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Guinness the toast as Diageo rides out beer slump worries
Simon English, Evening Standard14.02.08
Drinks giant Diageo shrugged off talk that the UK beer market is in terminal decline today with a strong set of results that included a surprising lift in sales of Guinness.
With rivals warning that beer sales are the lowest since the Great Depression of the 1930s and pubs closing at an alarming rate, Diageo still pushed sales of the black stuff up 6%.
That enabled it to increase market share in Britain and Ireland, mature markets where it has been assumed Guinness could hold its own at best.
Strong demand in America and Asia for top-priced vodka and scotch also helped Diageo to half-year profits of £975 million, a result that beat most analysts' expectations.
Diageo increased its marketing budget by 4% to keep sales high following fears the US has tipped into recession. Finance director Nick Rose said: "Given the noise about the external environment, it's a pretty resilient set of results."
Rose believes Diageo is benefiting from concentrating on the premium end of the market, saying budget brands are struggling. Smirnoff remains the leader in the US vodka market while Johnnie Walker whisky and Captain Morgan rum are gaining in popularity. The shares added 30p to 1064p, valuing the company at more than £27 billion.
Diageo last week pulled out of the auction for Sweden's Absolut vodka brand, instead signing a joint venture with family-owned Ketel One.
The company is nervously eyeing the Budget on 12 March, as the UK Government looks to shore up its finances. Rose insists it is not "inevitable" that duty on beer and spirits will go up, claiming the Government understands that such a move could hurt sales, so would not automatically increase the tax take.
