We're drinking our way out of recession, says Diageo

Britons are drinking their way through recession, Smirnoff-to-Guinness giant Diageo said today as strong domestic markets bucked falling first-half sales across the group.

The firm's marketing drive to celebrate the famous pint's 250th birthday saw Guinness gain market share in Britain and Ireland in the six months to December 31.

A promotional push on spirits over Christmas and Blossom Hill wine also contributed to a 6 per cent volume rise and a 5 per cent sales jump in Britain with "share gains delivered across spirits, beer and wine".

This contrasted with a 2 per cent fall in underlying sales to £5.2 billion overall during the first half for the Johnnie Walker maker, although Diageo saw growth resume in the second quarter.

Sales of spirits from off-licences rose, while consumers are switching away from premium brands to cheaper lines, Diageo said.

The strong UK performance bucked much tougher trends across many struggling European markets. Alcohol sales were down 10 per cent in Ireland - a severe casualty of the financial crisis - with pubs sales down an even steeper 14 per cent.

In Spain, Diageo's net sales fell 12 per cent in a "challenging macro-economic environment" marked by trading down and much less drinking out. Meanwhile, Russian drinkers switched from higher-priced Johnnie Walker to cheaper brands such as Bell's and White Horse.

"The continued consumer shift from on-trade to off-trade accelerated during the period," Diageo said.

In North America, the firm endured a 6 per cent fall in net sales after a "disappointing" Thanksgiving.

Destocking by wholesalers and retailers - Diageo's customers deciding to hold less inventory - has also weighed on the business, although international sales to African and Latin American countries were up 8 per cent.

Richard Hunter, head of equities at Hargreaves Lansdown, said: "Its European operations - largely influenced by Spain and Ireland - have faced headwinds, whilst on the whole the consumer shift has been towards standard rather than premium brands.

"Even so, the progress in the likes of Latin America and Africa has been more promising."