we have made in faster growing markets continue to drive the performance of our business,” said Paul Walsh, Diageo’s chief executive.
“As a global business we continue to be aware of the uneven nature of the global economy. However we remain confident that we will deliver our medium term goals, given the strength of our brands and our routes to market,” added Walsh.
Last month, Diageo reignited interest in Indian firm United Spirits - a key player in the world’s largest whisky market. Diageo is also believed to be considering making a bid to take a minority stake in family-owned tequila maker Jose Cuervo.
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