Diageo’s Profit Rises 17%

on 25/08/11 at 2:00 pm

Industry

Diageo PLC posted a 17% rise in full-year net profit Thursday as surging demand in emerging markets offset weakness in North America and Europe.

The London-based maker of Johnnie Walker scotch, Guinness stout and Smirnoff vodka also set robust targets for double-digit earnings growth, despite Chief Executive Paul Walsh’s warning that the company operates in a “fragile global economy.”

Diageo’s growth has been driven by its operations in the booming economies of Africa, Asia Pacific and Latin America, where it continues to ramp up its marketing spend to build brand equity.

It expects those markets to contribute half of its global revenue in the next three to five years. The group’s results also have benefited as consumers opt for higher-priced products and as the company moves away from discounting. Selective price increases have also boosted performance.

Still, it faces a slowdown in mature economies, including the troubled Southern European economies of Spain, Greece and Italy, where, in addition to cut-throat promotional competition, the discretionary spending power of cash-strapped drinkers is being squeezed by government-backed austerity measures, inflation pressures and unemployment.

{FULL STORY via WSJ}

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