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Profits pour in as Diageo liquors up emerging markets

Jacob Tang/AP Images
Diageo is mastering the art of selling whiskey to the Chinese middle class.
By Jacob Albert
AfricaPublished Last updated This article is more than 2 years old.

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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