Olly Wehring

just On Call - Emerging market bumps fail to quell Diageo optimism

By | 31 July 2013

Diageo released its full-year results earlier today

Diageo released its full-year results earlier today

The slowdown in Brazil and ongoing challenges in Asia Pacific made their presence felt in Diageo's full-year results, although the company has maintained its medium-term guidance.

Having released its results for the 12 months to the end of June earlier today (31 July), company CEO Ivan Menezes reiterated the medium-term aim of CAGR of 6% for sales. In its latest fiscal year, sales rose by 6.2% on a reported basis and by 5% in organic terms.

At a presentation to media in London this afternoon, Menezes noted that Brazil has proved "challenging" of late, thanks to social unrest ahead of next year's World Cup football tournament and destocking in the on-trade as regulators tighten their tax collection enforcement.

Asia Pacific also provided headaches through the year, thanks to a marked fall in on-trade business in South Korea, destocking in the region's travel retail channel and in India and the anti-extravagance measures introduced by the Chinese authorities late last year.

"It has been a tougher year for (Chinese baijiu brand) Shuijingfang," Menezes said today. "In the second half, the brand struggled."

Despite these issues, Menezes maintained that Diageo is still on course to meet its medium-term goals. "The US still offers great potential for premium spirits," Menezes added. "We also plan to increase our presence in the emerging markets."

When asked about Diageo's future plans for Tequila, Menezes said that he would have some news on this front by the next full-year results announcement in July, 2014. "We are undergoing an exploration of alternatives in Tequila," he said, declining to comment further.

Diageo concluded its sales and distribution deal with the Beckmann family over its Jose Cuervo Tequila brand at the end of June. Diageo currently only has the Don Julio brand in its portfolio.

Expert analysis

Diageo plc - Mergers & Acquisitions (M&A), Partnerships & Alliances and Investment Report

MarketLine's Company Mergers & Acquisitions (M&A), Partnerships & Alliances and Investments reports offer a comprehensive breakdown of the organic and inorganic growth activity undertaken by an organization to sustain its competitive advantage.

Sectors: Beer & cider, Company results, Emerging markets – BRIC, Spirits, Wine

Companies: Diageo

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