Diageo To Focus Spending On North America, Emerging Markets

on 25/02/11 at 10:31 am

Industry

Diageo PLC (DEO, DGE.LN) will minimize advertising spending in its European market in the second half of its fiscal year, instead plowing funds into its rebounding North American business and fast-growing emerging markets.

The spirits giant, whose brands include Johnnie Walker scotch, Jose Cuervo tequila, Guinness stout and Smirnoff vodka, has seen demand tumble in markets such as Portugal, Ireland, Greece and Spain as cash-strapped consumers remain hesitant to spend amid harsh budget cuts.

Those markets “are not coming back any time soon,” Diageo Chief Executive Paul Walsh said in an interview. While profitable, he said, “They are not going to give this company the growth that it needs.”

Walsh noted that the troubled markets in Spain, Ireland and Greece only comprise about 11% of company revenue and are “quite contained.”

While it may not cut marketing outright, the Walsh said advertising outlays in the region will be flat at best in coming months.

Speaking on the sidelines of the Consumer Analyst Group of New York conference here, Walsh said that it doesn’t make sense to buy ad space if people aren’t drinking at all. Advertising only helps encourage drinkers to buy a certain brand, he said, it doesn’t actually encourage those who aren’t drinking to start.

{Full story via Nasdaq}

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