Charmed spirits

Profits pour in as Diageo liquors up emerging markets

January 31, 2013
January 31, 2013

Diageo, the British distiller that makes more money selling spirits than any company in the world, had a fantastic second half of 2012. While sales increased 5% year-on-year, net profit reached $2.43 billion, an increase of 61%, though that bump is exaggerated by a large tax charge in 2011.

Newly acquired tastes in emerging-markets for Diageo’s hooch—a portfolio that includes Johnnie Walker, Guinness and Captain Morgan, to name a few—spurred galloping growth, said CEO Paul Walsh. “Our expanding reach to emerging middle-class consumers in faster growing markets was the key driver of our volume growth,” said Walsh. In Latin America, where overall sales grew 18%, drinkers proved increasingly fond of Scotch (paywall), while beer was a big hit in Africa, which saw a 10% sales increase.

Those new revenue sources offset dismal sales in Europe, which makes up around 28% of Diageo’s total sales. Heavier drinking in Turkey, Russia and Eastern Europe wasn’t enough to make up for a 19% decline in southern Europe, where chronic recession and austerity have tightened the screws on consumer spending. Overall sales in the region fell 2% year-on-year.

Another profit boost came from North Americans, who continued to pay top dollar for “the good stuff,” despite Diageo’s higher pricing of its top-shelf brands there. Buoyed by the holiday season, North America sales jumped 5%.

The company also announced a 9% increase to its dividend—more good news for Diageo investors, whose shares in the company gained some 31% in 2012.

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