Diageo announces strong results

Related tags Great britain Diageo United kingdom of great britain and ireland

Diageo announced strong results in the year to June 2007, with a 13 per cent underlying rise in annual earnings and operating profit growth of 8.7...

Diageo announced strong results in the year to June 2007, with a 13 per cent underlying rise in annual earnings and operating profit growth of 8.7 per cent.

The world's largest drinks company raised its targets for 2008, aiming for an increase in operating profit of nine per cent.

In Great Britain, a first half net sales decline was offset by a second half improvement driven by an "aggressive focus" on core spirits brands Smirnoff, Baileys and Captain Morgan.

Paul Walsh, chief executive of Diageo, said: "While we watch for any impact the current volatility in financial markets may have on broader trading conditions, the investments we have made in brands and markets this year have created an even stronger platform for the future.

"Therefore, we currently expect increased organic operating profit growth in 2008 of nine per cent."

Guinness volumes were down by 5 per cent across the year, with the brand declining in the 'tough beer markets' of Great Britain and Ireland, although growing sales internationally. RTD volumes fell 12 per cent, with Smirnoff Ice losing ground in Great Britain, Germany and France.

Baileys volume declined 25 per cent and net sales declined 21 per cent in the first half of the year as a result of a Cristmas pricing policy under which Diageo didn't fund deep discounting in the on-trade in the way it has traditionally done over the festive period. However, the spirit's net sales rose 12 per cent in the second half.

Andrew Morgan, president of Diageo Europe, said of Baileys and RTDs: "Our decision not to fund deep discounting of Baileys at Christmas resulted in a significant price increase, and therefore it was disappointing last year. However, that philosophy will not change, but we expect to do better on volume.

"What we are finding with RTDs is that, to be succesful in Great Britain, you need to have a differentiated product. We ditched a few products last year which didn't achieve that. We hope to come up with new ones that do achieve that differentiation."

Related topics Beer Spirits & Cocktails

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