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Emerging Markets, Johnnie Walker Propel Diageo’s Sales, Profits In Fiscal First Half

February 9, 2012

Diageo enjoyed solid sales and profit growth in the first half of its fiscal year, due largely to its impressive progress in emerging markets. Propelled by 18% net sales growth and 23% operating profit growth in its emerging market business—which now accounts for nearly 40% of Diageo’s total turnover—the company posted an 8% gain in overall net sales growth, to £5.76 billion ($9.1b) and a 7% operating profit increase, to £1.84 billion ($2.91b), for the six months ended December 31, 2011.

Diageo has said it expects emerging markets in Asia, Africa, Latin America and Eastern Europe to account for at least half of its business by 2015, and the company is aggressively investing toward that goal. Its marketing spend in that channel jumped by 20% in the last six months of calendar 2011, compared to a 10% increase in the company’s overall marketing spend.

Much of Diageo’s emerging market growth has been driven by Johnnie Walker. The Scotch whisky brand enjoyed a dynamic performance during the six-month period, with its global volume rising by 8% and—due largely to robust business for its luxury variants in Asia—net sales growing by 15%. Johnnie Walker’s net sales rose by 27% in Africa, 12% in Latin America and the Caribbean and 19% in Asia. The leading global Scotch brand also fared well in established markets, with 18% net sales growth in North America and a 7% boost in Europe.

Diageo’s other top sellers didn’t perform quite as well as Johnnie Walker, but some achieved solid growth nonetheless. Smirnoff’s net sales advanced by 9%, while net sales for Captain Morgan rose by 6%. Ketel One and Cîroc were both strong, with net sales growth of 11% and 50%, respectively, while Tanqueray (+7%), Buchanan’s (+25%, due to significant gains in Latin America) and Guinness (+4%) were also on the rise. However, Baileys, Jose Cuervo and Crown Royal all saw net sales either remain flat or decline, while Diageo’s wine and ready-to-drink businesses also lost ground.

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