Emerging markets keep Diageo “firmly on track”

Emerging markets underpinned a healthy performance from Diageo as the company posted 6% net sales growth in its preliminary end of year results.

Latin America proved a particularly strong market for Diageo last year

While sales in Europe fell by 1%, with Diageo’s European president Andrew Morgan flagging up the region’s “very uneven” economy, the firm reported a 15% rise in net sales from emerging markets, which now represent nearly 40% of Diageo’s total business.

Latin American and the Caribbean proved particularly buoyant, with 19% volume growth taking net sales up by 10% to £1.2 billion.

While Asia Pacific was held back by flat performances from developed markets such as South Korea and Australia; Mainland China, India and South-East Asia all achieved double digit growth.

Diageo received further boosts came from recent acquisitions in its fastest growing markets, especially Mey Içki in Turkey, all of which combined to generate a further £320 million in net sales for the world’s largest drinks company.

The last year has also seen Diageo increase its stake in Shui Jing Fang and Halico, announce an agreement to acquire Brazilian cachaça brand Ypioca and confirm a further £1bn investment in its Scotch whisky production. The company is also expected to close a major deal in the next few weeks for the Jose Cuervo Tequila brand.

Describing Diageo as “a strong business, getting stronger,” its chief executive Paul Walsh highlighted the company’s most important achievements over the past year, observing: “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. 6% organic top line growth, 9% operating profit growth and 60 basis points of margin expansion is a strong performance and demonstrates our commitment to delivering efficient growth.”

Insisting that these latest results “put us firmly on track” to meet the medium-term goals he set out a year ago, Walsh concluded: “We have continued to invest to ensure this business is well positioned for the future. Our confidence in the achievement of our medium term guidance is underscored by the 8% recommended increase in our final dividend.”