Diageo's sales reflect European economies

The drinks giant Diageo hailed its performance in emerging markets yesterday after profits rose despite sales of Guinness falling again in Europe.

Sales of the famous stout fell 5 per cent across the continent, with volumes in the core markets of the UK and Ireland hit by economic conditions, pub closures and January's rise in VAT, as well as other duty increases that shifted drinkers towards supermarkets and off-trade outlets.

Spirits did better, with a strong showing by deluxe brands such as Johnnie Walker Blue Label scotch and Tanqueray gin, while wine sales also picked up to lift UK sales overall by 2 per cent. Irish sales were down 11 per cent.

Overall European revenues fell by 5 per cent, which triggered a 23 per cent slump in profits from the region to £621m, with sales in Spain and Greece especially weak.

Total sales in the year to June rose 2 per cent to £9.94bn, with profits overall 5 per cent higher at £2.36bn as scotch and vodka sales in emerging markets – led by Johnnie Walker and Smirnoff – and good sales of top end brands in more mature markets offset the problems in Europe.

Diageo's chief executive, Paul Walsh, said that while the group was not immune to the global uncertainties, the figures were a "strong platform" to achieve its targets of 6 per cent organic annual sales growth and double-digit earnings per share growth over the medium term.