Diageo: earnings up in challenging year

Drinks giant Diageo, whose brands include Guinness and Smirnoff vodka, has reported a 10% rise in annual earnings despite a challenging year.

In Britain, net sales were up 2% driven by strong spirits and wine performance with Diageo gaining share of beer in the on-trade and of spirits in the off-trade.

Bell's and Baileys performed strongly with both brands gaining market share in the on and off-trades following a "robust" Christmas.

Smirnoff vodka net sales fell 3% as the brand came under pressure from heavily promoted competitor brands.

"This has been a very challenging year," said chief executive Paul Walsh. "Overall however our results demonstrate the resilience of our business. Our brand range and our geographic reach enabled us to deliver 4% organic operating profit growth and 10% earnings growth.

"While the economic downturn has affected all markets, the response of customers and consumers has not been uniform and therefore the impact on our business has been varied.

"By region, International, North America and Asia Pacific have been stronger than Europe. By category, we have delivered growth in categories which account for over 50% of our sales, primarily vodka, rum, tequila and beer. The gin and wine categories have been weaker and scotch and liqueurs have been most impacted by de-stocking."

The drinks producer is currently under fire for its decision to close its whisky bottling plant in Kilmarnock and its grain distillery in Port Dundas, Glasgow over the next two years with the loss of around 900 jobs. A demonstration is expected later in London.

Walsh added: "'We took action quickly to manage these difficult times, reducing our cost base and refocusing marketing spend as consumer trends changed. In fiscal 2010 we will benefit from cost reductions of £120 million as a result of our global restructuring initiative."