Diageo’s £76m Question

Diageo’s six monthly turnover is down 76m on last year’s figures.

Seventy six million pounds might represent a decent haul for a bank heist, but in corporate terms it’s small potatoes, particularly when those potatoes are growing in the garden of Diageo.  That figure – 76m – is how much the company’s six-monthly turnover is down compared to the same set of results last year.

But since overall turnover was £5 billion, Diageo’s executives aren’t likely to be losing too much sleep over such a relatively small downturn, particularly since a weak dollar cost them four times that much in adverse currency exchanges, and because the North American region remains a global bright-spot.

What is likely to be worrying them, however, is the volatile state of Asia, where lucrative Scotch markets such as Taiwan and Korea have suddenly come to a grinding halt, from double-digit growth barely 12 months ago.  Europe, too, remains resolutely supine, and given the region’s generally sound economic state, this is doubtless something the board will want to address.

Growth in Europe is currently best provided either by vodka or wine.  It’s hard to see what more Diageo could do with Smirnoff, given that it covers the full gamut for RTD to super-premium style-bar offering. But in wine the company’s options look limited.  It’s asking a lot of Blossom Hill to expect it to repeat it recent performance, while reinventing Piat is proving harder than expected.