Diageo raises glass to boosted profits

Drinks giant Diageo raised a glass to boosted profits today despite facing declining sales of Guinness in the product's Irish homeland.

The company reported pre-tax profits lifted to £2.1 billion during the year to June 30, compared with £1.9 billion for the same period last year.

Diageo, whose drinks include Captain Morgan Rum and Jose Cuervo tequila, cheered increased sales of spirits, wines and beers across the group.

But it admitted challenges in the Irish beer market had "adversely impacted" on top line growth in Europe as it saw Guinness sales in the Emerald Isle decline 3% during the year.

Drinkers in the UK continued to enjoy the firm's Smirnoff Vodka, with net sales up 8% after the company promoted signature cocktails and ramped up marketing.

The volume of Guinness sold in Britain declined 1%, although net sales grew by the same percentage after the company increased the price of a draught pint.

The amount of Baileys sold was also on the slide with net sales dropping 4%, as the company said it was facing stiff competition from value brands.

Blossom Hill wines toasted success in the UK with net sales up 2% and there is optimism over new alcoholic fruit drink Quinn's, which was launched in May.

Chief executive Paul Walsh said: "Diageo's strong full-year performance is the result of brand-building marketing campaigns, better sales execution to build superior relationships with our customers, and successful new product launches."

The company said the drop in sales of Guinness in Ireland had been caused by increased levels of competitor investment, although it is attempting to address the fall.

Trials are already taking place in around 80 outlets to test whether a new lower-alcohol Guinness will be able to tempt back customers.

Despite the slump in Ireland, Guinness is still tempting drinkers elsewhere in the world, with sales increasing in Russia.