|Diageo GB's net sales slip but emerging markets bolster global results|
|Written by Gemma McKenna|
|Thursday, 23 August 2012 10:12|
Diageo’s net sales in Great Britain fell 2% in the past year as the group reduced its promotional activities, but emerging markets helped lift global net sales by 6% to £10.8 billion.
Worldwide the group saw net sales growth of 6% and a 9% increase in operating profit for the year to June 30, 2012. European sales fell by 1%.
But globally wine volumes fell 3%, organic sales were down 7% and reported net sales were down by 9%.
The report stated: “Wine was 4% of Diageo net sales. It remained a challenging category with volume declining in North America and Europe and with a shift to the lower end of the portfolio.”
As expected emerging markets led the way, accounting for almost 40% of the drinks giant’s business, and growing net sales by 15% and operating profit by 23%.
Acquisitions in faster growing markets, mainly that of Mey İçki in Turkey, added £320 million of net sales and £82 million of operating profit after transaction and integration costs. Marketing investment increased by 8% and targeted strategic brands and the fastest growing markets.
Taking a closer look at how the portfolio breaks down, spirits are delivering 66% of net sales and 80% of growth. Whisky alone accounts for 35% of net sales. Spirits saw a 3% increase in volume sales, 8% increase in organic net sales and 12% in reported net sales.
Diageo GB country director Andrew Cowan, said that despite challenging conditions in Western Europe, it had “successfully delivered” its strategy of “driving positive price mix and margin expansion”. This still meant a 2% decline in net sales and 4 percentage points of positive price mix.
Spirits were the star performers in this market - with Smirnoff delivering a 6% increase in net sales. This was atttributed to campaigns including Smirnoff Nightlife Exchange experiential marketing programme, Battle of the Clubs, the Madonna partnership and the launch of the “World’s Best Drinks” programme.
Captain Morgan Spiced and Jose Cuervo were also highlighted for their strong UK performances.
The drinks giant confirmed that Oriental food wholsaler SeeWoo would be building its Shui Jing Fang premium baiju - the first European market for the brand.
Chief executive Paul Walsh said: “Diageo is a strong business, getting stronger and the results we released this morning show that very clearly.
“We have increased our presence in the faster growing markets of the world, through both acquisitions and strong organic growth. We have enhanced our leading brand positions globally, through effective marketing and industry leading innovation and we have strengthened our routes to market.”